Zero Equilibrium Market Wrap

By Chinedu Okoye 

 

Summary:

• Global Equities continue the rally as: Stocks across the U.S., Europe, and Asia started the month strong, extending a seven-month uptrend with the S&P 500 up ~40% since April’s slump

• Commodities are mixed with Gold cooled from record highs ($4,300 → $4,000) but stays bullish long-term as it holds above the key phtscological level. Brent crude rose 10% MoM above $65/bbl after OPEC+ paused supply hikes.

• Despite weak Chinese demand and German industrial strain, major indexes remain positive YoY with Q4 strength expected in the U.S., India, China, and Japan

• Crypto pullsback with BTC, ETH, XRP, and BCH postibg steep weekly losses, while gold-backed tokens (PAXG, XAUT) held firm—ZE views dips as buying opportunities.

• Though U.S 10-year yield rebounded to 4.21% as investors rotated to risk assets; ZE stays bullish on EM Sovereigns, Treasuries, and Gilts, expecting continued equity momentum barring a major downside shock.

Stocks rise in US, Europe and Asia in the first trading day if the month:

Equity market's neging the month I a positive note, with major indexes recording 7 mintsnif steady gain, since April when the initial tarrifs were enacted.

Over the oast month's US and Japan indexes have seen meteoric rise hiting all-time highs.

 

(S&P Year-on-year Chart)

 

S&P have rallied ~+40% since the slump in April, at the wake of the trade tensions. Gold itself has returned handsomely hitting and surpassing ZE Initial and revised targets, before a natural cool to settle at $4,000, a relative and considerable high regardless.

However the weekly movement has been flat, as the cgart below shows a 0.00% change as at the time of this article.

(S&P week-on-week)

Like ZE posited in the Q3 Financial Markets Review in the Q4 outlook section , Van Deck's Ann Wucts the S&P rally to continue unless in an event if a surprise downside event.

 

This suprise downside event can be;

• balance sheet recession,
• increased unemployment,
• reflation inn the US,
• global economic recession.

 

 

Commodities:

Gold has slipped in the last month for all-time highs of $4,300+ to around $4,000 as at the time of this article. This support is critical and reinforced conviction at ZE on our Proposed bulkish out out on the yellow metal.

Though marginally down on the week, the metal is up monthly and yearly.

OPEC+ seems to have switched stance to price, as the groups just paused it's planned hike, BRENT had risen 10% in the past month as a result. Brent stands at above $65/pb, as the market reacts to both upbeat news however mild from US - China trade debacle and OPEC+ decision to halt supply increases.

(WTI month-on-month Chart)

ZE Remarks and Expectations in the Global Economy and Financial Market:

However further economic weakness in China is expected as the tax changes could “dent global [investor] sentiments.

For now the Chinese economy gains fairly stable with no signs of an overall contraction in sight, and he trade truce given exporters a boost to substitute for weak tepid or slow local (Chinese) consumer demand.

Stocks are expected to maintain the momentum or at least stabilize through the rest of the quarter, with biggest winners expected in; the US, India, China, Britain, Australia, Japan, Brazil.

Below is a chart computednby ZE at the Euro open sh oh nf weekly, monthly and annual stock market % growth. China and Germany has seen the largest drawdown, with the latter plagued by industrial weakness from increased global competition and it's energy dependency, the latter plagued by the property market woes,and structural industrial weakness. However, all indexes represented below are up Year-on-year. 

 

 

Tech Stocks are expected to continue to lead the US Major Indexes in the time period (Q4). This would spill over to the above developed markets, whilst the EM carry trade, from a stronger dollar (meaning cheaper EM currencies, but stable nonetheless) is expected to continue to fuel EM equity market indexes.

Crypto:

Save for gold backed coins in the ZE Crypto Asset Watchlist/Portfolio, all other tokens are down in a weekly and daily streak. Ethereum leads the loses followed by XRP, BCH and BTC.

Coin           24Hr %∆.      7-days %∆

BTC:          -2.63%.           -7.52%

BCH:          -3.18%.           -7.95%

ETH:          -5.35%.          -13.90%

XRP:          -4.91%.          -12.72%

PAXG:        +0.10%.         +0.36%

XAUT:        +0.04%.        +0.26%

The volatility in crypto is not unexpectedz but with bitcoin above physiological levels, ZE remains bullish in the above deeming every temporary pullback as an entry opportunity. With PAXG and XAUT, as active hedges. 

US 10yrs saw declines within the month, breaching the 4% level, before rallying back from October 24th to 4.207% as markets go risk off ploughing more resources into equities. 

But the crypto slump would indicate that the optimism from the trade truce is still cautious, especially as the S&P seems to have hit resistance at current levels. 

We remain Bullish in EM Sovereigns and US Treasuries, and UK Gilts.

DISCLAIMER: THE ABOVE DO NOT CONSTITUTE INVESTMENT ADVICE, BUT MARKET COMMENTARY AIMED AT IMPROVING THE DISCOURSE AROUND FINANCIAL MARKETS AAND MACROECONOMIC DEVELOPMENTS.

✍🏾 By Chinedu Okoye for Zero Equilibrium®