As the equity market rally continues, the once-extensive laundry list of things investors cared about is dwindling by the hour. You can add renewed concerns about US-China relations and unrest in Hong Kong to that list of things the market cares little about. Although some Asia markets were lower, that has not fed through to European or US markets with S&P 500 Futures on the rise again. And trying to fade recent moves has been a painful exercise in frustration for Wall Streets finest as the current step higher has all the hallmarks of pros getting stopped in rather than stopped out when it comes to equities.
The Dollar
Interestingly FX markets seem to care as the big surprise today is that the US dollar has remained resilient despite much better global risk sentiment and the sharp BTP rally. But this could be an expression of the Swiss franc resilience rather than the market mapping to USD/CNH higher. Despite the positive risk sentiment, the franc refuses to weaken.
The market is reacting positively to coronavirus lockdowns being eased across the globe. Equities have enjoyed a firm rally in the past few days, and the Franco-German recovery fund proposal has supported European periphery assets. Overall, this is a surprisingly good set up for the euro to strengthen, but not today.
The dollar is at risk, but the market will need to clear the wrath of Trump via the Hong Kong law hurdle before more investors discard their US dollar safety umbrella.
Oil
Oil is under pressure again today, with traders focusing on Russian discussions on easing production cuts from July. While this is entirely consistent with the terms of the new OPEC+ agreement, the press is speculating on the potential for tensions between Russia and Saudi Arabia to re-emerge at the OPEC+ meeting scheduled to take place on June 9. Pull up a front-row chair as this is going to get fun for oil speculators
Musings
Its fun reading the explanations for the massive bull run pivot as analysts and journalists alike try to ascribe some casualty for the e-minis leap of faith above the 3000 levels. Intellectually, everyone wants to be bearish. Still, it feels increasingly wrong, and the costliest bias in finance is Grizzly Bias: Where you see bearish things everywhere, all the time, and ultimately you fail to see the forest for the tress. Not to mention, once traders start to venture into the world of intellect, its time for them to check out and find a new career.