Stocks Should Bounce Back On Positive Chinese Data

Having ignored the US presidential debate at first blush, risk sentiment wavered with E-minis down 1.6% from the highs during the debate and AUD/JPY (risk proxy in FX) selling off by 0.6% in that timeframe. Post-match commentary is typically bipartisan. 

European equities are set to open down 1%, with cyclicals (Banks & Energy) to lag, tracking US sector performance overnight. Tech and the broader momentum trade will also be in focus in the near term. Risks coming under pressure if we see de-risking/de-grossing—especially if the market begins to price in a clean sweep for the Democrats in the US election, or an increased probability that President Trump will not commit to an orderly transition of power should he lose. 

Last Of The Debates For This Commentator

The Twitter take on the US presidential debate, which is that it was a complete train wreck for everyone and difficult to watch, actually is one of the first times in recent memory where nearly everyone from both sides of the aisle is in agreement, which is a feat in and of itself.

A few exciting polls (albeit unscientific) are emerging from the media outlets themselves, asking their viewers who they thought won the evening. The results show exactly what you would expect from each outlet—viewers of Liberal-leaning outlets say Biden won, and then flip for more conservative-leaning outlets. The most interesting one for me, though, is the Telemundo poll—Spanish language network—which broke heavily in Trump's favor, 66% to 34%, which is noteworthy given the recent polling trend of Trump picking up margin vs. Biden with various minority groups and even beating Biden with Hispanics in Florida.

One point almost all the news feeds picked up on towards the end of the presidential debate was something that Trump 'didn't' say. He would not give a straight answer to questions about respecting the result. As Ed Luce of the Financial Times put it, "He also pointedly refuses to abide by the results of the election." Pretty much every news source I have read this morning has the same take: chaos; toxic, disorientating, not a debate; the interruptions and over-talking were intolerable; Biden took a beating in the early rounds as Trump's sheer force overwhelmed him. Biden recovered poise later. No one seems to be calling a winner or loser. Instead, most news outlets note that each candidate played to type. There is no reason to believe either will have swayed voters one way or the other. FiveThirtyEight's Nate Silver writes that while Biden was not sharp at the beginning, "he wasn't the guy who needed a win, since he's ahead in the polls."

Post Train Wreck

Now with that train wreck out of the way, maybe we can back to the trading the markets where the stock should bounce back on constructive data out of China and the stimulus and vaccine impulse. 

Forex 

I turned it off to build on my stable month currency positions in the WM fix between 15:00 and 16:00 London time to unwind en masse post Fix. This is all trader mumbo jumbo below and with 0 analysts hot takes. 

EUR/USD

That was of a messy presidential debate with risk sentiment slightly negative afterward, but FX markets remain quiet the last day of September. The EUR/USD pair has held up well despite the complimentary view running out of steam a bit but could not hold gains above the crucial 1.1750-60 level, so it might eventually be time to fade this move with month-end rebalancing looming.

Later, the ADP data release could hint what to expect from the monthly US job report on Friday.

The Brexit front has no breakthrough just yet with the UK's latest attempts to break the EU's impasse resisted for now. Mild sell rallies bias endures given current information and would be somewhat amplified on a daily close back below 1.2780. Also, specs are building month-end shorts on GBP/JPY on the rebalancing signal pushing. 

Risk assets continued to trade constructively ahead of the US presidential debate as the dialogue regarding the US stimulus progresses in the background. However, equities slipped a touch, and the USD firmed once the discussion concluded.

But AUD strength could be a bit deceiving as models which adjust equity-market returns (in USD terms) for cross-border equity holdings and the relative liquidity of each currency predicts most downward pressure will occur on CHF where the cross could be done either through AUD or USD

Back in March, AUD/CHF and USD/CHF rallied 0.6% and 0.3%, respectively, between 15:00 and 16:00 London time. The sell signals are also moderately strong for JPY, GBP, and CAD.