Fresh highs in equity futures
Dollar slightly lower
Nikkei 0.28% Dax 2.22%
UST 10Y 0.64
Oil $42
Gold $1948/oz
BTCUSD $1802

Asia and the EU
No Data

North America Open
No Data

Equities rose in a straight line in Asian and early European trade to start the week off in a decidedly risk-on mood.

There was no key economic or political news trigger the rally, but the markest are clearly expressing a bullish view on global economic recovery and pricing in the prospect of COVID peak without the fear of a massive second wave in the fall. COVID numbers have been trending lower with US data showing a string of sub 50,000 new case days suggesting that the worst of the viral spread may be over as masking and social distancing rules have greatly curbed the threat of infection.

In Europe, the numbers are starting to trend higher after restrictions were eased, but the pace of growth is far slower than before and the severity of cases is much less terminal. Still, the threat of the second wave infection cannot be totally dismissed especially as most of the industrialized world will enter a new academic school year and children return to the crowded public spaces.

For now, however, the markets are happily ignoring any possible risks and continue to push indices to fresh highs on momentum alone. Several analysts have pointed out that the SP500 has created its own “1%” as just six stocks in the index – Tesla, Amazon, Google, Facebook and Apple, and Microsoft have been responsible for all the gain while the rest of the index is flat.

Although it’s not unheard of to have narrow leadership in equities historically such lack of breadth opens the market to very vicious selloffs if the demand for the stellar six dissipates as demand for all rest of the equity universe has been long gone.

With stocks already up significantly on the day, it will be interesting to see if the US corps can keep the party going for the rest of the day.