Morning Commentary: How Quickly Market Sentiment Shifts

Foreign Exchange - Morning Commentary

How Quickly Market Sentiment Shifts

Share this story:
Alan Rose
Alan Rose
Foreign Exchange Head Trader
It was just a mere six days ago that U.S. equity markets were making all-time highs. Concerns about a too rapid rise in U.S. interest rates and a continuing strong U.S. economy propelled by extraordinary data last week appeared to be taken all in stride as U.S. 10-year yields broke above key levels to 3.20% and higher. The U.S. dollar was making monthly highs piggybacking the strong data and higher U.S. interest rate differentials. That was so last week!
Somehow the pendulum has shifted quickly away from all the optimism and confidence to one of finger pointing at the Fed among other issues. There are a lot of Monday morning quarterbacks out there now second guessing the Fed’s actions when it was just last week that the Fed was being praised for their measured approach. Whether it is a too rapid increase in U.S. interest rates or ongoing concerns about a long drawn out trade war with U.S. and China plus a myriad of other factors, sentiment has clearly shifted to see U.S. equities fall for five straight sessions.
Since last week, U.S. equities saw persistent profit-taking.  Finally, as price action broke through key technical levels yesterday, it finally triggered an avalanche of stop loss orders yesterday. The U.S. equity rout spilled out onto the global stage with Asian equities sharply lower (Chinese equities at four-year low down by 5.2%) and the U.S. dollar lower as the market began to price out future Fed rate increases.
Asset classes of equities, interest rates, commodity prices, and foreign exchange rates are all strongly interconnected and yesterday’s U.S. equity stampede has sent a chain reaction through all of them. The key question for the markets is whether the U.S. equity performance yesterday is just another correction (like many in the past years) or a warning sign of something more serious about the U.S. and global economy. More time will be needed to assess those questions.
  • There is a bit of good news today that might help lower the anxiety levels in the market. U.S. CPI for September came in softer than expected at 0.1% with the YoY rate dropping from 2.7% to 2.3%. Ex-food and energy rose by only 0.1% and the YoY rate remained at 2.2%. U.S. interest rates are actually higher on the day despite the benign inflation and the global equity rout.
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Investment and Insurance Products:
Are Not insured by the FDIC or any other federal government agency
Are Not deposits of or guaranteed by a Bank or any Bank Affiliate
May Lose Value
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. The Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2018 City National Bank – All Rights Reserved.
350 South Grand Avenue, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender


Popular posts from this blog