Stock markets held their own on Wednesday after doubts emerged about fresh US stimulus, while it was another wild day for gold and silver and a tough one for Turkey’s troubled lira.
A lively European session saw sterling shrug at Britain’s worst economic slump on record, gold pile on almost 4% after its biggest fall in seven years and bond yields go higher amid a deluge of global debt issuance.
Turkey’s volatile lira took another 1.5% pounding as concerns about a currency crisis there took hold again, while New Zealand’s dollar recoiled too as its central bank flagged negative interest rates could be coming.
Higher oil stocks had Wall Street’s S&P 500 not far from its long-awaited return to record highs, although there was still plenty to contemplate.
Asian stocks had struggled overnight as sniping continued between Beijing and Washington over Taiwan and TikTok.
China had also reported weaker-than-expected loan growth and a US Senate leader’s description of cross-party stimulus talks being “at a bit of a stalemate” hadn’t helped either.
“The bias at the moment is probably to fade the S&P 500 and fade risk generally,” said Societe Generale strategist Kit Juckes.
“What happens next probably depends on what happens in US equity markets (which are focused on stimulus)...that might be the decisive factor for the short-term sentiment.”
Barring a bipartisan deal on stimulus, the US economy could be left with measures US President Donald Trump called for on Saturday through executive orders to bypass Congress.
“We have enormous uncertainty. It appears it’s getting harder for both sides to compromise as the election is nearing...Trump’s proposals would be smaller than markets have expected. There’s a question over whether they are viable too,” said Junpei Tanaka, a strategist at Pictet.
The US election campaigns are also set to gather momentum after Democratic presidential candidate Joe Biden selected Senator Kamala Harris as his choice for vice president on Tuesday.
Bond markets were also driving sentiment. The 10-year US Treasuries’ yield climbed to 0.67% in Europe to stay at a one-month high.
The 10-year yield (+6.6 bps) and 30-year (+7.5 bps) yield saw their biggest increases in over a month on Tuesday. The gap between US two-year and 10-year Treasury yields is a metric closely watched for signs of a slowdown.
On top of hedge selling ahead of the largest-ever 10-year note auction later in the day, bonds have also lost some of their safe-haven allure on rising hopes of vaccines against Covid-19.