U.S Indices finally reversed course after a relentless five-month rally as speculated at length in yesterday’s Daily Commentary. The NASDAQ 100 led the decline closing 5% lower while the VIX which has signalled trouble all-week, closed 20% higher Concerns over a stronger U.S Dollar weighed on markets. Policymakers at the European Central Bank and Bank of Japan have taken notice of recent dollar weakness and have said they need to do more to weaken their own currencies. Dollar strength would make U.S. exports less attractive, as it would cost more in relation to other currencies. This prompted some profit taking in markets, especially after the S&P 500 and Nasdaq hit all-time highs on Wednesday. Economic data was stronger than expected, with both Initial Jobless Claims and Continuing Claims bearing estimates. This indicates that the job market continues to recover. Vaccine data was also positive, with Pfizer (PFE) saying that it could have late-stage trial data by the end of October. This took some of the wind out of tech’s sails, as it means economies could fully reopen. And with money coming out of tech, it rotated into value and cyclical names. European Markets initially rose before following the U.S Markets lower with a late sell-off. German Chancellor Angela Merkel’s political allies have endorsed plans for deficit spending in next year’s budget to further support the economy. German Bundesbank President Jens Weidmann said the European Central Bank should withdraw emergency stimulus once the Coronavirus pandemic is over. Euro-Zone Retail Sales unexpectedly fell in July, highlighting the regional economic recovery may take longer than expected. France unveiled its $118 billion stimulus plan, with a focus on tax cuts, subsidies, and public spending to supporting job growth. Elsewhere, Oil fell 1% on concerns that the rebound in fuel demand was stalling while Bitcoin was the big mover, falling 15% over the past 36 hours.
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