Lower Rates Volatility Provides Relief For Recent Underperforming

Lower rates volatility provides relief for recent underperforming areas of the market such as tech and bond proxies. More broadly, yesterday’s selloff related to the suspension of the AstraZeneca (NASDAQ:) vaccine rollout in Europe should partly correct, and we may get some more clarity as early as today. 

Looking a little further out, the dampening in equity beta to higher rates is encouraging, and barring a huge by Fed Chair Powell on Wednesday, the market seems well-positioned to push higher, especially cyclicals/value names as well some partial relief for the YTD underperforming FAANGS on any dovish impulse.

Asia Recap

US equities started the week on a positive note; U.S. bond yields slipped from 13-month highs as investors looked to the U.S. central bank’s meeting later in the week. prices slipped, pulling back from earlier gains bolstered by strong Chinese economic news. Consumer Discretionary names ripped higher as stimulus check optimism breathed life into Dept. Stores, Apparel and Restaurant names. Markets largely looked past tax reform focus in Washington, with the hitting a fresh all-time high. S&P +0.6%, +1.1%.

Asian markets saw modest gains in Japan and China, where investors watched for a possible broader crackdown on the internet sector. Japan’s gained 0.5% to just below the closely watched 30,000 marks, while the broader added 0.65%. HSI +0.6%.


has held up reasonably well despite Italy going back into partial lockdown, the poor performance for Germany’s CDU in regional elections, and negative vaccine news in Europe. But I suspect uncertainly over this weeks FOMC is keeping the dollar bulls at bay.,

Still, given it likely means EU vaccination rollout will continue to struggle short term, surprisingly, yesterday’s negative AstraZeneca vaccine news didn’t really seem to affect EUR/USD at all, even though it did push Bund yields lower.

For the , the resilience suggests that either: 1) investors are so uninterested in FX that they effectively do not trade the unloved EUR/USD, or 2) we are close to max vaccination negativity priced for Europe. I suspect the truth likely lies somewhere in the middle.

has posted sequential lower highs over the past few sessions. Since it failed to press on above 1.4000, gains have been hard-won.  Weaker recent domestic data in the UK and news the EU is initiating legal action regarding the UK easing Northern Ireland rules is perhaps adding some weight onto the pair.

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