Highlights:

• To our eye the stock markets clearly took the position that the Fed will not raise rates on Thursday
  • US stocks were higher by 1.3% with persistent buying throughout the day
  • The North American session was led by Industrials (+1.7%), Health Care (+1.4%) and Financials (+1.4%) while Utilities, Materials and Energy finished in the rear
  • All 10 economic sectors were higher on the day in North America and in DM in aggregate
  • Europe was stronger on the day as well led by Energy and Staples and Japan was the laggard as Energy, Materials, Financials and Telecom all sold off sharply
  • Energy’s initial bounce off of the 8/25 low is fading fast and has now been overtaken by both Tech and Consumer Discretionary with Health Care and Industrials catching up fast
    • As such, it’s looking more and more like the strength in Energy off of the 8/25 low was driven by short covering
  • The US seems to be pulling away from the pack off of the 8/25 low
  • EMs were down 0.11% led by a slump during the Asian hours
  • DM Knowledge Leaders were stronger on the day but slightly weaker than DM stocks as a whole
  • EM Knowledge Leaders were weaker on the day but slightly stronger than EM stocks as a whole
  • Over the last year Developed World and Emerging Markets Knowledge Leaders have bettered DM and EM stocks by more than 7% each
  • Over the last year, DM stocks are down 6.2% and EM stocks are down 23.5%
• Government benchmark bond yields were sharply higher on the day with the US 10Y trading 9bps higher in line with German and French yields
• The USD was oddly higher on the day driven by euro weakness, suggesting that maybe stocks are getting ahead of themselves
• Gold and silver also finished lower, proving evidence of a constituency of rate hike bets

Gavekal Capital Daily Financial Markets Chart Wrap

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