STATE OF THE MARKETS

Q2 closed in red. US stocks closed lower on Thursday as investors decided to demand more bond safety, sending yields lower across the board. Nasdaq (-1.33%) fell the most, followed by S&P (-0.88%), Dow (-0.82%) and Russell (-0.66%) as the Dollar index pulled back to close below the 104.80 barrier. The 10Y benchmark slipped below 3% and flirted around 2.97% as at writing.

In the commodities market, crude traded lower for the second day after OPEC+ decided to increase its output in August. The black gold settled around $104.55/bl as New York closed. Talks of rate hikes around the global central banks continue to weigh against the non-interest bearing gold that continues to fall without bids to the psychological level $1,800/oz. Elsewhere, iron ore suffered a similar fate as the commodity traded lower to $130.00/tn.

In the FX space, sentiments remain bearish as Swiss reign in demand in the medium and long term accounts while Yen leads in the short term. Short term traders, however, seemed quick to bid up the oversold Kiwi, Aussie and Sterling while turning Dollar and Loonie to offers.

On Friday, as markets open Q3 and go into a long weekend due to Independence day, we might see yields continue lower while bargain hunters scoop value names. No earnings reports are scheduled but Q2 earnings season will kick off in two weeks and markets may pay attention to manufacturing data from IHS and ISM.

OUR PICK – No New Picks

No new picks going into the weekend. Another week of outflow from major markets – US equity for $2.7 billion, $3.7 billion out of the taxable bond funds and $13.7 billion out of money markets. Long term investors continue to cash out and remain on the sideline waiting for better opportunities. In the meantime, we suspect some funds are flowing into real assets as inflation fears remain, while waiting to scoop real bargains when recession really kicks in.

Trades updates: 

Equities: We continue to see resiliency in VIPS (22% undervalued with 4.73 z-score) and T (6% undervalued, 5.30% yields) while CRON (26% undervalued with 27.82 z-score) pulled back. We still see M (48% undervalued, 3.44% yields) and WBA (33% undervalued, 5.04% yields) offer better opportunities for long term investors.

FX & Commodities: AUD/USD was stopped out due to sudden change in sentiments.

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