Small caps soar in catch-up rotation, Trump jars Taiwan
Republishes newsletter to embed graphics.
A look at the day ahead in U.S. and global markets from Mike Dolan
The dramatic switch to U.S. small cap stocks over the past week went into overdrive on Tuesday as interest rate cut and election fever combine, but world markets more broadly are getting nervy of the prospect of Donald Trump's return to the White House.
In a series of interviews around this week's Republican convention, Trump set out several of his policy priorities around tax cuts, tariff rises and foreign policy.
The most jarring comment overnight was his assertion that Taiwan should pay for its own defence - which knocked Taipei's benchmark index .TWII down about 1% - but it's just one of series of policy directions that's starting to feed market pricing.
Taiwan's chipmaking giant TSMC 2330.TW plunged 3%, the wider Taipei benchmark was down about 1% and chip stocks elsewhere were knocked back. Gold XAU= prices rose.
Caught in the slipstream of this chipmaker hit and the week's Wall St rotation, global megacaps such as Nvidia NVDA.O are set to fall for the third day.
It's a different picture for small caps however.
The Russell 2000 .RUT of soared 3.5% on Tuesday - its fifth straight day of gains greater than 1%, its longest winning streak since April 2000 and highest level since January 2022.
Jumping more than 10% over the past week, the index of mostly domestic-facing smaller business is now up almost 12% for the year to date - narrowing the gap with the S&P500's 19% for 2024 so far .SPX and the 21% rise in the Nasdaq 100 .NDX.
Adjusting for the outsized weightings of the megacaps, the equal-weighted S&P500 .EWGSPC is now up almost 9% for the year.
And futures suggest the Russell RTYcv1 will hold those gains later.
The gist of the argument behind the shift to better valued small caps from the pricy tech bellwethers is both stepped up interest rate cut speculation but also the tax, tariff and reshoring lean of a possible Trump return - now that his lead in betting markets for a November win has surged to more than 70%.
That home bias has been absorbed pretty well across the board by the big stock indexes so far, with the S&P500 also up marginally to new highs on Tuesday.
VOLATILITY CREEPING BACK
But there are growing signs of volatility and disruption creeping back in - with S&P500 futures ESc1 down almost 1% ahead of the Wednesday's bell and Nasdaq futures off 1.3% NQcv1.
The VIX volatility gauge .VIX was at its highest in more than a month.
The economic backdrop to the stock market churn seems less worrying.
Resuming U.S. disinflation still has futures fully pricing a first Fed rate cut in September and 65 basis points of rate cuts by year-end. Canada's surprisingly soft June inflation update reinforced that view.
The June U.S. retail sales readout was better than expected and the Atlanta Fed's 'GDPNow' real time growth monitor nudged up to 2.5% this week from 2% last week.
U.S. industrial production numbers and housing starts top the diary later and the earnings season starts to broaden out beyond the big banks.
Overseas, UK headline inflation came in on target at 2% - though that was slightly above the 1.9% forecast and services inflation also picked up steam.
Sterling GBP= rose as money markets dialed back the chances of a Bank of England rate cut next month to as little as a one-in-four chance.
Britain's new Prime Minister Keir Starmer will set out his first package of proposed laws on Wednesday, fleshing out how he will honour his election-winning pledge to rebuild the country after years of weak economic growth and political turmoil.
Key developments that should provide more direction to U.S. markets later on Wednesday:
* U.S. June industrial production, June housing starts
* US corporate earnings: Johnson & Johnson, Northern Trust, US Bancorp, Citizens Financial, Discover Financial, Synchrony Financial, United Airlines, Steel Dynamics, Prologis, Kinder Morgan, Crown Castle, Equifax, Elevance Health
* Federal Reserve releases Beige Book of economic conditions; Fed Board Governor Christopher Waller, Richmond Fed President Thomas Barkin and Kansas City Fed chief Jeffrey Schmid all speak
* New UK government sets out its legislative plans for the coming parliament in so-called King's Speech
* German Finance Minister Christian Lindner holds news conference on 2025 draft budget
* US Treasury auctions $13 billion of 20-year bonds
US small cap catchup https://tmsnrt.rs/4d7iSWV
Growth vs Value stocks in 2024 https://tmsnrt.rs/4d3CY4h
US retail sales beat forecast https://reut.rs/3W7I0FT
UK inflation remains at 2%, higher than expected https://reut.rs/3zIIAT8
Canada's inflation has been below 3% since the start of the year https://reut.rs/4bFY5sp
Editing by Bernadette Baum
Ativos relacionados
Últimas notícias
Isenção de Responsabilidade: As entidades do XM Group proporcionam serviço de apenas-execução e acesso à nossa plataforma online de negociação, permitindo a visualização e/ou uso do conteúdo disponível no website ou através deste, o que não se destina a alterar ou a expandir o supracitado. Tal acesso e uso estão sempre sujeitos a: (i) Termos e Condições; (ii) Avisos de Risco; e (iii) Termos de Responsabilidade. Este, é desta forma, fornecido como informação generalizada. Particularmente, por favor esteja ciente que os conteúdos da nossa plataforma online de negociação não constituem solicitação ou oferta para iniciar qualquer transação nos mercados financeiros. Negociar em qualquer mercado financeiro envolve um nível de risco significativo de perda do capital.
Todo o material publicado na nossa plataforma de negociação online tem apenas objetivos educacionais/informativos e não contém — e não deve ser considerado conter — conselhos e recomendações financeiras, de negociação ou fiscalidade de investimentos, registo de preços de negociação, oferta e solicitação de transação em qualquer instrumento financeiro ou promoção financeira não solicitada direcionadas a si.
Qual conteúdo obtido por uma terceira parte, assim como o conteúdo preparado pela XM, tais como, opiniões, pesquisa, análises, preços, outra informação ou links para websites de terceiras partes contidos neste website são prestados "no estado em que se encontram", como um comentário de mercado generalizado e não constitui conselho de investimento. Na medida em que qualquer conteúdo é construído como pesquisa de investimento, deve considerar e aceitar que este não tem como objetivo e nem foi preparado de acordo com os requisitos legais concebidos para promover a independência da pesquisa de investimento, desta forma, deve ser considerado material de marketing sob as leis e regulações relevantes. Por favor, certifique-se que leu e compreendeu a nossa Notificação sobre Pesquisa de Investimento não-independente e o Aviso de Risco, relativos à informação supracitada, os quais podem ser acedidos aqui.
