Wall Street climbs overnight
European and US equities performed strongly overnight, boosted by end-of-month portfolio rebalancing from institutional investors. That dragged in the buy the dip crowd and saw the S&P 500 rise 1.61%, the Nasdaq climb 1.87% and the Dow Jones rose 1.53%. Asian stock markets are mostly higher, although they are failing to share Wall Street’s exuberance with one eye on tonight’s first US presidential debate. Investors will get a close-up look at President “Tax-Return” take on Democrat candidate Mr “Sleepy-Joe” Biden.
The Nikkei 225 has edged lower by 0.36%, driven by 1000 TOPIX listed stocks going ex-dividend today. Elsewhere though the picture is positive. The Kospi has risen 0.90%, with mainland China’s Shanghai Composite rising 0.40% and the CSI 300 rising 0.30%. The Hang Seng is unchanged, while Singapore is up 0.15%. Meanwhile, in Australia, the All Ordinaries has climbed 0.75%, and the ASX 200 is 0.10% higher.
With the end of the month and the quarter upon markets, a lot of portfolio rebalancing is occurring in the institutional investor space. I would suggest that those flows, rather than a sudden “the world is saved” epiphany are the genesis of the overnight equity rally. That appears to have dragged in the FOMO buy the dip mob on a day when nothing materially changed in the world to justify the moves. US airline stocks, in particular, and banks, had an exceptional day. A session where the buy everything mob think airlines look cheap is as good a warning sign for the longevity of the overnight rally as I’ve ever seen. At least big tech is cashflow positive, even if they are not cheap.
The ex-dividend effect in Tokyo may also be muting gains in other regional markets. Impending holidays across much of Northern Asia will also dampen activity.
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