Stock futures opened uncertain as investors remain confused about which way to move this morning as lockdown fears take charge with the UK government sounding alarm bells as the Covid-19 curve moves in the wrong direction.

After the initial economic bounce from full-blown lockdowns, both the UK and Europe’s economic trajectory could be entering a gloomy second phase characterized by ongoing social distancing, elevated unemployment, and increasing damage to the supply side.

Investors are likely buckling in for yet another roller coaster week where the ultimate vaccine prize supports risk sentiment. However, they remain weighed down by a drip-feed of negativity around Covid-19 resurgence, US fiscal impasse and as the market starts to factor in US election risk in earnest.

Retail and hedge funds bought the initial Nasdaq dip after the September 2 carnage. But since then, there has been a noticeable shift in trading behaviour where bounces are quickly faded.

There is an emerging view that now that the Fed is out of the way (and potentially at the end of the policy runway), and as the recovery slows, the cost of protection to capture US Election risk will rise, which is now forcing investors to de-risk their crowded positions to protect performance.

On Friday, the nascent sentiment shift was getting captured on retail aggregators as those venues were reportedly sustained sellers in US Tech over long durations of the day with large net outflows in periods around the open/close, which is typically a first sign of retail exhaustion hitting the sector.

As U.S.-China tensions linger, President Donald Trump said he’d offer his blessing to Oracle Corp.’s bid for the US operations of TikTok “in concept.”

Meantime, the Trump administration’s curbs on WeChat were put on hold by a judge, upending an effort to halt the use of the Chinese-owned app in the US.

This news has probably tempered what might have been an extension of the Friday tech sell-off and has allowed the Yuan to retake flight.

Markets had closed Friday before reports emerged that US Supreme Court Justice Ruth Bader Ginsburg( RBG) had passed away, leaving a Supreme Court vacancy with just weeks to go until the US Presidential election.

RBG’s passing has prompted yet another bipartisan quarrel about the pre or post-election timing of the new Supreme Court apportionment where the Republican-controlled Senate looks like they are getting ready to buck typical protocol, where the appointment waits until after the Presidential election.

Unquestionably this will provide yet another distraction for lawmakers who should be focused on the most significant task at hand, which is a compromise on a new US stimulus bill. After all, people as still checking their mailboxes, wondering when that check will arrive.

Also supporting risk, President Trump indicated that he anticipates a coronavirus vaccine for “every American by April” after earlier predicting that a vaccine could win approval with weeks. According to the President: “We’ll have manufactured at least 100 million vaccine doses before the end of the year.”

Asia Currency Markets: Chinese Yuan

Although advocating a bit of caution about buying into crowded positions, clearly local traders want to stay long CNH having an exceedingly high conviction to reinstate and build USDCNH shorts due to robust domestic data and China’s likely inclusion in the FTSE WGBI, which continues underpinning currency strength.

Malaysian Ringgit continues to soar

The comeback kid continues to soar with the US Fed risk out of the way, and oil prices stabilising higher post-JMMC.

The ringgit should well as it continues to play catch up with the Yuan. Provided China recovery remains Covid-19 free, Malaysia exports to China will most certainly continue to improve with mainland retail consumption demand catching up to the China industrial engines firing on all cylinders.

Gold and EURUSD direction

The G-10 forex markets may give gold investors a more precise direction. The Fed’s message is that policy will remain accommodative, but there is no real appetite for adding to the easing.

By contrast, the European Central Bank’s (ECB) rhetoric continues to leave the door more open to further action this year.

The ECB’s Pablo Hernandez de Cos noted Friday that the recovery pace had decelerated in August and that the need for additional stimulus cannot be ruled out. If more accommodation is on the way from the ECB, while the Fed stays status quo, and the EUR-USD weakens, gold’s US dollar unpinning could be seriously undercut.

International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp