Market Commentary - November 2, 2020

Posted by Kevin Jock on Nov 2, 2020 7:00:08 AM

    Just two days away from U.S. elections, where upon results will set investment sentiment for the remainder of 2020 and dictate American policy for the next four years. A record 98m have voted early already. Sunday polling has Democrat Joe Biden leading the President in the final stretch though key swing states that carried Trumps’ 2016 win remain narrowly fought over. The presidents’ re-election campaign has been persistently plagued by his administration’s failure to contain the outbreak.

    A sell-off in tech weighed down Wall Street on Friday, though the S&P500 and Dow managed to end the session higher. Both Amazon and Facebook noted grim profit outlooks for 2021 amid COVID’s resurgence. Elsewhere, reprieve for European markets as strong earnings help prop up broad-based benchmarks after posting their sharpest weekly decline since February.

    Coming into Asia today, Australia, Japan and Hong Kong opened with a spring in their step as China released solid manufacturing and services PMI over the weekends. Though futures were a little changed.

SPT.CO.US-3

Figure 1 (Source: IS Prime): SPT.CO.US daily chart : Crude oil continues to tumble breaking major support lines amid Europe's lockdown.

    The U.S. dollar remains surprisingly docile before Tuesday elections with USDTRY continually outperforming among exotics. The Turkish lira extended losses for 7 consecutive days to above 8.3500, as the nation deals with a plethora of internal issues ranging from ineffective monetary policy, high inflation, and rising cases of COVID-19. Despite on-going Brexit negotiations and renewed 4-week national lockdown, the pound has been relatively mute during morning session. Meanwhile, for the same reasonings, oil tumbled as much as 5.3% intraday in Asia.

    For the week ahead, the RBA (Tuesday), BOE (Thursday) and Federal Reserve (Thursday) will deliberate on monetary policy. No changes are expected from the U.S. however analyst anticipate the BOE will expand asset purchases by another 50bn – 150bn to bolster growth. Australians are also expected to be gifted a 15 bp rate cut on top of additional easing.

Headliner to Review

  • GDP figures was released among Euro Zone members and Canada.
    • As the data does not encompass recent lockdown implications, Q3 GDP saw a rebound from Q2 with Eurozone prelim flash GDP to increase from -11.8% to 12.7%.
      • French flash GDP from -13.7% to 18.2%
      • Spanish flash GDP from -17.8% to 16.7%
      • German flash GDP from -9.7% to 8.2%
      • Italian flash GDP from -12.8% to 16.1%
    • Slower economic growth expected out of Canada with monthly GDP figures to moderate from 3.1% to 1.2%.
  • The figures in the US are better than expectation:
    • Core PCE Price Index m/m dropped slightly to 0.2% compared with the previous figure 0.3%.
    • Personal Spending m/m increased from 1.0% to 1.4%.
    • Chicago PMI decreased slightly from 62.4 to 61.1.
    • Revised UoM Consumer Sentiment increased from 81.2 to 81.8.
  • The manufacturing PMI in China came in at 51.4 while non-manufacturing PMI increased from 55.9 to 56.2. The latest reading was the highest since January 2011. China’s manufacturing sector expands for sixth straight month as pandemic fallout fades.

Headliner to Watch

  • Manufacturing PMI coming out of Canada, U.K. and U.S. expected to hold steady today though next months are expected to be more dire as much of Europe enters nation-wide lockdowns.
  • RBA set to cut cash rate from 0.25% to 0.10% in hopes to bolster a lethargic economic recovery. Much of the state of Victoria remains in lockdown, fortunately newer infection data suggest daily cases are subsiding.

 

Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice.

Authors:
Antony Tan
Ben Li
Kevin Jock

Topics: Market Commentary

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