Market Commentary - November 3, 2020
A day away with Monday polls showing Democrat Joe Biden still ahead nationally by 8.5 points, global indices have seemingly shaken off U.S. presidential election jitters amid European efforts in containing a resurgence in COVID-19. Both the S&P500 and Dow rebounded 0.7% and 1.1% respectively though Nasdaq continues to lag with the tech benchmark edging lower. The tone set by Apple and Amazons’ outlook last Friday has investors rotating into cyclical stocks well positioned to take advantage of an inevitable U.S. fiscal stimulus.
Likewise, European markets followed suit, further buoyed by better than expected factory activity overshadowing recent re-implementation of lockdown protocols among member states. Though morning trading saw a glitch delaying STOXX opening by 1 hr, the index nonetheless rose 1.8% by sessions’ end. Germany and U.K. also posted healthy gains amid on-going Brexit negotiations with the deadline just nine weeks away. A no-deal Brexit would see $900bn of annual bilateral trade tarnished by tariffs and quotas.
Mondays’ mood flowed into Asia’s session with Hong Kong and Japan opening upbeat. Poised to benefit ahead of RBA’s announcement the S&P200 positioned itself higher by 2.3% intra-day as investors price in the expected 15 basis point cut.
Figure 1 (Source: IS Prime): USDRUB daily chart : Investors flee the Russian ruble as a confluence of global risk factors increase near-term uncertainty
Mixed sentiment in FX ahead of U.S. elections results saw the U.S. dollar index strengthen to a 1-month high, however recent performance against majors remain underwhelming. Among exotics, USDRUB hit a 6-month high above 80.0000 plagued by a persistent rise in infection cases of their own, pessimistic medium-term outlook in oil and a Joe Biden win which would be detrimental to US – Russian relations. Meanwhile the Turkish lira continues to break records appreciating another 900 pips to settle above 8.4000.
Elsewhere gold steadies itself just below the 1,900 level, while oil bounced back sharply to above $36 as investor chase value.
Headliner to Review
- Much to markets surprise, manufacturing activity released yesterday from Europe, U.K. Canada and the U.S. was better than anticipated. Well worth noting though, European and U.K. figures does not entail the impact from recent nationwide lockdown
- Euro manufacturing PMI from 54.4 to 54.8
- U.K. manufacturing PMI from 53.3 to 53.7
- Canadian manufacturing PMI from 56.0 to 55.5
- U.S. manufacturing PMI from 55.4 to 59.3
- As expected, the RBA cut the official cash rate from 0.25% to 0.10%. The board stated Australia continues to face a period of high unemployment with a bumpy and drawn out economic recovery.
Headliner to Watch
- All eyes will be glued to the U.S. Presidential election on Tuesday. Whilst Trump made his final pitch in battleground states Wisconsin, Michigan, North Carolina and Pennsylvania, Biden toured Pennsylvania and Ohio. Over 98m have voted thus far, with Biden favoured to win by pollsters and betting odds.
- New Zealand expected to show a jump in joblessness with the unemployment to increase from 4% to 5.3%. At the expense in successfully containing an outbreak, the labour market took a hit in Q3 as businesses shut down. Nonetheless, Q4 is expected to see an improvement with much of economy returning to norm.
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Topics: Market Commentary