Market Commentary - October 09, 2020
Asia is off to a mute start as investors mulled whether taking on weekend volatility outweighed risk if U.S. stimulus talks were to derail over Saturday and Sunday. Following Trump personally torpedoing congressional relief negotiations, the President’s subsequent backflip fuelled a 2-day rally across global indices. By the end of yesterdays session, Wall Street closed at monthly highs with the S&P500 leading the charge. Likewise, European indices hit a 3-week high despite Brexit risk and newly imposed Iranian bank sanctions protruding into investor mood.
With talks resuming between House Speaker Pelosi and Treasury Secretary Mnuchin, the U.S. dollar edged lower against a basket of major currencies. Though Pelosi has rejected a stand-alone airline bailout, her party has revised down their proposal to $2.2tn (from $2.4tn). Also. as election odds blow out in favour of Joe Biden, investors are seeing an increasing likelihood of stimulus if Democrats won the presidency. Of exotic currencies, China’s yuan rallied 0.5% on open today after a week-long Chinese holiday. A resurgence in COVID-19 cases have set back Thailand’s plan to reopen for tourism. As a result, alongside continuing anti-government protest the Thai baht continues to under perform among Asian currencies against the greenback.
Figure 1 (Source: Refinitiv): Bitcoin Daily Chart : Since breaking above 10,000 this year, Bitcoin has safely settled above the key psychological level.
As the U.S. Gulf Coast braces for a third hurricane (named Delta) in the past 2 months, crude prices rose 3% on Thursday. The hurricane recently upgraded to a category 3 (with 5 being catastrophic) is expected to make landfall by Saturday. Approximately 30% of offshore crude oil production facilities has been forced to closed.
Bitcoin received a boost, both in price (up 2.3%) and in public relations when Square CEO Jack Dorsey announced the company had purchased $50mn worth of the cryptocurrency. Equivalent to 4,709 coins and 1% of Square’s total asset. As of today, approximately 18 million bitcoins have been mined out of the 21 million cap. Of that 18 million, only 16.3 million is actively circulated leaving 1.7 million considered zombie coins where some experts believe are forever lost.
Headliner to Review
- Unemployment claims fell slightly to 840,000 disappointing analyst consensuses of 820,000. Of the past 5 weeks, analyst have missed official numbers 4 times bringing forth into question are forecaster overly optimistic regarding U.S. labour markets.
- Bank of England (BOE) Governor Andrew Bailey said Britain and EU should reach trade deal. He said, “In terms of our policy tools, and we will use that firepower as appropriate, properly and strongly in response to second and third waves, where we think it is necessary,”
- The seven-day average of confirmed Covid-19 cases in Canada reached a new high since the onset of the pandemic. Bank of Canada (BOC) Governor Tiff Macklem warned, "As much as a bold policy response was needed, it will inevitably make the economy and financial system more vulnerable to economic shocks down the road."
- The Reserve Bank of Australia (RBA) in Financial Stability Review warned that business failures will rise substantially. “These businesses are in a tenuous position and are particularly vulnerable to a further deterioration in trading conditions or the removal of support measures"
Headliner to Watch
- Canada expected to release employment change and unemployment rate figures illustrating an ever-improving labour market. 150,000 Canadians is expected to be employed whilst the jobless rate is seen to decline to 9.8%
- As the U.K. GDP growth moderates to 4.6%, growing concern surround the economic impact of the counties second wave of COVID-19. Health officials believe a culture of eating out and drinking in pubs have further exacerbated the situation.
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Topics: Market Commentary