Market Commentary - November 10, 2020
Initial COVID-19 vaccine euphoria saw the S&P500 and Dow surge to all time highs, only to have gains pare off by the end of session. Meanwhile, Nasdaq diverged from Wall Street as investors rotated out of technology stocks whom benefited from this years’ work-from-home norm.
Combined efforts from pharmaceutical drug-maker Pfizer and biotechnology firm BioNTech resulted in the development of an experimental shot that appears 90% effective in stopping COVID-19. Despite a successful large-scale clinical trial, questions remain regarding how safe the vaccine is over the long run. Most recently, final-stage trials of Chinas’ Coronavac vaccine were halted in Brazil citing serious adverse event. A category inclusive of death, incapacitation and hospitalization.
Nonetheless, European benchmarks withstood investor cynicism by holding onto intra-day gains. Leading the pack was Spain, up by 8.6% and France, higher by 6.2%, closing at multi-month highs. Both of whom were hardest hit from the recent resurgence in infections across Europe and anticipating economic slowdown from lockdown.
Figure 1 (Source: IS Prime): US500 1-min chart : Entire market cycle can be gleamed from yesterday's US500 price action. From accumulative, markup, distribution and finally the decline.
Moving past elation, Asia saw investors continue profit taking. Since open, Australia, Japan and Hong Kong coordinated declines down 2.3%, 2% and 1.5% respectively. Regardless of the vaccine’s efficacy, regulatory approval, mass manufacturing and distribution would see a readily available drug months away. Renewed geopolitical tension after the U.S. imposed more sanctions over four Hong Kong high profile individuals on top of China’s derailment of Ant Group’s IPO also weighed in on the Hang Seng’s underperformance.
Unlike their stock counterparts, FX markets remained largely stable amid yesterday’s surprise announcement. Among the outliers, the Japanese yen and Gold suffered significant tumbles as investors sought to dump safe-haven assets in favour of riskier returns. The former depreciated 200 pips whilst the later fell $92. The realisation of Turkey’s Central Bank governor dismissal was fully encapsulated in the lira’s appreciation against the American greenback, up 4,673 pips on Monday. Elsewhere, the prospect of back-to-normality saw crude oil rise $2.40.
Headliner to Review
- In China, CPI y/y dropped from 1.7% to 0.5% while PPI y/y remained at -2.1%. Both economic figures are worse than the expectation.
- In September, Germany’s trade balance widened from 15.4bn to 17.8bn, which was better than the forecast of 17.2bn.
Headliner to Watch
- Amid renew lockdown measures, the U.K is expected to see unemployment tick higher to 4.7% from 4.5%. Alongside worsening employment conditions, claimant count change is also expected to stay positive at 20.3K.
- Likewise, nationwide lockdowns are expected to impact French and German industrial production. With the former set to decline from 1.3% to 0.8%, whilst the later set to contract -1.9%.
- Economic sentiment in Europe and particularly Germany is expected to get a beating. ZEW’s index is expected to decline from 52.3 to 43.3 amid coronavirus woes across Europe.
- The RBNZ is expected to keep the cash rate unchanged at 0.25% as the nation enjoys a health economic recovery unabated by resurging infection cases experienced by other developed counterparts.
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Topics: Market Commentary