Market Commentary - November 11, 2020
Pfizer’s vaccine continues to grab headlines with the S&P500 and Dow holding steady after Monday’s overreaction. Still an outlier among Wall Street, Nasdaq diverges 1.9% lower for two consecutive days. In addition to investors adjusting bets taking advantage of a cyclical recovery, tech worldwide has been plagued by a slew of negative announcements. Amazon faces anti-trust complaints from the E.U whilst Ant group will return 120bn HKD to investors following a suspended IPO. Meanwhile, China is overhauling antitrust guidelines to reign in on internet monopolies and their growing economic influence.
Despite European member states in partial or full down, broad-based benchmarks surge on ahead on the back of the European Commission expected to approve a contract for the supply of Pfizer’s and BioNTech’s potential vaccine. Investors are willing to look ahead past a pandemic plagued market towards optimism. Not to mention President-elect Joe Biden is expected to restore U.S. – E.U. trade relations.
Mixed results in Asia with Australia ticking higher, Japan remaining relatively unchanged and Hong Kong weighed down by political turmoil after Beijing seeks to disqualify Hong Kong lawmakers deemed “unpatriotic”.
Figure 1 (Source: IS Prime): IDX.US.500 vs IDX.US.100 5 Minute Chart (rebased to 100): Following Pfizer's announcement a clear divergence in Wall Street can be seen as investors rotate out of tech in favour of cyclical.
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
- The Reserve Bank in New Zealand kept the official cash rate at 0.25% rather than decrease it to zero. The Reserve Bank rolled out a new scheme to lend money at very low interest rates to stimulate the economy. Negative rates may be considered by retail banks by the start of December if the economic hit from COVID-19 prove damaging enough.
- US JOLTS Job Openings increased from 6.35 million to 6.44 million, which was worse than the forecast of 6.5 million. Vacancies remained far below the 7 million level in February before COVID-19.
- Unemployment rate in UK jumped from 4.5% to 4.8%. Young people have been hardest hit particularly as new hiring’s plummet along with internships and graduate jobs. Since the government tapered wage support for furloughed workers, there has been reluctance by employers to hire amid an uncertain outlook
- French Industrial Production m/m increased from 1.1% to 1.4% while Italian Industrial Production m/m dropped from 7.4% to -5.6%.
Headliner to Watch
- A lack of major macroeconomic news today as :
- France rejoices Armistice Day.
- Canada observes Remembrance Day.
- U.S. celebrates Veterans Day.
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Topics: Market Commentary