Market Commentary - November 16, 2020
The ongoing U.S. election saga saw a hint of Trump accepting defeat as the President tweeted “He won because the election was rigged” only to recanted it moments later announcing, “I concede NOTHING”. Despite a transition in chaos and deteriorating health situations across the country, Wall Street nonetheless notched higher last Friday with the S&P500 closing at all-time highs. Whilst the Dow is just 25 points shy from following suite, the Nasdaq continues to underperform amid a rotation towards cyclical shares. Vaccine hope continues to fuel optimism, especially as we will likely seek Moderna’s trial results this week. The incoming administration COVID-19 advisers further relieved concern that they would opt for targeted local restrictions as opposed to nationwide lockdowns. Likewise, European indices and the U.K recovered lost ground from Thursday’s brief correction.
Asia markets poised for gains followings the world’s largest Asia-Pacific free-trade agreement deal signed on Sunday during the 37th Asean Summit. Among the most noteworthy supporters were Australia, China, Japan, and South Korea. The agreement is said reduce tariffs, unify e-commerce rules, and alleviate logistic strains via universal regulations. An expected 26.2tn worth of GDP will flourish under the deal.
Following better than expected GDP figures in Asia session, the Nikkei settles comfortably at a 29-yr high, rallying 0.9% intra-day. Futures saw the S&P200 surge 40 points only to be subsequently weighed by disruptions in the ASX equity markets. Share trading has been paused after the exchange discovered market data issues. Hong Kong enjoyed a 0.97% gap higher but retreated following profit-taking.
Figure 1 (Source: IS Prime): JP225 Weekly Chart : A cascade of positive news from Biden's win, COVID-19 vaccine, free-trade agreement and better than expected GDP boost the Nikkei to a 29 year high.
Across the board, the U.S. dollar saw outflows as investors searched for higher yield. Last week saw the RNBZ wrong footed speculators when the bank chose not to explore negative rates. Elsewhere, in a single week the Turkish lira reversed a month of depreciation as the banks new head adopts a hawkish approach. Demand for China’s yuan resumes, much to the credit of their economic growth, with recent Q3 figures solidifying acceleration. Elsewhere, gold struggles to regain the $1,900 level whilst crude oil slips slightly. On the crypto front, bitcoin remains strong above 16,000.
For the week ahead, a breather for all as there’s a lack of central banking monetary policy decisions.
Headliner to Review
- Flash Employment Change in Europe increased by 0.9%, compared with the previous decrease of 2.9%. Flash GDP decreased slightly from 12.7% to 12.6%.
- US Core PPI m/m dropped from 0.4% to 0.1% while US PPI m/m dropped from 0.4% to 0.3%.
- Prelim UoM Consumer Sentiment decreased from 81.8 to 77.0, which was worse than the expectation 82.1. Prelim UoM Inflation Expectations increased slightly from 2.6% to 2.8%.
- Economic figures in Japan were better than the expectations. Prelim GDP Price Index y/y decreased from 1.3% to 1.1%. Prelim GDP q/q jumped from -7.9% to 5.0%.
- Economic figures in China meet the market expectation. Unemployment rate decrease slightly from 5.4% to 5.3%. Retail Sales y/y increased from 3.3% to 4.3%. Industrial Production y/y remained at 6.9%. Fixed Asset Investment ytd/y increased from 0.8% to 1.8%.
Headliner to Watch
- The RBA will release their meeting minutes tomorrow following a rate cut early this month. Much anticipated is their economic outlook and factors in determining further easing coming into 2021.
- RBA Gov Rob Lowe is expected to speak in an online webinar in relation to COVID and its impact towards the changing monetary policy landscape.
- Likewise, ECB President Christine Lagarde is due to speak at the World Economic Forum’s Pioneer of Change Summit.
- ECB set to release their Financial Stability Review, of which is expected to garner much attention amid Europe’s second-wave of COVID-19.
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Topics: Market Commentary