Market Commentary - November 18, 2020
Wall Street retreated following Fed Chair Jerome Powell downplaying vaccine optimism, citing amid current rising infection rates, there exist significant economic downside in the near term and any recovery has a long way to go. Powell’s sentiment further reinforced by Tuesday’s U.S retail sales data failing to meet analyst expectations. With American consumer spending curtailing as we fast approach Christmas shopping season, alongside a lack of fiscal development in congress, 2020’s year-end outlook is becoming seemingly bleak.
Following suit, European markets corrected from an 8-month high as tighter piecemeal COVID restrictions begin to weigh in on short-term economic outlook. Most recently, post-lockdown, the U.K. government is contemplating stricter controls than the previously announced three-tier system. Sweden too has stepped up efforts, with a new ban on public gatherings and a recommendation to avoid public transport.
The S&P200 defied overnight sentiment edging higher to a new nine-month high and revelling in their first glitch free day of the week. Meanwhile Hong Kong rose 1.1% intraday as China shrugs off news that the U.S. Securities and Exchange Commission is contemplating delisting Chinese companies on U.S. stock exchanges for not complying with American auditing standards. Thus far, Beijing has blocked attempts by U.S. regulators in auditing firms citing confidentiality. Elsewhere, Nikkei set to post two consecutive days of loses as the nation faces COVID strife of their own and investors repatriation results in the Japanese yen appreciating 4 days in a row.
Figure 1 (Source: IS Prime): USDCNH Daily Chart : In search for higher yield, investors drive China's yuan to a 15-month high .
In focus today, bitcoin fast approaches all-time highs of 19,666 made in Dec-17 2017 after soaring another $850 intraday parabolically to $18,465. The U.S. dollar regains some ground against the Aussie and Kiwi but news of a breakthrough on Brexit negotiations saw the Pound rise 55 pips and Euro end in positive territory. Elsewhere, demand for China’s yuan remains relentless. Recent IMF projections see China’s per-capita income jump 56 places to be ranked 70th in the world.
Headliner to Review
- Amid the Bay Area Council Business Hall of Fame Awards Ceremony, Powell remarked the Fed is committed to using all tools to support economic recovery whilst raising concerns that “the next few months may be very challenging”.
- The figures in U.S. retails sales were worse than anticipated with core retail sales dropping from 1.2% to 0.2% while retail sales m/m dropped from 1.6% to 0.3%. Following August, varying government support programs have expired weighing in on the average consumer spending habit.
- During an online webinar, RBA Governor Lowe noted Australia’s need to keep strong trade relationship with China to prevent further economic impacts. Especially as the pandemic leaves an extend period of higher unemployment.
Headliner to Watch
- Canadian monthly CPI data set to post positive figures following 2 consecutive months of deflationary data.
- Australian unemployment expected to show another month of further joblessness with the rate to increase from 6.9% to 7.1% and 26.7K Aussies to go unemployed.
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Topics: Market Commentary