Market Commentary - October 28, 2020
Outlook for a global rebound dim ahead of U.S. presidential elections as uncontained outbreaks across Europe and U.S. hinder economic recoveries. While U.S. benchmarks Dow and SP500 closed lower at 0.8% and 1.2% respectively, Nasdaq bucked the trend etching out a minor gain on the back of AMD’s $35bn takeover of Xilinx. Meanwhile, possibility for COVID relief reached zero following the U.S. Senate adjourning for recess till November 9.
Europe paints a similar picture extending losses across the board. The FTSE, DAX and STOXX hit 4 to 5-month lows with France and Spain faring better settling at monthly lows. Investors foresee a slippery slope towards full nation-wide lockdowns after Germany began implementing “light” measures preventing bars and restaurants from opening. Likewise, France considers extending nightly curfews for another month.
Asia opened mixed, with Hong Kong and Japan relatively mute, though Australia rallied 0.6% following solid earnings announcements from blue chips like Afterpay and Blackmores.
Figure 1 (Source: IS Prime): Bitcoin Weekly Chart : Bitcoin momentum continues with the cryptocurrency hitting a 3 year high.
Overall risk-off sentiment see’s the U.S. dollar in favour with the Aussie and Kiwi outperforming their European and U.K. counterparts betrodden by COVID. In the east, the PBOC removed the counter-cyclical factor in calculating the yuan’s daily reference rate in an indirect attempt to intervene in the currency’s appreciation. Middle east saw USDTRY break records again, gaining over 1,000 pips on Tuesday, just 0.2% shy from the 8.2000 level. The HKMA sold another 6.4bn HKD to defend their band as demand for HKD reach frenzy highs in anticipation for Ant Groups 34bn USD IPO on November 9th.
Rumours that Singapore bank DBS is building a crypto exchange and will offer crypto custody services regulated under MAS saw Bitcoin break $13,500. Briefly touching 3-year highs of $13,880 but still a fair distance away from all-time highs of $19,783. The cryptocurrency continues to enjoy a spate of rally inducing announcements.
Headliner to Review
- U.S. monthly core durable and durable goods orders jumped to 0.8% and 1.9%, which was much better than the forecast of 0.3% and 0.5% respectively.
- U.S. consumer confidence decreased from 101.3 to 100.9, which was worse than the expectation and remains well below pre-pandemic levels. Factors including the increasing cases of coronavirus cases across the US and the uncertainty over next week’s presidential election may play an important role in the consumer confidence index.
- Australia’s CPI increased from -1.9% and 1.6% QoQ, which was slightly better than the forecast of 1.5%. Trimmed Mean CPI increased from -0.1% to 0.4%. Q3 saw the resumption in business activity across Australia following Q2 nationwide lockdowns. However, the two core measures are both far below the RBA’s target. It may result further easing to come at the November 3 policy meeting.
Headliner to Watch
- Wednesday will see Bank of Canada hold their monthly monetary policy meeting. Overnight rates are expected to remain at 0.25% and unlikely to adjust until organic economic growth and 2% inflation is achieved.
- Despite revising growth and inflation outlook down for 2020, the Bank of Japan is expected to leave monetary policy unchanged but stands ready should economic woes deepen further. Of existing tools, the first line of defense would see the BOJ aggressively purchase corporate debt and implement lending facilities to funnel money into smaller firms.
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Topics: Market Commentary