Market Commentary - November 30, 2020
Global indices are poised to have one of their best if not the best performing month on record following a spate of well received announcements during November. From Joe Biden’s Presidential win to COVID-19 vaccine breakthroughs and central banks alluding to additional quantitative easing. All events pointing to accelerating economic recoveries next year. However, it is not all smooth sailing ahead as the out-going administration escalates tension with Beijing to cement President Trumps tough on China legacy and wedge President-elect Biden into a hardline position against Beijing. Documents revealed today see China’s top chipmaker SMIC and oil & gas producer CNOOC added to a blacklist curbing access to U.S. investors.
Heightening anti-China rhetoric and month-end profit booking saw risk aversion amid Monday’s Asia session as broad-based benchmarks retreated on open. Both Australia and Japan decline by 125 and 330 points respectively, whilst Hong Kong gapped lower by 130. Futures across U.S. and European markets caught wind and followed similar price action.
Figure 1 (Source: IS Prime): XAUUSD Daily : Following a break of an important support level at 1,850, gold suffers as economies return to normalcy
Since Jerome Powell testified to congress last Tuesday, the American greenback has steadily lost ground among major peers. The Federal Reserve has increased speculation more bond purchasing will be announced in December to support an economy lacking fiscal stimulus.
In focus today, crude oil retreats below $45 as the OPEC-JMMC meeting on Sunday fails to meet a consensus. The group largely agrees to maintain production cuts going into 2021’s first quarter however the UAE and Kazakhstan have opposed continuing such measures with complaints from also Iraq and Nigeria. Thus far since the pandemic started, vast supply curbs were implemented to support the price’s meteoric rise from April lows. OPEC only members will meet again today to devise an agreement. Failure would result in an expected additional 1.9mn barrels of output a day.
Elsewhere, after bitcoins tumble from all-time highs to 17,000, the cryptocurrency surged to 18,000 following China’s seizure of $4.2bn worth of coins from South Korean based crypto exchange PlusToken. Authorities swooped in on the basis the exchange operated like a Ponzi scheme guaranteeing that interest-bearing accounts would generate 8%-16% returns monthly.
Headliner to Review
- Japan’s retail sales on October rebounded 0.4% month-on-month, compared with previous figure of 0.1% decrease, which was slightly worse than market expectations of 0.5% increase. The retail sales by year rebounded from -8.7% to 6.4%, ending the seven-month consecutive decline, which also slightly exceeded market expectations and rebounded by 6.3%.
- In Australia, MI Inflation Gauge m/m rebounded from -0.1% to 0.3%. Company Operating Profits q/q dropped from 15.8% to 3.2%. Private Sector Credit m/m remained at 0.0%.
- In China, Manufacturing PMI rose from 51.4 in October to 52.1 in November and Non-Manufacturing PMI rose from 56.2 in October to 56.4 in November. China’s economic activity extended its strong growth in Nubember.
- The business confidence levels in New Zealand are continuing to improve, rising from 15.6 to -6.9, almost 9 points higher than previous month.
Headliner to Watch
- Following November's 15 basis point rate cut, the RBA is expected to leave December policy rates unchanged on Tuesday in a wait and see approach.
- U.S. pending homes sales expected to expand 1.1% in November following an unexpected contraction in August.
- U.S. Chicago PMI index will see a slide down to 59.4 from 61.1, though the long-term picture still shows a relatively stable U.S. recovery.
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Topics: Market Commentary