Market Commentary - January 5, 2021
Volatile start for 2021 as Wall Street tumbled with the VIX index gaining 18% on Monday over rising global uncertainty. Investors wrangled with a conflicting political environment ahead of Georgia’s Senate run-off. A Democrat’s win would almost certainly ensure greater U.S. fiscal stimulus but at the expense of higher taxes for the wealthy and less business-friendly regulatory reform. Alternatively, if Republican’s retain majority, the recently passed bill would most likely be all the relief American households would receive. Meanwhile, U.S. deaths top 354K and the new faster spreading variant risks boosting infections tempering optimism.
European markets followed suit, failing to sustain momentum fuelled by vaccination campaigns and the landmark Brexit trade deal. The STOXX and CAC slipped, whilst the DAX was rejected from closing at all-time highs. The FTSE fared better surging as high 6,666 intra-day but settled for 6,552 at sessions end despite a new national-wide lockdown. The U.K also began administering the Oxford/AstraZeneca vaccine on Monday and is expected to increase the pace of shots in Q1 in hopes to combat the fast-spreading variant.
Mixed price action in Asia, with Australia recovering overnight losses, Japan relatively unchanged and Hong Kong gaining 180 index points following a backflip from the NYSE in delisting Chinese oil firms.
Alongside rising risk, the U.S. dollar index regain some ground as investors began rotating back to risk-off assets. The pound was among the worst performers as bad new piles on. Gold soared $48 to a 2-month high whilst bitcoin plummets from 33,600 to 27,900 and ultimately closing at 30,000 following New Year. Elsewhere, crude falls back around $47 after OPEC+ reached a deadlock with Russia proposing an increase in production on grounds that demand has rebounded.
Figure 1 (Source: IS Prime): XAUUSD Daily : Revised inflationary expectations and safe-haven demand sees gold back above 1,940.
Headliner to Review
- The final Manufacturing Purchasing Managers Index (PMI) in US in November unexpectedly revised up to a more than six-year high, rising from the previous value of 56.5 to 57.1, the highest since September 2014. It has been eight consecutively Monthly expansion when the market expected to fall back to 56.3.
- Canada’s Manufacturing Purchasing Managers’ Index (PMI) growth rate accelerated for the second consecutive month in December 2020, rising from the previous value of 55.8 to 57.9, the highest since the record in October 2010. It has been the sixth consecutive month expansion.
- The Final Manufacturing Purchasing Managers’ Index (PMI) in UK increased from 57.3 to 57.5, which was better than the expectation 57.3.
- The mortgage approval in the United Kingdom in November rose to approximately 104,969, the highest in more than thirteen years since August 2007, and much higher than market expectations of 82,500.
Headliner to Watch
- Unemployment situation across Europe expected to worsen with Spain and Germany jobless to grow 10K and 30.5K respectively. Alongside a lethargic labour market German retail sales set to contract -2.0%.
- US manufacturing PMI expected to continue tapering off November highs to 56.6 but will remain in expansionary territory. On the other hand, China’s Caixin services anticipated to edge higher from 57.8 to 58.1.
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Topics: Market Commentary