Market Commentary - September 8, 2020

Posted by Kevin Jock on Sep 8, 2020 6:58:53 AM

    Brexit back in the headlines with the pound sinking 0.9% on a quiet day more or less as the U.S. celebrates Labour Day. Against other majors and gold, the greenback gained slightly. U.K PM Boris Johnson publicly stated on Monday if a withdrawal agreement is not met by Oct. 15th, he’d rather a no-deal Brexit than compromise on conditions seen favourable to the E.U. Markets were reminded of the risk of UK leaving without a deal, especially as the Dec. 31st deadline looms, where the standstill agreement expires.

    Elsewhere President Trump ups the ante against Beijing, as he intends to decouple economic relationships between China and the U.S. Tariffs will be imposed on American companies creating jobs in China, as well as forbidding such companies from obtaining federal contracts.

GBPUSD Intraday

Figure 1 (Source: Refinitiv): GBPUSD intraday - Pound slides as geopolitical tensions rise between UK and EU over Brexit conditions.

    Europe shrugged off last weeks U.S. led tech rout with major benchmarks up for the day. Dax jumped 1.7%, France higher by 1.2% and Stoxx with a moderate 1.1%. Amid Brexit talks, U.K. surprisingly fared better gaining 2.1%. Asia off to a mute start with Australia and Japan mostly unchanged, though Hong Kong plummeted - 1.4% after open despite Chinese bottled water giant Nongfu Spring’s IPO debut, with shares soaring 85 percent today.

    Oil extended losses as Saudi Arabia’s demand concerns continue to reverberate in fuel markets. Major support seen at the 10,000 level in bitcoin as attempts to break down fail.

Headliner to Review

  • Victoria’s relapse into stage 4 lockdown restrictions continues to hinder business confidence with the NAB seeing the index climb from -14 in July to -8 in August. However, still in negative territory as it reflects weakness in employment, sales and profitability amid the COVID-19 pandemic.
  • Final GDP of the second quarter in Japan dropped slightly to -7.9% from -7.8%, which was better than the expectation -8.1%. it is still very weak. Considering the risks to Asia’s major economy highlighted by the Bank of Japan policymakers, the weakness in the GDP may push the Japanese central bank towards further easing. PM candidate front-runner Chief Cabinet Secretary Yoshihide Suga is expected to continue pursing “Abenomics”.

Headliner to Watch

  • The Euro zones revised GDP is expected to see the continent contract -12.1% as 3rd quarter employment declines by -2.8%. Retail sales from Italy set to show stark warnings signs with numbers drastically declining from 12.15 to 1.1%. Despite implementing a 750bn stimulus fund, economic recovery remains fragile
  • Consumer confidence out of Australia expected to stay negative for 3 consecutive months. Weakness all-round in recent macroeconomic number as well as lockdown and state border closures has kept pessimism afloat.
  • Swiss unemployment expected to edge higher 3.4%. Much of the impact from COVID-19 has hit young people particularly hard whilst people on short-term work permits is set to decline.
  • Inflationary pressure in China is set to weaken from 2.7% to 2.4% despite better than manufacturing and services PMI last week.

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Antony Tan
Ben Li
Kevin Jock

Topics: Market Commentary

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