Market Commentary - January 29, 2021

Posted by Kevin Jock on Jan 29, 2021 6:52:43 AM

    Wall Street’s overnight bounce faded as Asia-Pacific benchmarks opened on Friday. Growing concerns over a potential cash squeeze in China saw Australia’s S&P200 chip away 144 index points. With the Australian services sector restricted by COVID-19 related measures, mining companies have thus far supported the market on the back of China’s V-shape recovery. However, as China’s short-term borrowing cost spiked back to pre-COVID-19 levels, construction activity will inherently be affected. Meanwhile, the Hang Seng fell 177 points as Q4 GDP contracts 6% whilst the Nikkei declined 647 points from end-of-month portfolio rebalancing by pension funds.

    Volatile session across U.S. indices on Thursday, with a 3% daily range but gaining just under 1% into positive ground. News of the day, Main Street’s rebellion hampered by trade restrictions by the likes of Robinhood, Charles Schwab and Interactive broker preventing buying of volatile stocks. Statements released by affected brokers validated the moved as a risk management decision to protect investors.

    European counterparts closed higher over upbeat earning reports, despite the EU’s vaccine tussle with AstraZeneca and continuing coronavirus restrictions. Across the channel, UK’s FTSE100 ended slightly in positive territory.

    Improving risk-appetite saw the U.S. dollar edge lower. Since her confirmation, Treasury Secretary Yellen has rejected a strong dollar policy. Consequently, her remarks have opened the administration up to the possibility of currency wars claims.

    Bitcoin received a boost back above 33,000 from Ray Dalio, after the founder of Bridgewater Associates called the cryptocurrency “one hell of an invention” to protect against fiat money debasement. Likewise, Reddit frenzy caused silver to spike 4.6% to $26.45 following a post encouraging people to purchase iShares Silver Trust for another short squeeze. Elsewhere crude slides but remain above $52 and gold at $1,843.

Market Commentary - January 28, 2021

Posted by Kevin Jock on Jan 28, 2021 4:48:42 AM

    Reassurances from the Fed failed to stave off Wall Street’s dive as corporate earnings outlook raise concerns over extended valuations. This despite tech giants like Apple reporting their highest-ever net-profit quarter and Tesla topping analyst expectations. Meanwhile, Federal Reserve Chairman Powell delivered a doubled edged message yesterday. Reiterating the central banks commitment in sustaining monetary easing and dispelling rumours of tapering whilst articulating a slower US and global recovery amid a resurgence of COVID-19.

    Likewise, economy-linked stocks across Europe soured with the German government slashing it’s GDP forecast for 2021 and other Euro members likely to follow to suit. The re-evaluations come amid extensions in coronavirus lockdowns. Pandemic risk was further elevated following a dispute between EU and AstraZeneca. Brussels has claimed the vaccine maker is in breach of contractual commitment by prioritizing deployment towards the UK implying delays to Europe’s inoculation campaign.

    Asia-pacific benchmarks extended overnight sentiment. The S&P200 slumped 75 index points, Hang Seng declined for 3 consecutive days and Nikkei fell as much as 310 points. Japan faces deployment woes of their own, with health experts insisting local clinical trials before the scheduled roll-out in March.

    Risk aversion saw the U.S. dollar gain amid the stock rout. Among majors, the euro fell 50 pips following ECB members warning the bank may consider piecemeal interest rate cuts to curb the currencies demand. Despite growth concerns, crude stayed above $52, gold edged lower to 1,844 and bitcoin bounces off 30,000 back to 31,000

Market Commentary - January 27, 2021

Posted by Kevin Jock on Jan 27, 2021 7:20:40 AM

    Wall Street’s Dow and S&P500 remain steady ahead of Wednesday’s FOMC announcement. With COVID-19 still headlining main street news as global cases surpass 100m and Biden’s administration contemplating travel bans, Nasdaq outperformed up 0.7%. Corporate earning announcements from tech firms yesterday reveal stay-at-home companies continue to profit heavily from an otherwise dire situation.

    Across the Atlantic, European benchmarks snap a 3-day decline. Though lockdown extensions still weigh heavily across investor minds, the IMF yesterday has raised their global economy growth forecast by 0.3% for 2021 to 5.5% on the basis the vaccine roll-out will promote economic recovery. Elsewhere, the FTSE100 was relatively unchanged despite the U.K. becoming the first nation to hit 100,000 deaths compared to European counterparts.

    Australia’s S&P200 slips as much as 0.6% intraday on concern’s China may be cooling off. For the past months, metal prices have surged, especially iron ore to multiyear highs on the back of Chinese construction activity. However, signs are emerging Beijing will rein in on government expenditure this year considering the V-shape recovery amid 2020. Likewise, Hong Kong and Japan pointed lower during Asia session.

    The U.S. dollar retreated against majors anticipating a dovish tone from Fed Chair Powell today. Crude oil hovers below $53 whilst gold closes lower at 1,850 and bitcoin finds support at 31,000.

Market Commentary - January 26, 2021

Posted by Kevin Jock on Jan 26, 2021 4:42:26 AM

    Choppy start to the week on Wall Street as investors were whipsawed following comments from Senate Majority Leader Schumer cautioning a relief bill may not pass till March. This, despite previous reports that Democrats intend to push through the stimulus plan before Trump’s impeachment trial in February. A change in tone by President Biden, calling for open dialogue with Republicans to head off concerns that $1.9tn is too expensive further left markets anxious. U.S benchmarks tumbled as much as 2.75% intra-day before regaining ground by sessions end.

    COVID-19 woes continue to persist across Europe as indices tumble on Tuesday with technology the only sector outperforming. The slow pace of vaccination remains a cause for concern alongside the new variant of which Moderna’s existing vaccine results illustrate, is only one sixth as effective as against the original strain.

    Whilst Australian’s celebrates Australia Day, overnight risk-off sentiment seeped into the Hang Seng and Nikkei. Thus far, the former has fallen 560 index points and the latter 225 points intra-day. Assurance for Japanese investors though, as members of the BOJ explore more flexible options in prolonging the centrals bank’s massive stimulus program. One member has brought forth the idea of expanding ETF purchases.

    The U.S. dollar gained against a basket of majors as stimulus jitters leaves risk appetite afar. Meanwhile, level headedness offsets irrational exuberance with bitcoin continuing its slide lower hitting 31,500. Crude oil oscillates between $51 - $53 ahead of Wednesday’s inventory data. Likewise, gold stalls at the $1,855.

Market Commentary - January 25, 2021

Posted by Kevin Jock on Jan 25, 2021 6:16:45 AM

    Australia and Japan’s benchmarks pointed higher Monday open following reports on Sunday that the Democrats using their newly elected Senate majority power, intend to push through the 1.9tn stimulus plan before Donald Trump’s impeachment trial on February 8th. The Hang Seng outperformed rallying 2% as Hong Kong lifts it’s 48-hour lockdown in the city of Kowloon amid a spike in daily cases in the area in question. Over 10,000 residents were affected, with 7,000 tested during the weekend and 13 found positive.

    Wall Street slipped last Friday hampered by continuing coronavirus concerns especially as retail sales drag and joblessness remains elevated. With vaccine distribution being key to a return to normalcy, Biden’ Chief of Staff conveyed, since taking office, the administration was surprised that no formal roll-out plan had been devised by Trump and his advisors.

    Europe followed suit, ending the session lower. A double-dip recession is anticipated for the Euro area and UK as restrictions curb economic activity. New measures by the EU focus on hotspot area’s labelled dark red zones. Travelers to and from these areas will be required to partake a COVID-19 test and quarantine.

    Pandemic gloom alongside a halt in risk appetite saw the U.S. dollar hold its’ ground among its peers. Crude oil fell a dollar closing just below $52, gold at $1,855 and bitcoin recovers back to 33,000.

    For the week ahead, all eyes will be on the FOMC press conference on Wednesday. Investors are expecting further assurance from Fed Chair Powell on top of Biden’s stimulus plan. Meanwhile. the World Economic Forum begins today, with China President Xi Jinping headlining the day’s opener. Biden’s administration has taken a softer tone as the U.S. state department urged for dialogue between China and Taiwan following Chinese military planes entering Taiwanese airspace on Saturday.

Market Commentary - January 21, 2021

Posted by Kevin Jock on Jan 21, 2021 5:43:18 AM

    America ushered in their 46th President as Wall Street welcome’s Joe Biden with record highs fuelled by prospects that looser fiscal expenditure will kick-start economic growth. In his inauguration speech Biden addressed the nation, focusing on unity and cooperation among fellow American’s juxtaposed by the 25,000 heavily geared troops guarding the ceremony. Despite gaining a majority on the Senate floor, it’s not all smooth sailing ahead. Various business leaders have vowed to lobby against planned corporate tax hikes, tight regulation and increases in federal minimum wage.

    European benchmarks ended their session near intra-day highs as all eyes were on the U.S. The ECB will meet on Thursday, but no changes are expected given the expansion in bond-purchases since December. ECB President Christine Lagarde will more likely shift burden on towards governments and their fiscal policy to chart 2021’s course as fresh lockdowns impact recovery.

    Asia-pacific indices pointed higher following overnight optimism. Australian job data helped bolster the S&P200 higher by 28 index points, whilst the unprecedented Mainland Chinese interest in Hong Kong stocks, saw the Hang Seng hit the 30,000 level. An estimated $27bn has been poured in the market via the stock connection since the start of the year. Though uncertainty still overshadow future US – China relations. Whilst the Biden is not expected to adopt Trumps’ hard-line approach to China, thus far the incoming administration has not signalled relaxing the existing sanctions. In final bout of tit-for-tat, China has sanctioned various out-going Trump officials including Secretary of State Mike Pompeo. Meanwhile the Nikkei edges higher after the BOJ revised their 2021 growth forecast higher noting enough stimulus has been delivered that will eventually offset the pandemic.

    The U.S. dollar retreated among majors as the Treasury is set to light up the printing press. Crude ranges around $53 as investors balance between COVID restricting demand recovery and fiscal stimulus boosting economic activity. Gold rises $31 whilst bitcoin appears to find itself in a state of equilibrium as volatility subsides.

Market Commentary - January 19, 2021

Posted by Kevin Jock on Jan 19, 2021 5:59:30 AM

    Despite a bank holiday, futures on Wall Street managed to etch out gains ahead of Janet Yellen’s confirmation hearing for Treasury Secretary in front of the Senate Finance Committee. Though Yellen will touch on topics of foreign exchange and taxes, the hearing is anticipated to act as a proxy forum for lawmakers to grill incoming President Joe Biden’s 1.9tn stimulus package.

    European benchmarks regained momentum cheered on by better than expected GDP figures out of China. The quarterly rebound saw luxury goods stocks outperform as much of industry is dependent upon Chinese consumption.

    With social restrictions to extend past January amid triple digit infection rates stifling Hong Kong’s economic recovery, the Hang Seng surged among Asia-Pacific indices posting 860 index point. Much of the move can be seen driven by inflows from Mainland China seeking value via the Stock Connect program. Thus far, Hong Kong stocks have boasted one of the lowest price-earning multiples across Asia, with Mainland counterparts 35% more expensive. Elsewhere, the S&P200 and Nikkei climb 49 and 315 points respectively. The state of Queensland in Australia is expected to lift restrictions, whilst miners led the board on increased electricity consumption in China, indicative of improving industrial activity.

    The U.S. dollar index reaches a 1 month high amid a quiet market yesterday with the Turkey lira in focus. President Erdogan reiterated previous comments suggesting higher inflation accompanies higher interest rates. His comments put the newly placed central bank chief in a tough spot, of whom since taking the position, has raised benchmark rates to 17% from 8.25%. Meanwhile, crude fluctuates above $52, gold closes yesterday at 1,837 and bitcoin remains at 36,000.

Market Commentary - January 18, 2021

Posted by Kevin Jock on Jan 18, 2021 5:49:46 AM

    Ahead of Joe Biden’s inauguration, global indices ended last week lower as uncertainty overshadow the ambitious 1.9tn stimulus package. The President-elect has promised, once officially in office will sign several executive orders overturning a raft of contentious policies implemented by Trump. Meanwhile, Democrats have become divided over the one-time stimulus check amount. Far-left purveyors have argued for another 2,000 whilst moderates voiced 1,400 is sufficient in topping up the 600 already passed in December.

    COVID-19 still grabbed headline across Europe as benchmarks retreat. Ever escalating restriction’s have sowed the possibility of a double-dip recession, whilst the rate of inoculations has remained below expectations amid resurging cases. Mixed trial data for China’s Sinovac vaccine has delayed Hong Kong’s distribution. Nevertheless, the Hang Seng rallied 1.1% on open on the back of expectations beating GDP figures out of China. Australia points lower and a lack of action in the Japanese Nikkei.

    Evidence mounts for a reversal in the U.S. dollar’s fortune with Janet Yellen set to be confirmed as Treasury Secretary. She is expected to give assurance the U.S. will not seek a weaker dollar for trade advantage and allow market forces to freely dictate direction. Elsewhere, early Asia session saw gold tumbling $23 dollars to 1,803 following a surprise announcement by the U.S. administration to revoke U.S. company export licenses of Huawei suppliers. Bitcoin loses steam, with the cryptocurrency back below 35,000.

    Disappointing U.S. retail data worsened crude oil’s short-term outlook. Continuing surges in coronavirus infections still linger in the backdrop that could hinder global demand recovery. The decline could have been severe had it not been for Libya’s output reduction of 200,000 bpd after a leaking pipeline was discovered.

    For the week ahead, central bankers in Canada (Wednesday), Europe (Thursday) and Turkey (Thursday) will deliberate on monetary policy. The ECB is expected to keep rates unchanged but communicate flexibility in expanding bond purchases should the pandemic worsen. Since hiking rates consecutively, Turkey’s new governor is set to make no adjustments but will monitor inflation closely.

Market Commentary - January 15, 2021

Posted by Kevin Jock on Jan 15, 2021 4:25:33 AM

    Ahead of President-elect Joe Biden’s $1.9tn stimulus announcement, Wall Street diverges with the Russell’s index settling at record highs whilst large cap and tech retreated. Small businesses are anticipated to be the main beneficiary of a new wave of spending, including expanding jobless benefits and vaccinations programs on top of more direct payments to American households. Meanwhile out-going President Trump struggles to assemble a legal team ahead of his 2nd impeachment and uncertainty still cloud when the trial will begin.

    European benchmarks managed to notch higher on brighter re-evaluations in the face of social lockdowns that’s stifling economic recovery. Alongside the large U.S. relief package, Chinese trade balance data not only exceeded expectations but now stands at historic highs. An encouraging sign, especially after the EU and China signing a trade deal earlier this week.

    Elsewhere US – China relations continues to sour as the Trump administration in the their finals days is set to impose sanctions on smartphone maker Xiaomi and oil company CNOOC, citing security risk for the former and punishing the later for their involvement in disputed South China Sea waters. Though news initially flustered the Hang Seng on open, the indices regained ground intra-day hitting an 11-month high. Australian shares rose on the back of Biden’s unveiling whilst Japan took a breather, slipping 0.78% thus far. Nevertheless, following a strong start to 2021, the Nikkei is now just 5% from the 30,000 level. Investors are anticipating a bumper earnings season despite prevailing headwinds. An outbreak still uncontained, an Olympic in doubt and a plunging approval rating for Prime Minister Suga.

    The U.S. dollar index fluctuates around the 90 level as elevated Treasury yields stave off risk-appetite for alternative currencies. Gold steadies at 1,850, crude hits 53.00 on demand recovery and bitcoin back at 40,000.

Market Commentary - January 14, 2021

Posted by Kevin Jock on Jan 14, 2021 5:35:05 AM

    As Treasury yields pare off recent gains following consecutive days of strong auction demand for government debt. Wall Street’s unease settled with indices resuming their upward trajectory despite the U.S. house historically voting to impeach President Trump a second time. A single article of inciting insurrection has been approved however Senate Majority Leader McConnell signalled trial will not proceed until after Joe Biden’s inauguration, ensuring Trump serves his full presidency. Fed member Lael Brainard further reassured jitters yesterday that the central bank has no considerations to start tapering off its bond purchasing program this year.

    European indices managed to notch higher after Francois Villeroy said the ECB will continue its super accommodative policies for as long as needed. Though investor mood is still mired by elevated COVID-19 daily infection rates prolonging social restrictions. Meanwhile, the U.K. was hit with most deaths in one day dragging the FTSE100 eleven index points lower.

    One step forward, two steps back for the U.S. administration as they retracted plans to ban American investment in Chinese tech giants like Alibaba, Baidu and Tencent. Welcoming news for the Hang Seng, gapping 0.6% but lost ground throughout the session. Declassified documents revealed the U.S. had strategized in 2018 to counter China’s rising dominance via better relations with India and Taiwan. Elsewhere, Australia and Japan surge 0.5% and 1.8% fuelled by overnight rumours Biden is considering a further $2tn in relief aid. The BOJ also reaffirmed their readiness to expand monetary policy should the pandemic worsen.

    The U.S. dollar index continue to rebound defying retreating yields, gold falls back below $1,850 and oil slips lower on profit taking. Despite bitcoin clawing back to 37,000 following a turbulent week, the spike in volatility has renew lingering doubts the cryptocurrency’s adoption as a mainstream asset.

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