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.

Market Commentary - January 12, 2021

Posted by Kevin Jock on Jan 12, 2021 6:50:45 AM

    Stretched valuations alongside rising Treasury yields temper irrational exuberance with Wall Street retreating from record highs. American politics started the week drumming up a 2nd impeachment for President Trump over citing insurrection against Capitol Hill. The Democratically controlled House have already introduced a resolution on Monday scheduled for a vote later in the week. Though Vice President Pence and Republican hardliners have strongly voiced against it.

    Surging coronavirus cases induced exposure reduction across European benchmarks, especially among cyclical firms. Infections across the continent have topped 25 million whilst governments have upped the pace of vaccine rollouts in hopes stifle the new variant. London remains in tier 4 lockdown with the U.K. government mulling extra restrictions resulting in the FTSE100 falling 1.5%.

    The S&P200 followed overnight U.S. sentiment, slipping 26 index points. A lack of short-term optimism has left the Australia benchmark in a 200-point range since the start of December last year. Meanwhile, both the Hang Seng and Nikkei surge intra-day. Imminent de-listings of Chinese firms in the U.S. market have re-directed investor capital towards the Hong Kong exchange, the most likely recipient of future China company listings. Drug makers in Japan kept optimism elevated following reports of successful vaccine trials.

    The U.S. dollar post 4 consecutive days of gains. Higher U.S. yields have thus far deterred further exposure in risk-on currencies. Oil retraces but stays above $52, whilst gold fought back tumbling momentum from Monday. Bitcoin crashes 20% to $30,250 with few exchanges like Kraken triggering limit downs halting further declines. So far into Asia’s session, the cryptocurrency has recovered back to the $36,000 level.

Market Commentary - January 11, 2021

Posted by Kevin Jock on Jan 11, 2021 6:57:41 AM

    Record highs again on Wall Street following President-elect Biden announcing plans for trillions more in further fiscal relief, including boosting stimulus checks to $2,000. Calling the $900bn bill signed last month by President Trump as a “down payment” whilst for his plans “the price tag will be high”. Meanwhile, the 10-year Treasury shot up to 1.12% as investor overhaul inflation expectations for 2021.

    Likewise, the planned buffer for U.S. economic growth reverberated across European benchmarks boasting their best week in 2-months. Rising optimism from a U.S. Democratic Senate sweep and continuing vaccine rollouts saw the STOXX and DAX indices gain 0.7% and 0.6% respectively.

    Asia-pacific indices opened Monday more cautiously as Australia fell 41 index points and Nikkei futures slips 235 points on a Japanese bank holiday. Defying expectations, the Hang Seng surged as high as 1.3% intraday, despite last week’s sell off in China’s telecom stocks following their removal from U.S. exchanges and plans by U.S. banks to delist approx. 500 structured HK investment products. Better growth prospects and 50 mainland funds expecting to launch in the coming months fueled the momentum.

    The U.S. dollar index continues to rebound as investors temper their bearish bets as rising yields deter from alternative risk-on currencies. Elsewhere, crude takes a breather retreating below $52 whilst gold tumbles $64 down to $1,848. In focus, bitcoin experiences one of its worst Mondays, plunging 20% from historical highs of $41,989 to $33,745. Some $170 bn has been wiped off the cryptocurrencies market cap as analyst largely attribute the decline to whale’s profit-taking.

Market Commentary - January 8, 2021

Posted by Kevin Jock on Jan 8, 2021 5:56:24 AM

    Despite growing calls to remove out-going President Trump as many believe his rhetoric instigated violence at Capitol Hill. Wall Street extends to all-time highs as prospects for more short-term stimulus outweigh risk of tougher business regulations and higher taxes. Both House Speaker Pelosi and Senate Democratic leader Schumer have insisted Vice-President Pence to invoke the 25th amendment and remove Trump from office immediately.

    Meanwhile, European indices climbed two consecutive days in a row, with Spain outperforming posting gains of 3.3%. Defying lockdown measures, a string of positive news from better than expected German factory orders to European approval for Moderna’s second COVID-19 vaccine have boosted overall investor confidence.

    Coming into Asia, the Hang Seng continues to defy expectations rallying to an 11-month high amid a dire outlook for Chinese companies on Wall Street. Both MSCI and FTSE Russell have confirmed they will delete three China telecom companies from their global indexes. Elsewhere, Australia is poised to break out of a 2-month consolidation, where as Japan rallies for 3 days in a row whilst a state of emergency has been declared in Tokyo.

    Reprieve for the U.S. dollar following a bounce back from 3-year lows for the index. The Greenbacks turn around came alongside rising Treasury yields and inflation expectations with St. Louis Fed President Bullard commenting once the impact of vaccine reverberates across the states, “you have the economy poised to boom at the end of the pandemic”. Among exotic’s the South African Rand is emerging as the biggest loser thus far in 2021 with the USDZAR weakening to 15.40. The country reported a record 21,832 in new daily cases, culminating from the more infectious variant. Outflow’s have been intensifying amid a government contemplating nationwide lockdown.

    Elsewhere, crude oil briefly hits $51, gold back down to 1,910 and bitcoin’s rollercoaster ride continues, temporarily passing 40K followed by a $3,500 tumble then back up to 39K again.

Market Commentary - January 7, 2021

Posted by Kevin Jock on Jan 7, 2021 4:18:24 AM

    Pro-Trump supporters storm Capitol Hill in an attempt to block Congress from certifying Biden’s presidency following a decisive win for Democrats in Georgia’s run-off election. Both Jon Ossoff and Raphael Warnock’s victory ensures the Senate floor is now split 50-50 leaving Vice President-elect Kamala Harris as the tiebreaker. The S&P500 and Dow Jones relished the news both gaining 0.9% and 1.6% respectively on the prospect a top-up stimulus package is on horizon for American households. Meanwhile the Nasdaq underperform as investors fret over uncertainty if Democrats would impose harsher non-business friendly tech policies.

    Despite lockdown, economically sensitive stocks boosted European benchmarks higher after Moderna’s vaccine won regulatory approval from the European Medicine Authority and the European Commission. Investors were also optimistic over better trade ties with the U.S. as the Democrats are on the cusp of gaining majority power.

    Asia-pacific indices advanced higher, set to continue overnight U.S. momentum with the S&P200 and Nikkei climbing defying peripheral risk. The Japanese PM Suga is set to declare a state of emergency today for the Tokyo region, expected to decrease 0.7% of GDP for each month it’s implemented. Whilst the declaration does not impose lockdowns, authorities can close or limit business operations as well as urge residents to stay home. The Hang Seng continues to rise despite increasing hostility from U.S. officials in expanding the Wall Street backlist. The most recent rumours surround payment apps Alibaba and Tencent as the NYSE announced they will delist the ADR of China Mobile, China Telecom and China Unicorn prior to open on Monday 11th Jan.

    Sentiment remains bearish on the U.S. dollar as it fluctuates at lows. Majors across are the board are hitting levels unseen for years. The Aussie nears 0.78, the Euro closes above 1.23 and the Yen at 103. Exotics paint a similar picture with the TRY and MXN breaking multi-month highs. Elsewhere, crude hits $51 today, gold tumbles whilst bitcoin achieves’ a literal vertical trajectory upwards approaching $38,000.

Market Commentary - January 6, 2021

Posted by Kevin Jock on Jan 6, 2021 6:50:24 AM

    Wall Street tempers Monday’s losses as the U.S. Senate majority hangs in the balance on Georgia’s run-off election. Early results show Democrats in front by a 7-point margin with the gap expected to slim down razor thin. Whether President-elect Joe Biden’s presidency will be a lame duck for the next four years hinges upon Tuesday nights results.

    Elsewhere, European counterparts remain on edge amid a volatile session despite closing relatively unchanged from yesterday’s close. The FTSE shrugged off the latest lockdown woes on the back of oil majors surging from OPEC’s meeting.

    With Georgia’s vote counting still on-going, Asia-pacific indices tumbled with the S&P200 the worst performer, down 70 index points thus far. The 1% decline on the Hang Seng was further exacerbated by the NYSE’s 360 rotation back in favour of delisting three Chinese state-run telecom groups again. The exchange’s initial backflip drew fury among Treasury Secretary Steven Mnuchin and the Trump administration. Meanwhile, the Japanese Nikkei slips 0.38%.

    The U.S. dollar continues to debase, hitting its lowest point since February 2018 among majors. Investors remain weary of the Thai baht’s recent appreciation following a hawkish tone from the Thailand’s central bank whilst a new coronavirus wave is set to impact economic projections. Authorities in China signalled their appetite for a strong yuan however discouraged a freefall in USDCNH as they set the fixing slightly higher at 6.4604.

    Gold trades at an 8-week high at 1,950 on ever increasing inflation expectations whilst bitcoin recovers entirely from Monday’s crash. Oil prices just a tad shy from $50 after surging to a 10-month high as Saudi Arabia pledges to cut enough output to offset production increases from Russia and Kazakhstan.

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