Market Commentary - February 15, 2021

Posted by Kevin Jock on Feb 15, 2021 4:43:52 AM

    Despite bank holidays in China and U.S. as they celebrate Lunar New Year and President’s day respectively, Australia’s S&P200 continued Friday’s overnight U.S. momentum surging as high as 0.8% on open. The Aussie market upbeat as earning season cranks up a notch this week with 10 of the largest blue chips anticipated to revise their 2021 outlook higher amid March’s vaccination roll-out. Following suite, the Japanese Nikkei posted a 1.2% intraday gain of their own. Morning preliminary GDP figures revealed a more resilient economy emerging out of the pandemic than previously forecasted. Both household and corporate spending continue to lift as well as international trade.

    Wall Street ended last week on a high. Words of reassurance from Janet Yellen amid her first G7 meeting had the U.S. Treasury Secretary voice among the rest of her G7 counterparts that “the time to go big is now” on fiscal support for 2021. On a fading note, the 45th President Donald Trump was for a second time acquitted from impeachment. Though the final Senate vote was 57 guilty to 43 not guilty, a super majority of 67 guilty votes was required to convict.

    UK and European benchmarks reversed intra-day losses on Friday, as investors clanged onto the ever-improving progress of Joe Biden’s $1.9tn stimulus package. Relief was also found in the World Health Organisation, of whom are expected to approve AstraZeneca’s coronavirus vaccine as early as today for worldwide use for all adults.

    The reflation trade has the U.S. dollar index settle near the week’s low. Following a brief intermission in the last 3 days, the Singaporean dollar was back on track towards the 1.3200 level. The nation had suffered its worst annual economic contraction since independence. However, confidence returned on Monday with the Ministry of Trade and Industry releasing a projected economic rebound between 4% - 6% in 2021. Gold steadies at $1,824 whilst crude resumes its parabolic rise to above $60 as an artic blast dominates parts of the U.S, freezing oil pipelines.

    Weekend action saw bitcoin on the verge of hitting $50,000 only to pull back down to $47,000. The cryptocurrency had recorded an all-time high at $49,694 and up 70% since the start of the year. With its recent rise fuelled by speculative action from Wall Street and the almost inevitable adoption by main street corporations as an alternate form of payment.

Market Commentary - February 12, 2021

Posted by Kevin Jock on Feb 12, 2021 4:54:00 AM

    Subdued start in Asia with Hong Kong markets closed for Lunar New Year. Authorities urged millions of people in restraining festivities amid 21 new infections confirmed on Thursday. Meanwhile Australia’s S&P200 trickles down 35 index points following the state of Victoria announcing a snap 5-day lockdown in response to cases testing positive for the hyper-infectious UK strain. Separately, holiday lull also relieved Japanese investors from risk-on appetite as the Nikkei remains relatively unchanged.

    Increasing geo-political confrontations between US – China tempered the S&P500 and Dow from any gains on Thursday. Though Nasdaq did manage to crawl into positive territory and in turn record another all-time high. Following Joe Biden and Xi Jinping’s 2-hour call for the first time since taking office, the US President outspokenly told reporters that China will “eat our lunch” if America does not spend substantially on infrastructure.

    Corporate earnings kept European markets abuzz. Both the STOXX and DAX gained 0.8% and 0.6% respectively whilst the UK’s FTSE100 underperformed. Concerns are growing over UK’s variant strain. A study last week by AstraZeneca in South Africa revealed a significantly lower efficacy rate despite adjusting inoculations to deal with mutations.

    Crude oil breaks its momentous advance of recent weeks to below $58 after a report released by the International Energy Agency entailed global oil demand lower by 3% than in 2019. Worries were also raised that despite demand recovery in 2021 after the turmoil brought by the pandemic, production from non-OPEC nations such as Russia is expected to increase by 35% a day in the latter half of 2021.

    Another endorsement, another new high for bitcoin hitting $48,969 surpassing the previous record reached from Tesla on Monday. In following the electric vehicle maker, both Mastercard and Bank of New York Mellon announced services to accommodate for cryptocurrencies. Though short on details, Mastercard revealed later in the year, clients would have the option to make purchases via crypto, whilst BNYM had formed a digital asset unit to help address needs for crypto asset demand.

    Gold falls to $1,825 and mixed performance for the U.S. dollar against majors as weaker than expected claims figures see an improving but lethargic labour market.

Market Commentary - February 11, 2021

Posted by Kevin Jock on Feb 11, 2021 8:07:22 AM

    Lacklustre inflationary pressure saw Wall Street tumble intra-day upon release only to regain some ground by sessions end. For the past days, investors have been positioning exposure in favour of upward revisions to inflation expectations. Despite Thursday’s reality check, U.S. Treasury continue to illustrate bullish signals over the medium-term as yields remain above 1%. Meanwhile, arguments by Democrat prosecutors begin today, following Trumps defence team yesterday. Chance of impeachment for the former President remains unlikely but odds are ever increasing after Senate Minority Leader McConnell surprisingly told Republicans, their votes should be a matter of conscience and not party.

    European benchmarks tracked Wall Street’s decline but failed to follow suit on the subsequent recovery. This despite news from the World Health Organization recommending use of AstraZeneca’s vaccine for all adults, increasing the pace of inoculations across the Euro Area. Previously, medical experts in France and Sweden restricted its use to young adults only, concerned of insufficient clinical data.

    Ahead of Lunar New Year, marking the year of the Ox, investors push Hong Kong’s Hang Seng beyond 30,000 before the indices close for the long weekend. Hong Kong is anticipated to relax social restriction following celebrations on the 17th February, in hope spur consumer spending. Elsewhere Australia’s S&P200 rallied on open whilst Japan’s Nikkei remained relatively unchanged.

    The U.S. dollar index stagnated as investors contemplate softer inflation alongside the impact of an inevitable $1.9tn spending package in the coming weeks. Following Tesla’s euphoria, bitcoin settles back down at $45,000, gold rises higher by $4 to $1,843 and crude finally halts its momentous 7-day consecutive rally to settle at $58.34

Market Commentary - February 10, 2021

Posted by Kevin Jock on Feb 10, 2021 6:15:50 AM

    Wall Street at a standstill on Tuesday as investors focus on Donald Trump’s second impeachment trial for inciting insurrection. Lawmakers debated for four hours beforehand to determine whether it was constitutionally correct to impeach an official who was no longer in office. The hearing began with prosecutors playing a 10-minute video including snippets of then President Trump suggesting to the crowds to march towards Congress and “fight like hell”. Meanwhile, reiterating Treasury Secretary Yellen’s stance, Richmond Fed President Tom Barkin told the Financial Times, Biden’s $1.9tn package would not destabilize long-term inflation and that he’s “keeping focus on medium-term expectations” instead.

    Following a strong rally of recent days fuelled by Draghi’s appointment euphoria, European benchmarks retreated yesterday. The UK’s FTSE100 manage to etch out a 20-point gain on improving 2021 outlook after homebuilders revealed increasing demand. Australia’s S&P200 surged 0.5% on open, Hang Seng up 1.3% and the Nikkei recovers last sessions losses. The BOJ is expected to tweak in asset purchase program March to make it more sustainable and effective.

    Bitcoin’s irrational exuberance ran its course retreating down to $46,000 after surging 10,400 points to $48,000 on the back of Tesla’s endorsement. A moment of clarity from Treasury experts illustrate an unlikely world where corporations would shift assets towards cryptocurrency. Especially the unpredictable volatility of the asset regardless of direction.

    Elsewhere gold advances for three consecutive days to $1,838 on rising inflation expectations, whilst the U.S dollar continues to debase. Platinum breaks above $1,200 as supply tightens and demands surges from the global economic recovery. Ahead of inventory data today, crude oil’s upward momentum is unrelenting as it ends 7 consecutive days in bull territory.

Market Commentary - February 9, 2021

Posted by Kevin Jock on Feb 9, 2021 6:40:06 AM

    Ever-improving economic outlook from U.S. stimulus moving closer towards a signed deal to rounding the curve in virus infection rates see’s revisions in inflation expectations. Alongside 30-year Treasury yields breaking 2% for the first time in a year, Wall Street’s bull market continues to drive benchmarks to record highs. The biggest beneficiaries being small caps whilst tech underperforms on prospects work culture returns to normalcy.

    Sentiment across Europe was buoyed by M&A activity amid Japanese chipmaker Renesas Electronic Corp buying out German equivalent Dialog Semiconductor. Meanwhile, despite investors pricing out a rate cut below zero by the BOE, the FTSE100 still ended in positive territory as the UK’s vaccine schedule is well underway.

    Heading into Asia open, Australia’s S&P200 was dragged lower 0.6% by blue-chip banks slashing first half profits. The Japanese Nikkei and Hong Kong’s Hang Seng took a pause with investors mulling increasing geo-political tension. Chinese efforts to bring Hong Kong more integrated with CCP values has resulted in UK dual nationalities no longer being recognized in the special territory.

    Bitcoin mania overwhelms January scepticism after Tesla’s public endorsement boosts the cryptocurrency to above 47,000. Yesterday, the electric vehicle company had revealed a $1.5bn investment into bitcoin, signalling their future intent to accept bitcoin as a form of payment, much like Paypal. Elon Musk had previous added #bitcoin onto his Twitter profile stirring speculation and with Monday’s announcement, cements the electronic currency closer to a mainstream asset.

    Elsewhere, the dollar depreciates against basket of majors, gold gains $16 to $1,830 as investors revise inflationary expectations and crude post 6 consecutive days of gains

Market Commentary - February 8, 2021

Posted by Kevin Jock on Feb 8, 2021 4:44:26 AM

    Beyond volatility of recent weeks, Treasury Secretary Janet Yellen sought to reinvigorate investor sentiment on Sunday, quashing criticism the 1.9tn stimulus package would trigger above-norm inflation. Ex-Treasury Secretary and Economic advisor, Larry Summers warned the plan brought forth by Democrats entails the risk of severe dollar debasement and in turn financial instability. In response, Yellen emphasize the most concerning risk right now is failing to address existing economic impacts from COVID-19.

    Monday open saw global indices and futures welcoming Yellen’s reassurance. Australia’s S&P200 rallied as high as 66 index points, Japan’s Nikkei gained 560 points and the Hang Seng gapped 0.6% higher. Nevertheless, headwinds on the horizon for Hong Kong’s asset markets. Since the start of 2021, the Hang Seng has enjoyed an appreciation as high as 10% in January. However, come Lunar New Year, the resilience of risk-on appetite will be put to the test as the China – Hong Kong trading links are halted till the end of holidays on February 17th.

    Amid a relatively docile Friday despite conflicting jobs data, Wall Street still etch consecutive days of gains with both the Nasdaq and S&P500 recording new highs, again. Growth stocks remained mute, leading to Dow’s laggard underperformance.

    Mixed results across European benchmarks as Draghi-led market euphoria extends gains in some whilst disappointing economic figures weigh down others. The STOXX50 managed to settle at a 1-year high, France’s CAC higher by 0.8% and likewise Spain’s indices also. Germany’s DAX was unchanged on unexpected factory orders contracting, whilst BOE Governor Bailey’s remarks during the Monetary Policy Report National Agency Briefing failed to buoy UK’s FTSE100.

    Not all roses and sunshine as the American greenback returns to its risk-off dollar debasement roll following disappointing employment gains. Gold rallies $20 to 1,814 whilst twitter-fueled momentum has bitcoin back up above 38,000. Elsewhere crude above $57 posting 5 days of consecutive gains as investors increase bets on global demand recovery for 2021.

Market Commentary - February 5, 2021

Posted by Kevin Jock on Feb 5, 2021 8:01:11 AM

    A streak of positive news propelled the Nasdaq and S&P500 to record highs, whilst the Dow lagged. Restrictions across States are easing, the Democrats intend to ram through President Biden’s 1.9tn stimulus package and Thursday employment data painted an upbeat economic outlook.

    Elsewhere, additional relief measures taken by Germany buoyed European markets. Investors were further hopeful the pace of vaccinations will improve in coming weeks. Across the channel, remarks by the BOE weighed down UK’s FTSE100 half a percent. According to feedback from commercial lenders, negative rates were not well received deterring the central bank from considering such measures for another 6 months.

    Overnight U.S. sentiment boosted Australia’s S&P200 and Japan’s Nikkei higher. An exuberant IPO market saw the Hang Seng gain as much as 400 index points intra-day. Video-sharing platform Kuaishou Technology, seen as an alternative to Tik-Tok, saw their debut price almost triple after a $5.3bn IPO.

    Following on from OPEC+, crude oil notches higher five consecutive days to 56.43 amid reassurance from producers to restrain global supply. Saudi Arabia has shown despite unanimous agreement amongst members, they are willing to step in and offset supply increases from other oil nations. In turn, supporting market prices until a full-fledged global recovery eventuates this year.

    With 10-year Treasury yields firmly situating itself above 1%, the U.S. dollar begins to shed its role as the world’s risk-off asset. Alongside an equity bull run, from 2021 January lows the American greenback has appreciated 2.6% amongst a basket of major counterparts. Meanwhile, gold crumbles below 1,800 and bitcoin closes above 37,500.

    Ahead of China’s Lunar New Year holiday, selling pressure from corporates halted the yuan’s advance back above 6.47, much to the PBOC’s relief. Beijing would much prefer a stabile currency however recent international inflows from yield seekers saw the currency advance 10% in the past year.

Market Commentary - February 4, 2021

Posted by Kevin Jock on Feb 4, 2021 5:37:35 AM

    As the struggle between Main Street and Wall Street subsides, mixed corporate earnings yesterday saw scattered results among U.S. benchmarks ending the 2-day strong rebound. Nasdaq underperformed slipping 0.7% despite Alphabet hitting record earnings, Dow edged slightly higher and the S&P500 remained unchanged. Speaking online, Chicago Fed President Evan’s reassured investors that President Biden’s $1.9tn would lift inflation via a faster recovery without overheating the economy. Joe Biden refuses to concede any grounds to reduce the $1,400 payment telling Democrats anything less would break a promise he was voted in for. Meanwhile, St. Louis Fed President Bullard cooled scepticism that markets are overextended saying prices reflect current optimism about growth.

    Dragged into the frying pan, former ECB chief Mario Draghi accepted President Mattarella’s request to assist in forming a new Italian government following the collapse of Prime Minister Conte’s coalition. On top of a dysfunctional government, the country has been hit harshly by the COVID-19 pandemic. The news was received well by European investors as both the STOXX and DAX ended the day in positive territory. Meanwhile UK’s FTSE100 stayed unchanged, cautious of comments made by the BOE. Governor Bailey exuded an upbeat tone as Britain’s rolled-out it’s vaccines faster than European counterparts, alluding to a more pronounced economic recovery whilst downplayed previous comments of considering negative interest rates.

    Indices pointed lower coming into Asia. Weaker all-round earnings saw Australia’s S&P200 lose 51 index points, the Hang Seng 251 points as Mainland China capital inflow eased and Japan’s Nikkei down 223 points.

    The dollar crept higher on Wednesday on the back of better than expected leading macro indicators. Crude continues to notch higher, hitting $56 with reassurances from OPEC’s meeting to maintain current production policy. Gold drops to 1,833 whilst bitcoin regains popularity settling above 37,000.

Market Commentary - February 3, 2021

Posted by Kevin Jock on Feb 3, 2021 7:56:57 AM

    Following a disappointing January, Wall Street begins February returning to a glimmer of normalcy. Short interest in GameStop collapsed from 114% to 23% yesterday as Reddit’s crusade continue to “hold the line”. The stock subsequently tumbled 74% to $90 after rallying 1,600% in January. Short sellers are estimated to have taken a $80bn hit last month. With concerns of retail volatility receding, alongside renewed progress on pandemic relief, Nasdaq outperformed posting consecutive days of gains just shy from record highs, whilst Dow lagged etching out just 1.6% yesterday. President Biden and Republicans reassured markets after “very productive” meetings these past 2 days as a budget resolution was introduced yesterday. Considered as the first step in passing the $1.9tn stimulus.
    Despite lockdowns’ being extended well into the 1st quarter, Europe’s benchmarks posted gains 2-days in a row on upbeat economic data. On the coronavirus front, amid a slower than expected roll-out schedule, EU leaders like Angela Merkel have been reassuring citizens on the vaccine’s availability.
    Asia-pacific indices opened following overnight U.S. sentiment, set to post 3 consecutive days of gains. Speaking at the National Press Club, RBA governor Lowe noted the central bank estimates it would take at least 3-years before the economy meet’s policymaker targets, implying rates and quantitative easing will stay accommodative for years. Elsewhere Japan’s Nikkei edged 0.56% higher driven by a boost in earning forecast.
    Crude oil breaks out of its 14-day consolidation to $55. It’s highest it’s ever been since January 2020 as U.S. inventory reveals an unexpected drawdown and ahead of OPEC’s meeting, estimates reveal a global supply deficit for 2021.
Silver crashes back to reality following a chaotic Monday open briefly hitting above $30 before closing $26.68 yesterday. As anticipated by analyst, unlike GameStop weighed down by heavy short selling interest, the CBOT COT report portrayed a net-long exposure in futures and options for the precious metal.
Though risk-on appetite has returned to equity markets, the U.S. dollar index remained relatively unchanged by Tuesday close. Gold falls back down to $1,837 and bitcoins resurgence continues following Elon Musk stealthy endorsement.

Market Commentary - February 1, 2021

Posted by Kevin Jock on Feb 1, 2021 7:03:22 AM

    Reddit triggered buying frenzy seeps into commodity markets in Asia open as silver gaps open 5% higher to $28.53. The abnormal demand apparently started from sub-forum “WallStreetBets” encouraging members to purchase iShares Silver Trust. By Friday’s close an unprecedented $944m had flowed into the ETF. Over the weekend online sellers of silver coins and bars across the globe also experienced unhinged buying. Nevertheless, skepticism over how long this retail induced pressured could last. As unlike GameStop, silver futures and options according to the weekly COT reports has been net-long the precious metals since mid-2019.

    Last Friday Wall Street continued Wednesday’s bloodbath. A mix of disappointing vaccine data from Johnson & Johnson alongside anxiety induced selling resulting from the unpredictability of hivemind retail traders saw indices tumble another 2%. Questions arose whether hedge funds will need to liquidate positions to free up cashflow as buffer for short positions or whether trade restrictions on prominent brokerage platforms would hamper buying.

    European benchmarks suffered a similar fate. Despite the European Commission approving a 3rd vaccine for populace use, the current pain point for many investors, is the pace of roll-out. Thus far, being sorely behind schedule.

    By Monday Asia open, global indices regained some share of confidence as both Asia-Pacific indices and overnight futures pointed higher. Australia’s S&P200 posted 88 index points higher, Japan’s Nikkei 431 points and Hong Kong’s Hang Seng 488 points.

    Elsewhere, the U.S. dollar index held steady on aggregate. Crude continues to oscillate between $52-$54. And gold bumps up to $1,865 following silver’s irrationality.

    A smudge in an otherwise pristine recovery by China coming into 2021. Ahead of Lunar New Year, a recent uncontained outbreak in infections in Northern China has collapsed the nations domestic tourism industry. Historically much of Q1 growth, especially the services sector is reliant on the 6 days of national holidays. Monday open saw China’s yuan slip as much as 190 pips intraday.

    For the week ahead, central policy makers in the RBA will deliberate on Tuesday and the BOE on Thursday. No changes on policy are expected though a focus on vaccinations and the new variants impact is anticipated.

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