Market Commentary – August 18, 2020

Kevin Jock

18th August 2020

    NASDAQ remain in favour with the tech benchmark again settling at record highs. Amid a global pandemic, investors continue to see tech focused innovation firms as the main beneficiary. Likewise, Golds’ decline last week has transitioned into a correction with the precious metals resuming its rally yesterday. The S&P500 ended up but still a hairline short of February highs whilst Dow Jones was weighed down on news Berkshire Hathaway slashes holdings in US banks.

EURTRY 30 days

Figure 1 (Source: Refinitiv): EURTRY Chart – Turkey’s central bank fail at halting the lira’s depreciation as EURTRY resumes higher.

    Back in focus, the Turkish lira depreciates for the fourth day. Coming into Asia session, the currency seeing further declines. Yesterday the central bank signaled a probably rate rise coming this Thursday by lending out 10bn lira at a 11.25% yield while the official policy rate sits at 8.25%. Analyst see a rate increase to 10% on Thursday’s meetings and to 12% by September in attempts to stifle further depreciation.

    Elsewhere the greenback poised to re-tested multi-week or month lows against other majors. For the first time in two years, the COT report see’s hedge fund net short on the dollar. Bearish pressure mount amid near zero rates and an ever-growing Fed balance sheet.

Headliner to Review

  • As expected, RBA meeting minutes revealed a wait and see policy. Rates will remain unchanged and further easing halted. While Australia’s Victoria lockdown has a major impact on the economy, the members noted a recovery is already underway in remaining states from a downturn that ‘had not been as severe as earlier expected’.
  • American mortgage delinquencies increased from 4.36% to 8.22% to a 9-year high. A level unseen since the GFC and entirely stemming from the coronavirus pandemic. A weak job market has affected homeowners’ abilities to ensure monthly mortgage payments. Nonetheless financial markets have been unfazed by the largest jump in survey history. Differences to note between now and the GFC is the resilient US housing market. Still posting monthly price gains. Government assistance via loan deferrals and modification option to avoid home foreclosures has also alleviated pain.

Headliner to Watch

  • Out of the US, building permits and housing starts projected to gain month on month. Permits to increase from 1.26m to 1.33M. Starts to increase from 1.19M to 1.23M. After the initial slump, US housing has made a steady recovery proceeding quarantine. With credit liquidity in an abundance, housing is expected to remain strong throughout.
  • In Japan, machinery orders remains positive at 2.1% whilst trade balance relatively unchanged from -0.42T to -0.44T. Since persistent trade tensions among Japan, US and China has the nation in a trade deficit since 2019.


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Antony Tan
Ben Li
Kevin Jock