Market Commentary – August 21, 2020

Kevin Jock

21st August 2020

    Tesla pulls Nasdaq to record highs as the electric vehicle company recently reinvigorated investor interest by announcing a 5-to-1 split. The stock settling just above $2,000 has gained 45% in the past 7 days, whilst the tech benchmark rose a modest 4.5% the same period. Despite poor jobless claims figures, the remainder of Wall Street followed suit though Asia rallied on open, optimism fizzled mid-session.

    Elsewhere, the US dollar lost ground against other majors after yesterday’s unemployment claims. In turn, gold retraced back some losses from Wednesday’s $75 drop.

   Surprisingly, the Turkish lira remained steady after the central bank left interest rates unchanged at 8.25% on Thursday. Markets had anticipated a possible rate hike to 10%, but instead was left with fringe policies to cease funding on one-week repo’s and an increase in mandatory reserve ratios for lenders. Turkey’s leader President Erdogan had always repeated a view that high interest rates leads to high inflation, a belief other central banks oppose.


Figure 1 (Source: Refinitiv): AUDNZD Daily – Diverging monetary approaches by authorities sees Aussie gaining against the Kiwi.

    At the end of yesterday’s session, AUDNZD closed at 2-year highs. Since March lows, the Aussie dollar has gained just under 10% against the Kiwi. The steady appreciation can be largely explained by the differing approaches implemented by each respective country central bank. With cash rates at record lows the RBNZ has continued to expand its balance sheet and is even considering taking cash rates to negative territory. Across the Tasman, Australia’s RBA has halted any additional pace of quantitative easing and shifted responsibility towards further Government assistance instead to place the economy back on track.

Headliner to Review

  • Momentum in Canada’s labour market recovery continues, posting two consecutive months of over 1M jobs created. Employment growth has been exceptional since businesses reopened in July. Biggest sector gains unsurprisingly can be seen in health care as the coronavirus persist. Construction, trade, transportation, and utilities also saw 6-digit employment growth.
  • Across the border, US unemployment claims numbers disappoint as figures unexpectedly rose back above 1 million (1.106M) whilst analyst expected further declines to 930K. Fresh outbreaks has been detect in colleges as campuses re-opened while the existing spread of the virus across states had resulted in some businesses forced to closed or re-opening delayed.
  • ABS posted better than expected Australia retail sales figures increasing from 2.75% to 3.3% despite the entire state of Victoria in lockdown. Retail turnover in other states benefited from continuing support in food and clothing establishments.

Headliner to Watch

  • From the EU, flash manufacturing expects modest gains from 51.8 to 52.7 as both Germany and France set to post gains whilst services ticks lower from 54.7 to 54.6. Both Germany and France sees lower demand in services as the outbreak persist.
  • British flash manufacturing and services expected to rise to 54 and 57 respectively. Unlike their EU counterparties, the isle’s economy has benefited from lower recorded cases of COVID-19, with the pace of new infections plateauing.
  • US flash manufacturing and services PMI set to move higher to 51.9 and 50.9 respectively. Analyst expect general activity, new orders, and shipments to grow steadily over time.
  • Canada expected to experience ongoing exceptional retail sales MoM. Previous month’s figures saw a 18.7% increase. This month’s number to be at 24.7%.


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Antony Tan
Ben Li
Kevin Jock