Market Commentary – December 1, 2020

Kevin Jock

1st December 2020

    End of month profit-taking saw Wall Street tumble early U.S. session. Nonetheless, most indices attempted to recover with Nasdaq outperforming, ending Monday unchanged whilst the S&P500 and Dow fell. Despite, Moderna set to submit its COVID-19 vaccine for approval in the U.S. and E.U, Jerome Powell warned of challenging months ahead. The Fed Chair said “the vaccine front is very positive for the medium term. For now…uncertainties remain, including timing, production and distribution…across different groups”. Meanwhile, Treasury Secretary Mnuchin encouraged congress to re-deploy the re-directed $455bn of the emergency lending facilities to be utilized as another round of fiscal stimulus.

    Elsewhere, the U.K and European markets ended November erasing the previous week of gains over on-going Brexit woes. Only five weeks remain before the deadline with fisheries still a sore point of contention. Under current engagements, U.K. and E.U. fishing fleets have full access to each other’s respective waters as well as pre-negotiated national quotas. However, British fishing grounds covers broader nautical miles and is more bountiful than E.U. waters. In return for access, Boris Johnson is haggling over a higher volume of fish Brit’s can catch.

    With prospects of a global vaccine roll out within weeks, Asia-pacific indices rallied on open. Both Australia and Japan surged whilst Hong Kong gapped up despite the nation imposing new restrictions amid the latest wave of COVID-19.


Figure 1 (Source: IS Prime): USDCAD Daily : The loonie approaches a major support level 1.2950, where previous attempts to breach were rejected.

    The month of November saw the worst dollar performance since July as the EURUSD is just tad shy from the 1.20 level. Likewise, the pound is just 160 pips away from 1.3515 taking the GBPUSD to multi-year highs. Meanwhile the Kiwi settles comfortably above 0.70 as the most likely developed nation to tighten monetary policy, if ever.

    OPEC continues to remain in headlines with talks postponed till 3rd of December. Monday’s meeting broke down as both the UAE and Kazakhstan refuse to concede to majority consensus among the group. Signs of frustration can be seen with Saudi Arabia’s energy minister rumoured he may resign as co-chair of the OPEC panel. Crude oil prices held firm.

    On the crypto front, bitcoin rallied to historic highs to 19,846 on the back of China’s 4.2bn seizure. Authorities have signalled they have no intention of selling the assets.

Headliner to Review

  • U.S. Chicago Purchasing Managers Index (PMI) on November fell for the second consecutive month from 61.1, a two-years high, to 58.2, which was lower than market expectation of 59.4, reflecting a further slowdown in the expansion of manufacturing activities. US pending home sales on November increased from -2.0% to -1.1%, which was lower than the expectation of 1.1%.
  • In Japan, the unemployment rate rose slightly from 3.0% to 3.1%, which matched the median forecast 3.1%. Capital Spending q/y rose from -11.3% to -10.6. Final Manufacturing PMI increased from 48.3 to 49.0, which was better than the forecast 48.3.
  • China Caixin Manufacturing PMI increased from 53.6 to 54.9, 10-year highs. Activity in China’s factory sector accelerated at the fastest pace in a decade in November. The manufacturing activity of China recovers to pre-pandemic levels.

Headliner to Watch

  • RBA cash rate remained unchanged at a record low of 0.10% and maintained its yield curve control policy.
  • Both Fed Chair Powell and Treasury Secretary Mnuchin will testify to the Senate Banking Committee today. On the top of the agenda the CARES Act and the $455bn in unused funds.
  • U.S manufacturing PMI set to decline to 57.9 from 59.3. The uncontained outbreak continues to overshadow the American economy.

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Antony Tan
Ben Li
Kevin Jock