Market Commentary – December 14, 2020

Kevin Jock

14th December 2020

    Brexit negotiations given another lifeline as UK PM Boris Johnson and EC President Ursula von der Leyen agreed to extend talks beyond Sundays’ deadline. EU Representative von der Leyen said “Despite the exhaustion after almost a year of negotiations, despite the fact that deadlines have been missed over and over, we think it is responsible at this point to go the extra mile.”

    The pound gapped 130 pips higher along with broad-based benchmarks in Australia, Hong Kong and Japan. Whilst the latter two lost ground throughout Asia’s session, the S&P200 retained gains intraday, rallying as high as 1.1%. Global futures also pointed higher as the first batch of Pfizer-BioNTech vaccines were due to be delivered in the U.S. on Monday.

    Friday close saw Wall Street steady itself ahead of a risk-filled weekend whilst European and British investors offloaded exposure ahead of Brexit’s deadline. Though Democrats and Republicans have agreed on a ballpark figure to implement a 908bn stimulus package, differences still lie in how the bill should be structured. Senate Majority Leader McConnell has been willing to concede business liability protection against COVID-19 in exchange for dropping a supplementary $300 employment benefit for jobless American’s. A point House Speaker Pelosi has refused to give in.

    The U.S. dollar resumed its depreciation among majors on Monday open as weekend risk subsides. Oil set to point higher on the back of a 6-week rally. Alongside vaccine prospects, OPEC+JMMC’s decision to delay production increase eased any crude jitters. Compared to bitcoin which open above 19,000 from 18,000 last Friday, gold has remained docile above the 1,830 level.

    For the week ahead, the FED (Thursday), SNB (Thursday), BOE (Thursday) and BOJ (Friday) will deliberate in their final monetary policy meeting for 2020. The FED is expected to clarifying guidance surrounding the emergency bond-buying program whilst the BOE’s decision is at the mercy of Brexit trade talks. If negotiations deteriorate further, a cut to zero is anticipated. Meanwhile, no changes expected from the SNB and BOJ.

Crude Oil-3

Figure 1 (Source: IS Prime): Crude Oil Weekly : Crude oil comfortable settles above $44 alongside demand recovery prospect with the initial batch of vaccines bein disseminated across the U.K and U.S

Headliner to Review

  • In the United States, PPI m/m dropped from 0.3% to 0.1%m which met the expectation. Core PPI m/m remained at 0.1%, which was worse than the forecast of 0.2%. Prelim UoM Consumer Sentiment jumped from 76.9 to 81.4. Prelim UoM Inflation Expectations decreased from 2.8% to 2.3%.
  • In Japan, the sentiment amongst the Japanese manufacturing and services firms improved for the second straight month this year. Tankan Manufacturing Index improved from -27 to -10 while Tankan Non-Manufacturing Index improved from -12 to -5. Even the figures were still negative, it is a sign that the economy was gradually recovering from the coronavirus pandemic.
  • The unemployment rate in Italy rebounded to 9.8% in the 3rd quarter, an increase of 0.9% year-on-year. During the period, the number of unemployed rebounded sharply by 18.5% to a total of 2.486 million. The figure rebounded by 8.6% year-on-year, ending the 13th consecutive quarter of decline.

Headliner to Watch

  • China is set to release leading economic indicators on Tuesday. Industrial production, retail sales and unemployment rate are all expected to improve month on month. Further fueling the yuan’s outperformance against the greenback as investors search for yield offshore.

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Antony Tan
Ben Li
Kevin Jock