Market Commentary – December 15, 2020

Kevin Jock

15th December 2020

    Harsher restriction across Europe is souring investor mood ahead of Christmas. Monday open saw European futures buoyed by an extension in Brexits’ negotiation deadline, only to have indices retreat lower by session end. Non-essential shops, services and schools will close until January with gatherings reduced to 5 people from 10. Likewise, The Dutch PM announced the Netherlands will start a five-week nationwide shutdown starting today. Depending upon neighbouring countries Ireland may reimpose piecemeal COVID-19 restrictions in January.

    Meanwhile, the FTSE100 fell 48 points after the mayor of London placed the city under tier 3 coronavirus restrictions from Wednesday. The pound though ended Monday in bear territory still retained its appreciation (up 97 pips) from last Friday close due to the opening gap up.

    Across the pond, cyclical stocks suffered dragging both the Dow and S&P500 lower whilst Nasdaq outperformed. Despite the first U.S. vaccination being administered yesterday, investors are re-evaluating their bullish optimism over distribution hurdles slowing down national wide roll out. On the stimulus front, a bipartisan group of Senators presented a drastically reduced stimulus bill amounting to only $748bn (from $908bn) in hopes to compromise the differences between Senate Majority leader McConnell and House Speaker Pelosi. Reception on Capitol Hill was mixed.

    Asia open was weighed down by market risk of their own. The Nikkei edged lower following Japanese PM Suga suspending his governments domestic tourism promotion campaign over rising infections. The government had hoped to revitalise domestic growth via a travel subsidy programmed dubbed “Go To Travel”. Alongside the S&P200’s 32-point loss, the Hang Seng too declined 267 points over Australia and China’s increasing geopolitical spat. In retaliation for China banning coal imports from Australia, the Aussies are taking Beijing to the WTO over barley export tariffs and government subsidies creating unbalanced markets.

    As Joe Biden was formally confirmed as the next U.S. president by the electoral college, the greenback traded at 2.5-year lows against a basket of peers. Elsewhere, China’s yuan oscillates above 6.50 in anticipation of the central bank flooding the financial system with 800bn yuan in funding. The communist party had begun tapering fiscal stimulus but has set off a string of corporate defaults. Crude oil holds firm below $47 defying a recent OPEC report revealing a downward revision in global demand for 2021.


Figure 1 (Source: IS Prime): USDMXN Daily : Mexican peso seeing more outflows among exotics as concern rose over a bill that could force the central bank to purchase drug money. The bill entails the central bank to buy foreign currency in local banks, of which generally result from drug trafficking

Headliner to Review

  • In Europe Industrial Production m/m rose from 0.1% to 2.1%, which was better than the expectation 1.8%. German WPI m/m increased from -0.2% to 0.1%.
  • In China, unemployment rate dropped from 5.3% to 5.2%, which was in line with expectations, and had fallen for four consecutive months. 10.99 million new jobs were created in cities and towns across the country, completing 122.1% of the annual target. Retail Sales y/y increased from 4.3% to 5.0%. Industrial Production y/y increased from 6.9% to 6.0%. Fixed Asset Investment ytd/y increased from 1.8% to 2.6%.
  • In New Zealand, Westpac Consumer Sentiment increased from 95.1 to 107. Consumers regain festive spirit as confidence rebounds.

Headliner to Watch

  • The Brit’s are expected to release unemployment figures today, depicting a rise in claimant claims of 10.5K with joblessness edging higher to 5.1% from 4.8%. With tiered lockdowns throughout the nation, figures are expected dire for the months ahead.
  • Australian manufacturing and services PMI expected to continue expanding for the month of November. Though the services industry took a hit mid-year from Victoria’s lockdown, cases across the nation has improved since.

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Antony Tan
Ben Li
Kevin Jock