Market Commentary – December 2, 2020

Kevin Jock

2nd December 2020

    Building on Wall Street’s momentum spurred on by vaccine breakthroughs and prospective approvals later in this month, the S&P500 and Nasdaq surged to all-time highs whilst the Dow Jones underperformed closing relatively unchanged from Monday.

    Yesterday’s strong finish followed a proposed $908bn piecemeal fiscal stimulus package by a bipartisan group of U.S. senator amid Fed Chair Powell’s appeal for more government support. Though the package falls short of the $2tn brought forth by Democrats, the bipartisan bill would immediately provide $288bn aid to small businesses and $180bn in additional unemployment. Much needed in a period where ‘the labour market is still 10m jobs below pre-pandemic levels’ as noted by the Fed Chair.

    European indices and the FTSE started off December reversing Monday’s woes on the back of news E.U. regulators could approve Pfizer’s vaccines and be ready for distribution by January. The announcement was well received especially as economic growth remains subdued amid stringent restrictions.


Figure 1 (Source: IS Prime): EURUSD Daily : With prospects of another round of quantitative easing fading, the euro breaks above.

    Coming into Asia, growing rhetoric between Australia and China shed overnight gains on indices. Since China’s depiction of Australia soldiers as war criminals, tensions have been escalating tit-for-tat. Most recently, Beijing announced tariffs on Australia wine makers of up to 200 percent. An all-out trade war would cost Australia 6% in annual GDP. Meanwhile, as the Hong Kong government remains on high alert over the 4th wave, the Hang Seng sipped by as much as 180 points intra-day, whilst Japan stays stable.

    The U.S. dollar resumed its slide to a two and a half year low. Among majors, the EURUSD outperformed, surging 1.21% after ECB council member Isabel Schnabel disappointed investors warning not to expect “blockbuster stimulus” but rather a tweak in delaying when quantitative easing would end. Elsewhere, gold back up above the 1,800 level and crude slips ahead of OPEC’s rescheduled meeting. Bitcoin attempts reinforce recent success but fails to cement all-time highs.

Headliner to Review

  • Final Manufacturing PMI in Europe increased from 53.6 to 53.8, which was better than the expectation 53.6. Final Manufacturing PMI in UK increased from 55.2 to 55.6, which was better than the forecast 55.2.
  • In Canada, GDP m/m dropped slightly from 0.9% to 0.8%, the consecutive 5-month increase. However, it’s the slowest growth rate during the period. Manufacturing PMI increased from 55.5 to 55.8.
  • In US, Final Manufacturing PMI remained at 56.7 while ISM Manufacturing PMI dropped from 59.3, the two-year high, to 57.5, which was a bit worse than expectation. It is the sixth month expansion of manufacturing activity. ISM Manufacturing Prices dropped slightly from 65.5 to 65.4.
  • In Australia, GDP q/q rebounded from -7.0% to 3.3%. The forecast bounce in Q3 GDP is larger than the expectation. While the extended lockdown in Melbourne will affect growth, the recovery in other states has been impressive.

Headliner to Watch

  • ADP Non-farm employment change expected to see a sizeable increase from October figures. From 365K to 433K.
  • Federal Reserve Chairman Powell continues to testify before the House Financial Services Committee for day 2. Powell’s plea for additional government support yesterday has seemingly spurred a few congressional member to action, but however has been negative for the U.S. dollar.

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Antony Tan
Ben Li
Kevin Jock