Market Commentary – December 21, 2020

Kevin Jock

21st December 2020

    Mixed session in Asian trading with futures across Wall Street pointing lower as markets were spooked over emerging evidence revealing a new coronavirus strain sweeping across Europe and Australia. The new variant is said to spread more quickly and has been a factor in driving the recent surge in infection.

    In Asia, the S&P200 oscillated but remained unchanged, the Nikkei tumbling 1.7% and Hang Seng gapping lower 0.4% only to regain the entirely in later session. Currencies across the board against the U.S. dollar tumbled as risk appetite was sapped with more global lockdowns and restrictions on the horizon. The move was further exacerbated with investors fearing the incoming Treasury Secretary would favour a strong dollar policy after two predecessors, Larry Summers and Paul Hankson urged Janet Yellen to manage the greenbacks global dominance role more prudently.

    With focus on COVID, the much-anticipated stimulus reformed announced Monday morning failed to buoy investor sentiment. Whilst the Japanese parliament signed on a record 106.6 trn yen annual budget for 2021 boosting military and welfare expenditure. Congressional leaders in the U.S have reached a $900bn relief package after multiple rounds of negotiations in past weeks. Hard-hit households would receive a one-off $600 check in addition to another $300 per week in unemployment benefits. COVID liability shield remains a point of contention and thus was excluded.

    Last Friday saw European and UK benchmarks weaker as Brexit negotiations drag on. A draft deal had been anticipated before January 1st, however progress thus far suggest talks will now continue past Christmas. The previously resolved fishing matters have returned to the forefront with negotiator arguing over EU boat rights in UK waters and the length of the transition period.

    Elsewhere, crude oil slips below $48 with demand recovery now in doubt. Gold and bitcoin continue to make significant gains, more so the latter asset. The cryptocurrency gained 32% last week as more prominent investors publicly embraced the digital coin. This morning the crypto gained another $1,000 on the back of Elon Musk’s twit pondering converting part of Tesla’s balance sheet into Bitcoin.


Figure 1 (Source: IS Prime): Bitcoin Daily : Year to date, bitcoin gains a staggering 245% as prominent institutional figures throughout the year embrace the cryptocurrency’s utility.

Headliner to Review

  • In Canada, the figure of Retail Sales dropped as expected. Retail Sales m/m dropped from 1.9% to 0.4%. Core Retail Sales m/m dropped from 1.9% to 0.0%.
  • In US, the figures are better than forecast. CB Leading Index m/m decreased from 0.8% to 0.6%. Current Account dropped from -161B to -179B.

Headliner to Watch

  • Consumer confidence in the EU expected stagnant in negative territory and will remain so in coming months. Despite a vaccination drive across the continent, the surge in infection cases remain uncontained and if the new strain is found to be immune to recent breakthroughs, then the subsequently economic consequences would be dire.
  • Retail sales in Australia anticipated to experience a bump from 1.4% to 2.4% ahead of Christmas. Nonetheless investors remain weary over the new surge in cases across the state of NSW.

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Antony Tan
Ben Li
Kevin Jock