Market Commentary – December 24, 2020

Kevin Jock

24th December 2020

    Ahead of Christmas, European broad-based benchmarks outperformed American counterparts on Wednesday upon clear signs a Brexit trade deal is imminent. As negotiations come down to wire, the European Commission has said they’re now in the “final stages” after fine-tuning fishing right details. One last eleventh hour issue remains and that is trading rules for electric vehicles. Downing Street has requested U.K. electric cars to be tariff free if most of the components were outsourced beyond EU and UK territories.

    Across the Atlantic, U.S. households were left in limbo following Trumps refusal to sign the 900bn coronavirus relief deal. Some House Republicans have called the bill tainted and supported the White House proposal to increase stimulus checks from $600 to $2,000. With unemployment benefits set to expire the day after Christmas, congressional Republican party is scrambling to find a compromise. The uncertainty President Trump injected left Wall Street mixed. Nasdaq ended the session lower by 48 points whilst the Dow Jones outperformed by 171 points followed by the S&P500. Concerns have also risen over the pace in which vaccine doses have been disseminated. Millions of injections are still in storage and the goal of vaccinating 20 million people by December end is in doubt.

    Despite authorities in China launching an investigation on Alibaba’s monopolistic practices, the Hang Seng managed to etch out 0.3% intra-day. Elsewhere, disappointing performance from the S&P200 and the Japanese Nikkei had price in negative territory.

    The U.S. dollar resumed declines with the pound outperforming, surging as high as 213 pips amid increasing probability of a Brexit deal. Expectation beating GDP figures saw the Canadian Loonie reversed Tuesday’s losses in its entirety. Meanwhile, crude oil gains just over $1.10 over inventory drawdowns, gold steadies itself at $1,872 and bitcoin takes a breather, fluctuating between two major psychological round numbers. $23,000 – $24,000.


Figure 1 (Source: IS Prime): GBPUSD Minute (London – US Session) : Pound soars during London session after breakthrough Brexit deal imminent.

Headliner to Review

  • In United States, the number of people claiming unemployment benefits for the first time for the week ended December 19 stopped rising for two consecutive weeks. It dropped sharply by 89,000 weekly, from three-month high of 892,000 to a total of 803,000, which was far less than the market expected total of 885,000.
  • The U.S. Personal Consumption Expenditure (PCE) price index, regarded as an inflation indicator by the Federal Reserve, unexpectedly maintained zero monthly growth in November, compared with the market expected to rebound by 0.1%. The year-on-year figure expectedly slowed to 1.1%, compared with the market expected 1.2%.
  • Canada’s gross domestic product (GDP) increased for six consecutive months, but the monthly growth rate continued to drop from 0.8% to 0.4%, which was still higher than market expectations for a growth of 0.3%.
  • Japan’s Service Producer Price Index (SPPI) on November continued to fall by 0.6% year-on-year, compared with the previous value of -0.5%, which was in line with market expectations.

Headliner to Watch

  • Other than Japan, global banks on break to celebrate Christmas Day.
  • As cumulative cases top 200K, fewer feet on the ground is anticipated to see retail sales growth decline from 6.4% to 1.8% in Japan.
  • Japan’s unemployment rate is expected to stay at it’s highest in two years at 3.1% amid the pandemic.

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Antony Tan
Ben Li
Kevin Jock