Market Commentary – December 31, 2020

Kevin Jock

31st December 2020

    Ahead of New Year’s Eve, global investors began winding down exposure as broad-based benchmarks ended in bear territory albeit with some stragglers on Wednesday. Wall Street was disappointed as Senate Majority Leader McConnell positioned the $2,000 stimulus payment alongside measures on election integrity and social media liability protections. The packaged deal addresses President Trump’s 3 most vocal demands whilst deterring Senators from both congressional sides in unanimously voting for the bill. The most likely outcome would leave the bill dead in the Senate floor.

    Despite positive momentum on the vaccination front and the U.K. parliament overwhelmingly voting in favour of the Brexit deal, the FTSE fell 80 index points with European counterparts following suit. Brits rejoiced following local approval of AstraZeneca’s COVID-19 vaccine whilst China’s President and European leaders met to finalise an EU-China investment agreement designed to promote post-pandemic economic recovery in bi-lateral trade. Elsewhere, on-going trade dispute between EU-US saw the out-going administration slap additional tariffs on European Union products including aircraft component and wine.

    Asia followed overnight U.S. sentiment posting declines in Australia whilst action in Hong Kong and Japan remained muted. Authorities in Sydney and Melbourne area struggling to battle COVID-19 clusters across both states after an initial outbreak on the Northern Beaches have now grown to 144 people.

    The U.S. dollar index settled at a 2 and a half year low yesterday. Since the pandemic began back in March, the year of 2020 saw investors shun the greenback as a Federal Reserve’s commitment to being super-accommodative and loose fiscal policy debase the currency. Meanwhile, gold surges towards $1,900, crude stays above $48 and bitcoin breaks all times highs again briefly touching 29,000.


Figure 1 (Source: IS Prime): GBPUSD Weekly : An orderly Brexit see’s the pound appreciate to multi-year highs.

Headliner to Review

  • The official non-manufacturing manufacturing purchasing managers’ index (PMI), which measures sentiment in the service and construction sectors, fell to 55.7 from 56.4. China’s official manufacturing purchasing managers’ index (PMI) fell to 51.9 in December from 52.1 in November.
  • The Prelim Wholesale Inventories in US in November unexpectedly stopped rising for three consecutive months, falling by 0.1% month-on-month. The previous value was slightly revised up by 1.1%. The market expected to continue to rise by 0.7%.
  • The Chicago Purchasing Managers Index (PMI) unexpectedly stopped its two-month decline from a high in the past two months. It rose to 59.5 from 58.2 in November, reflecting that the expansion of manufacturing activities in the Midwest, which has
  • Pending Home Sales in US dropped from -0.9% to -2.6%, which was much less than the expectation of 0.1% increase.

Headliner to Watch

  • Unemployment Claims in US expected to increase from 803,000 to 832,000. The much needed stimulus package is anticipated to stifle the current deteriorating labour market.
  • Natural Gas Storage expected to increase from -152 billion to -127 billion.

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Antony Tan
Ben Li
Kevin Jock