Market Commentary – December 4, 2020

Kevin Jock

4th December 2020

    Wall Street remained firm near record highs as promising stimulus prospects were offset by COVID-19 vaccine doubts. A $908bn fiscal package drew further bi-partisan support on Thursday across Senate and House floors. Senate Majority leader McConnell has been under increasing pressure from fellow Republicans to negotiate a deal as the new proposal already falls way below the $2.2tn Democrats had initially argued for. On the vaccine front, Pfizer hit a logistics snag resulting in 50mn from 100mn of vaccine doses it had planned by the end of this year. Meanwhile leading U.S. infectious disease expert Dr Fauci warned U.K. regulators that they are rushing the approval process without proper clinical trial scrutiny.

    Likewise, European indices ended little changed though surprisingly U.K. rallied despite renewed Brexit woes. British negotiators have accused their French counterparts of making eleventh hour demands, derailing progress made thus far. France is demanding a guaranteed level playing field for U.K – French businesses inclusive of a British regulator to police state aid to companies and ratchet clauses to ensure environmental and labour regulations evolve in similar fashion over time.

    Mixed results coming into Asia with Australia rallying on open whilst Japan and Hong Kong retreated. Souring US – China relationship seeped into the Hang Seng after Congress passed legislation yesterday that would force Chinese companies to delist from American stock exchanges. Nevertheless, recent data shows Wall Street unphased by geopolitics, piling in a record $212bn into Chinese bonds and stocks this year.

Crude Oil-2

Figure 1 (Source: IS Prime): Crude Oil Daily: Crude rises to a 9-month high on OPEC compromise to curb sizeable production increases.

    Euphoria for oil markets as crude shot up above $46 following a tense OPEC-JMMC meeting over the past couple days. Members have agreed to compromise a planned multi-million bpd increase a day with only a piecemeal change of 500K bpd for January 2021.

    The U.S. dollar continues to disappoint as investors hunted for higher yield elsewhere. Particularly the Euro, on a 3-day bull run from 1.1920 to 1.2140. Though headwinds are upon the horizon with the ECB expecting to expand their quantitative easing chest next week. The Turkish lira fell 700 pips yesterday following annual inflation figures jumping to their highest for more than a year, at 14%. With increasing inflation and a hawkish new central bank head, investors are anticipating another sharp rate hike in the coming months.

Headliner to Review

  • Yesterday saw improving final services PMI from Europe and the U.K. The former rose to 41.7 from 41.3, whilst the latter jumped to 47.6 from 45.8. Though production has fallen, business optimism was at nine-month highs.
  • Services PMI data from the U.S. edged lower to 55.9 from 56.6 Conflicting national, regional and local COVID-19 guidelines have made it hard for businesses navigate.

Headliner to Watch

  • American joblessness improved better than expected with claims lower to 712K from 775K
  • In focus, unemployment data out of Canada and the U.S.
    • Non-farm pay rolls is expected to another 500K last month with the unemployment improving to 6.8% from 6.9%
    • Similar views seen for Canada as another 22K is expected to find jobs.

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Antony Tan
Ben Li
Kevin Jock