Market Commentary – January 18, 2021

Kevin Jock

18th January 2021

    Ahead of Joe Biden’s inauguration, global indices ended last week lower as uncertainty overshadow the ambitious 1.9tn stimulus package. The President-elect has promised, once officially in office will sign several executive orders overturning a raft of contentious policies implemented by Trump. Meanwhile, Democrats have become divided over the one-time stimulus check amount. Far-left purveyors have argued for another 2,000 whilst moderates voiced 1,400 is sufficient in topping up the 600 already passed in December.

    COVID-19 still grabbed headline across Europe as benchmarks retreat. Ever escalating restriction’s have sowed the possibility of a double-dip recession, whilst the rate of inoculations has remained below expectations amid resurging cases. Mixed trial data for China’s Sinovac vaccine has delayed Hong Kong’s distribution. Nevertheless, the Hang Seng rallied 1.1% on open on the back of expectations beating GDP figures out of China. Australia points lower and a lack of action in the Japanese Nikkei.

    Evidence mounts for a reversal in the U.S. dollar’s fortune with Janet Yellen set to be confirmed as Treasury Secretary. She is expected to give assurance the U.S. will not seek a weaker dollar for trade advantage and allow market forces to freely dictate direction. Elsewhere, early Asia session saw gold tumbling $23 dollars to 1,803 following a surprise announcement by the U.S. administration to revoke U.S. company export licenses of Huawei suppliers. Bitcoin loses steam, with the cryptocurrency back below 35,000.

    Disappointing U.S. retail data worsened crude oil’s short-term outlook. Continuing surges in coronavirus infections still linger in the backdrop that could hinder global demand recovery. The decline could have been severe had it not been for Libya’s output reduction of 200,000 bpd after a leaking pipeline was discovered.

    For the week ahead, central bankers in Canada (Wednesday), Europe (Thursday) and Turkey (Thursday) will deliberate on monetary policy. The ECB is expected to keep rates unchanged but communicate flexibility in expanding bond purchases should the pandemic worsen. Since hiking rates consecutively, Turkey’s new governor is set to make no adjustments but will monitor inflation closely.


Figure 1 (Source: IS Prime): USDTRY Daily : A change in central bank head last year saw a reversal in fortune as the Turkish Lira appreciates from 8.50 to 7.45

Headliner to Review

  • In the US, retail sales fell 0.7% month-on-month, and fell for three consecutive months, which was higher than market expectations of 0.1%. Excluding auto agency sales and gasoline station sales, retail sales fell 2.1% in December. The core retail sales decreased from -1.3% to -1.4%, which was higher than market expectations of -0.1%.
  • In China, the annual GDP was 101.6 trillion yuan, an increase of 2.3% over the previous year. The first quarter decreased by 6.8% year-on-year, the second quarter increased by 3.2%, the third quarter increased by 4.9%, and the fourth quarter increased by 6.5%.
  • The unemployment rate in China remained at 5.2%, which met the market expectations.
  • The industrial production y/y increased from 7.0% to 7.3%, which was higher than market expectations of 6.9%.

Headliner to Watch

  • BOE governor Bailey is expected to speak on Climate Change via a webinar.

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Antony Tan
Ben Li
Kevin Jock