Market Commentary – January 8, 2021

Kevin Jock

8th January 2021

    Despite growing calls to remove out-going President Trump as many believe his rhetoric instigated violence at Capitol Hill. Wall Street extends to all-time highs as prospects for more short-term stimulus outweigh risk of tougher business regulations and higher taxes. Both House Speaker Pelosi and Senate Democratic leader Schumer have insisted Vice-President Pence to invoke the 25th amendment and remove Trump from office immediately.

    Meanwhile, European indices climbed two consecutive days in a row, with Spain outperforming posting gains of 3.3%. Defying lockdown measures, a string of positive news from better than expected German factory orders to European approval for Moderna’s second COVID-19 vaccine have boosted overall investor confidence.

    Coming into Asia, the Hang Seng continues to defy expectations rallying to an 11-month high amid a dire outlook for Chinese companies on Wall Street. Both MSCI and FTSE Russell have confirmed they will delete three China telecom companies from their global indexes. Elsewhere, Australia is poised to break out of a 2-month consolidation, where as Japan rallies for 3 days in a row whilst a state of emergency has been declared in Tokyo.

    Reprieve for the U.S. dollar following a bounce back from 3-year lows for the index. The Greenbacks turn around came alongside rising Treasury yields and inflation expectations with St. Louis Fed President Bullard commenting once the impact of vaccine reverberates across the states, “you have the economy poised to boom at the end of the pandemic”. Among exotic’s the South African Rand is emerging as the biggest loser thus far in 2021 with the USDZAR weakening to 15.40. The country reported a record 21,832 in new daily cases, culminating from the more infectious variant. Outflow’s have been intensifying amid a government contemplating nationwide lockdown.

    Elsewhere, crude oil briefly hits $51, gold back down to 1,910 and bitcoin’s rollercoaster ride continues, temporarily passing 40K followed by a $3,500 tumble then back up to 39K again.


Figure 1 (Source: IS Prime): USDZAR Daily : Hit with a variant strain, difficulties procuring sufficient vaccines, and potential lockdowns, investors flee the South African Rand.

Headliner to Review

  • The number of unemployment claims for the first time in the United States for the week ending January 2, 2021 unexpectedly dropped for three consecutive weeks, but the weekly decline further narrowed to 3,000. It fell to 787,000 people (the previous value was only revised down to 790,000 people), the lowest in more than a month, and the market expected to rebound to a total of 800,000
  • US ISM Service Industry Index unexpectedly rebounded from the previous value of 55.9 to 57.2. The market expected to fall to 54.6.
  • Canada’s Ivey Purchasing Managers’ Index (PMI) unexpectedly dropped into contraction in December 2020, from the previous value of 52.7 to 46.7, ending six consecutive months of expansion, which is also much lower than 51.9 in the same period last year. The market expected to increase to 53.1
  • The Eurozone economic sentiment index rose from the previous value of 87.7 to 90.4 in December last year, higher than market expectations and rose to 90. The Eurozone service industry prosperity index fell from -17.1 to – 17.4, lower than market expectations and rose to – 15. The Eurozone Industrial Prosperity Index rose from -10.1 to -7.2 in December, which beat market expectations.

Headliner to Watch

  • Following holiday season, US non-farm employment change move towards a grinding halt, with figures expected to decline from 245K to 60K. The joblessness rate will in turn increase from 6.7% to 6.8% as American seek to find employment in the new year.
  • Likewise, Canadian employment set to contract from 62.1K to -32.5K with the unemployment rate to increase from 8.5% to 8.7%.

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Antony Tan
Ben Li
Kevin Jock