Market Commentary – November 20, 2020

Kevin Jock

20th November 2020

    Vaccine sentiment that propelled the S&P and Dow to all-time highs on Monday has begun fading as the resurgence in COVID infections saw investors rotate back into stay-at-home tech firms. Among Wall Street yesterday, Nasdaq was the only benchmark notching higher, by 0.8%. Meanwhile, the Dow underperformed, and S&P remained unchanged following a clash between Treasury Secretary Mnuchin and the Federal Reserve. Much to the Fed’s opposition, Mnuchin is pulling the plug on the central banks $445bn emergency lending facilities for struggling businesses. Though the program was largely unused, its existence was a source of confidence that relieved market anxiety about the broader economy.

    Likewise, ever increasing piecemeal social restriction measures has taken the wind out of U.K. and European indices as many settled within a plus/minus 0.5% range from the previous days close. A recent economist poll anticipates the Euro zone will contract 2.5% in Q4 2020 following a 12.6% rebound in Q3. Whilst Brexit negotiations will move online after a member of the EU team contracted COVID-19. Time is running short as both sides seek to conclude a draft in time for it to be legally checked, translated and ratified before December’s deadline.

    A lack of major news in Asia see’s mute activity across Asia-Pacific markets. Experts in Hong Kong foresee a fourth-wave following a rebound in cases with 12 confirmed and more than 20 suspected. Whilst Japanese PM Suga warned the country will move ahead with restrictions of their own, South Australia will come out of hard lockdown on Saturday after contact tracers were misled by an infected individual.


Figure 1 (Source: IS Prime): USDTRY Daily Chart : Expectations of further rate hikes see’s demand in Turkish lira soar.

    The euro ticked higher against the greenback, while the remaining majors underperformed against the dollar. In focus today, the Turkish lira rallied across the board following the Central Bank hiking weekly repo rates to 15%. As the news hit, the USDTRY tumbled sharply briefly touching 7.5000. Since the appointment of a new chief with vastly different perspective in how inflation is managed, the lira has depreciated 11.5% within 2 weeks. Turkish President Erdogan has also seemingly come to terms if high inflation persists, the subsequent economic damage would be irreversible.

    Elsewhere, bitcoin post 8 consecutive up days to settle just below 18,000.

Headliner to Review

  • ADP Non-Farm Employment Change in Canada jumped from -565.4k to -79.5k. The figure is much better but the employment change is still negative due to coronavirus pandemic.
  • In the US, the economic figures are expected as below:
    • Philly Fed Manufacturing Index dropped from 32.4 to 26.3.
    • Unemployment claims increased slightly from 711,000 to 742,000.
    • CB Leading Index m/m remained at 0.7%.
    • Existing Home Sales increased from 6.57 million to 6.85 million.
  • European Central Bank President Lagarde said EU economies need public investment-led stimulus. “The key challenge for policymakers will be to bridge the gap until vaccination is well advanced and the recovery can build its own momentum,” she said.
  • In Japan, National Core CPI y/y dropped from -0.3% to -0.7%. Flash Manufacturing PMI dropped from 48.7 to 48.3, which is still below the 50 level, indicating a deteriorating economic climate.

Headliner to Watch

  • Ahead of holiday season, Canada expects to see a reduction in retail sales growth from 0.4% to 0.2%, whilst core sales are set to fall from 0.5%
  • On Saturday, world leaders will meet virtually for the G20 Summit amid vaccine breakthroughs with the prospect of ending the pandemic. Other agenda’s will include discussing initiatives for poorer countries affected by COVID.

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Antony Tan
Ben Li
Kevin Jock