Market Commentary – November 26, 2020

Kevin Jock

26th November 2020

    Rotation out of cyclical firms saw the S&P500 and Dow take a breather after hitting all-time highs whilst Nasdaq took the opportunity to make up for lost ground from tech’s recent under performance. China’s president grabbed headlines yesterday as Xi congratulated Joe Biden’s election win with messages entailing hopes of a “healthy and stable” U.S. – China relationship with “no conflicts” and “no confrontations”. President Xi’s remarks come amid further U.S. sanctions on Chinese firms deemed facilitating Iran’s missile program.

    European markets ease off momentum following a series of recent positive announcements boosted broad based benchmarks to multi-month highs. Meanwhile, the FTSE suffered a 1% decline on Wednesday as Brexit tension flare again. European negotiators were unwilling to budge on rules surrounding swap trading by E.U. banks in the U.K. A no-deal Brexit would see disruption in the derivatives market worth $50tn a year.

    Mixed results across Asia with Australia following overnight Wall Street sentiment easing 45 points intra-day. Whilst Hong Kong remains unchanged, the Nikkei soared 1.1% as China’s foreign minister Yi and newly elected Japanese Prime Minister Suga forge multilateral trade deals. Both nations have also agreed on a business travel bubble to improve relations.

Crude Oil-1

Figure 1 (Source: IS Prime): Crude Oil Daily : Amid vaccine breakthroughs, crude has surged 25% this month alone.

    Downbeat unemployment data put the U.S. dollar on the defensive yesterday among majors. The Euro stood at 1.1915, its highest since September whilst the Kiwi resumes its upward trajectory since the RNBZ’s hawkish remarks. Thanks to higher crude prices, the Mexican peso reached it highest since May. Despite inventories swelling for 3 consecutive weeks, recent vaccine breakthroughs have investors betting on future demand prospects.

    Elsewhere, bitcoin tumbles as much as 8.6% intra-day following a brief breakout to all-time highs.

Headliner to Review

  • The number of initial unemployment claims in the US rose from 748.000 to 778,000, which was higher than the expectation of 732,000. This is the second consecutive week that the data has rebounded and increased, an increase of 30,000 from the revised data in a week.
  • Crude oil inventories decreased by 754,000 million barrels to 488.7 million barrels, a decrease of 0.2%, compared with the expected increase of 225,000. Barrels. The previous figure increased by 769,000 barrels. The four-week average supply of crude oil products in the United States was 19.315 million barrels per day, a decrease of 9.1% from the same period last year.
  • The prelim GDP in the US report remained at 33.1% annualized pace during the third quarter of 2020, which was expected.
  • The figures of Durable Goods Orders were better than expectations. Durable Goods Orders m/m decreased from 2.1% to 1.3% while Core Durable Goods Orders m/m increased from 0.9% to 1.3%.

Headliner to Watch

  • The ECB will publish the meeting minutes of Octobers rate policy decision. The central bank had left rates unchanged but did signal considering more quantitative easing should economic conditions worsen.
  • The U.S. markets will close for Thanksgiving on Thursday.

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Antony Tan
Ben Li
Kevin Jock