Market Commentary – November 4, 2021

Kevin Jock

4th November 2021

In meeting market expectations, Wall Street rallied to record all-times again. Following the FOMC, the Federal reserve will cut Treasury purchases by $10bn and mortgage-backed securities by $5bn starting this month but will remain flexible depending on how inflation evolves. Particularly as price increases have proved non-transitory due to persistent supply chain imbalances. The Nasdaq outperformed, advancing 1.2% whilst the S&P notched 0.7% and 0.2% respectively.

Across the Atlantic, European benchmarks kick off November echoing similar price action to the US. Looking past price pressures, a by-product of supply-chain bottles in combination with a strong earning’s seasons has seen the likes of the CAC40 rally 5 consecutive days with the STOXX50 and DAX30 reaching new heights.

Overnight euphoria fizzled amid Asia’s session as the Nikkei and Hang Seng retraced grounds made at the open. Meanwhile, the S&P200 bucked the trend, remaining near intra-day highs, though only eking out a 0.2% gain. Matters in relation to COVID-19 still remain in headlines across the region. Whilst Singapore hit’s a key metric that could the nation re-opening it’s borders, China clamps down further via shutting down train services in 23 region, particularly in Beijing as cases from the recent outbreak swell to 40.

Bitcoin fell back below $63,000 as the Shiba Inu token underscores concern that despite much transparency digital tokens offer, the alternative currencies cannot escape risk that a handful of wholes control the crypto world.

A head of the OPEC-JMMC on Thursday, crude tumbles to settle just above $80. Though unlikely to give in to US pressure calling for the group to raise supplies faster, a resumption of nuclear talks in Iran and U.S. domestic supply increasing according to the latest government figures, illustrate bearish signs.

The U.S. dollar index held steady despite tapering as Fed Chair Powell did a great job in de-linking reduction in monetary liquidity and the increasing prospect of rate hikes, further reassuring currency speculators.

USOIL-2

Figure 1 (Source: IS Prime) SPT.CO.US Daily : Regardless whether OPEC and friends increase supplies, crude positions lower as talks with Iran improve and  US inventories double from previous week.

Headliner to Review

  • FOMC concluded with the Federal Reserve reducing quantitative by $15bn a month, in the coming months, but subject to ever-changing economic outlook. Inflation, previously hoped to be transitory was subsequently reinforced as continuing supply bottlenecks keep price pressures elevated.
  • ADP non-farms employment change came in better than expected at 571K compared to 400K with demand for labour showing no signs of slowing, especially as ISM services further illustrated a strengthening economy increasing from 61.9 to 66.7.

Headliner to Watch

  • BOE to provide outlook on monetary regime for the coming month with no changes expected for asset purchases as 7 members look to vote a “hold”.

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Authors:
Antony Tan
Kerry Man