Market Commentary – November 9, 2020

Kevin Jock

9th November 2020

    Global futures and indices extend gains on Monday open following Joe Biden’s win over the weekend as President elect, emboldening risk-on sentiment across markets. Though President Trump has yet to acknowledge the outcome despite 290 electoral votes having been called for the incoming Commander-in-Chief and on the path to 306. The incumbency is pursuing legal means to contest the ballot counts in key battleground states. Nonetheless, Joe Biden will be moving forward today in launching the Democrats transition effort. On the top of the agenda, containing the coronavirus pandemic as the U.S. surpasses 10M cases on Sunday. Shoring up support for a 3.5tn stimulus package in a much-anticipated battle on a Republican-led Senate floor. And reigniting international relations via rejoining global efforts such as the Paris climate accord.

    Asia’s session saw Japan rally to highs unseen since 1991, up 2.5% as the Nikkei prices in a future where trade relations with the U.S. would improve. Meanwhile, Australia broke out of a 5-month consolidation, rising as high as 1.4% intraday, whilst Hong Kong remains comparatively mute much like China’s reception with no public congratulations from President Xi. Futures on the S&P500 and Nasdaq is just a tad shy away from all-time highs, though Dow continues to lag. European benchmarks ended Friday with mild losses weary of election uncertainty and growing COVID cases, though is expected to gap higher when London opens.


Figure 1 (Source: IS Prime): Nikkei weekly chart : Breath of fresh air for the Nikkei, as U.S. – Japan trade relations expected to improve under Biden.

    The FX market welcomed a Biden win via shorting the U.S. dollar index to a 2-month low, particularly the Kiwi appreciating beyond the 0.6800 level, a 1.5 year high. Some reprieve for the USDTRY gapping down 1.8% on open after Turkey’s central bank chief resigned on Saturday citing health concerns. The new appointee Naci Agba is known to oppose the previous chiefs’ policies which saw the lira depreciate 44% this year. The PBOC set the USDCNH midpoint to a 28-month low from 6.6290 to 6.6123 as the yuan goes on a tear since May, appreciating just under 10% thus far. Demand for the yuan has rebound following China’s economic resilience from COVID and producing high yielding bonds.

    Elsewhere crude oscillates around $38, gold ascends to $1,960 and bitcoin rejoices stability beyond the 15,000 level.

    For the week ahead, only the RBNZ will deliberate on monetary policy scheduled on Wednesday with no changes expected. Jerome Powell, Andrew Bailey, and Christine Lagarde will participate in an ECB forum on Thursday to discuss central banking.

Headliner to Review

  • The number of jobs created by the U.S. economy in October was the lowest in five months, and more Americans began to work part-time job, which highlights the fact that financial stimulus has dried up and coronavirus cases have surged across the country. The next president will face the challenge of keeping the economy recovering from the epidemic. Here are the economic figures in the US:
    • Unemployment Rate dropped from 7.9% to 6.9%.
    • Non-Farm Employment Change dropped from 672,000 to 638,000.
    • Average Hourly Earnings m/m increased from 0% to 0.1%.
  • Employment Change in Canada dropped from 382,000 to 83,600. Unemployment Rate in Canada dropped from 9.0% to 8.9%. Ivey PMI increased slightly from 54.3 to 54.5. The rise in October continue to fill the employment gap caused by the pandemic with hundreds of thousands of jobs yet to be recovered.
  • British Prime Minister Johnson stated that the trade agreement between the UK and the EU must be completed, and that he is always enthusiastic about reaching trade agreements with the EU and its partners. He said that the outline of the negotiations between the UK and the EU is very clear.

Headliner to Watch

  • Despite China’s economic rebound from COVID, YoY inflation figures are expected to halve from 1.7% to 0.8% whist PPI remains negative at 1.9%. If broader growth figures were to show signs of slowing down, authorities may be prompt to act to provide more support.
  • BOE Gov Bailey and ECN President Lagarde will speak at the Green Horizon Summit aimed at exploring how capital can be mobilized to ensure the U.K. transitions to net zero emissions by 2050.

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Antony Tan
Ben Li
Kevin Jock