Market Commentary – October 02, 2020

Kevin Jock

2nd October 2020

    Despite Tuesday night’s chaotic presidential debate between President Trump and candidate Biden, Wall Street ended Wednesday’s session higher as Democrats passed a 2.2tn stimulus bill in the House. Unfortunately, as House Republicans thoroughly rejected the package, the likelihood of a Republican controlled Senate approval is minimal. Nasdaq led the charge, up 1.7%, carried by tech juggernauts Amazon, Apple and Microsoft.

    Elsewhere, European benchmarks struggled to post gains as pharmaceuticals earning disappoint investors and oil firms slip from worsening crude prices.

    Asia’s session fared no better as Australia fell on open. Japan resumed trading (lower) after an unprecedented one-day outage on the Tokyo Stock Exchange due to a hardware glitch. Nonetheless with China and Hong Kong on holiday due to Mid-Autumn festivities, subdued trading is expected till London opens.

USDCNH 73 Week High

Figure 1 (Source: Refinitiv): USDCNH Daily Chart : 

    With U.S. stimulus talks back in headlines, the greenback retreated slightly across G7 currency pairs and gold rose back above the 1,900 level. Among emerging markets, the Mexican peso garnered most favor appreciating 1.3% as recent manufacturing PMI hit a 6-month high. The yuan continued to appreciate against the dollar, hitting a 73-week high. Thus far, China has emerged as the front-runner in successfully containing COVID-19 and managing the subsequent economic fallout. With capital control ensuring currency stability, the nation has attracted both foreign praise and international investments.

    Amid a worsening COVID-19 pandemic as Europe’s resurgence threatens global growth, crude oil fell $1.40. Recent OPEC daily production output data saw a 160,000 bpd increase fueled by Libya restarting oil fields. Though most members have adhered to production quotas, Libya’s crude output has risen to 270,000 bpd.


Headliner to Review

  • Thursday data show that the number of initial claims for unemployment benefits in the United States fell last week with better than expected figures, but still remained at the level of economic recession. Personal income declined in August. U.S. construction spending increased more than expected in August, as interest rates are at historically low levels to boost housing construction Manufacturing activity slowed unexpectedly in September.
      • US Unemployment Claims changed from 873k to 837k.
      • – Core PCE Price Index m/m declined slightly from 0.4% to 0.3%.
      • – Personal Spending m/m decreased from 1.5% to 1%.
      • – ISM Manufacturing PMI dropped slightly from 56.0 to 55.4.
  • The recovery in euro zone manufacturing activity continued in September. The eurozone manufacturing PMI increased to 53.7 in September, compared to 51.7 in August, which is the strongest growth levels for the sector since 2018. Better PMI figures which helps rising output, faster order book growth and strong exports. All helped to drive up manufacturing activity and reduce unemployment rate.

Headliner to Watch

  • All eyes on U.S. non-farm employment change, expected to add another 900K jobs to the American economy. Unemployment to edge lower from 8.4% to 8.2% whilst hourly earnings will increase for the third consecutive month by 0.5%. The slow grind in labour market recovery have economist concerned, the re-hiring’s from businesses re-open will fade. And without stimulus support, jobs gains will become subdued.

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Antony Tan
Ben Li
Kevin Jock