Market Commentary – October 15, 2020

Kevin Jock

15th October 2020

    On-going stimulus saga continue to plague global markets after Treasury Secretary Steven Mnuchin extinguished hope that congressional parties could strike a stimulus deal before November elections. Banking also weighed heavily on Wall Street as Wells Fargo tumbled 6% on a pessimistic forward guidance despite posting positive earnings last quarter while Bank of America sank 5.3% with the banks’ trading arm’s performance disappointed when compared to Goldman Sachs.

    Meanwhile, European indices edged lower with prospects of more lockdown ahead while vaccine delays further dent sentiment. Just recently Italian P.M Giuseppe Conte implemented new social distancing restrictions in restaurants, sports and school activities. Across the English Channel, rising Brexit uncertainty lingers onto top of the FTSE, with the benchmark falling 1.1% as Boris Johnson’s self-imposed deadline is set to expire today. Though the pound recovered, up 80 pips to an off-remark made by the U.K Prime Minister signalling he won’t abandon Brexit talks.


Figure 1 (Source: IS Prime): AU.200 Daily Chart : Aussie benchmark attempts to break higher, out of consolidation on RBA easing tailwind.

    Despite Hong Kong and Japan declining on Asia’s open following U.S. mood, the S&P 200 surged as high as 1% intra-day after RBA Gov Philip Lowe confirmed the central bank will cut rates in November. Lowe said, “As the economy opens up, though, it is reasonable to expect that further monetary easing would get more traction than was the case earlier.” Likewise, ahead of additional easing, investors reacted by shorting the Aussie dollar with the currency falling 39 pips thus far in Asia’s session.

    Elsewhere, US Oil held onto Tuesday gains, settling above $40.90 after U.S. stockpile fell surprisingly last week. The data largely attributed the fall to OPEC and member states complying with September curb outputs.

Headliner to Review

  • The US Producer Price Index (PPI) for final demand increased from 0.3% in August to 0.4% in September while the US core PPI for final demand increased remained at 0.4% in September. They are both better than the forecast of 0.2%.
  • Australia’s unemployment change had 29,500 jobs lost in the last month, compared with the gain of 129,000 in the previous figure. The unemployment rate rose slightly from 6.8% in August to 6.9% in September. The data providers further insights into the labor market impacts from the restrictions in Victoria.
  • The China producer price (PPI) for industrial producers in September dropped by 2.1% year-on-year, which was 0.1% larger than in August, and was lower than market expectations and fell by 1.8%.
  • The China consumer price (CPI) in September rose by 1.7% year-on-year, which was 0.7% points lower than in August, and lower than market expectations for a 1.8% increase.

Headliner to Watch

  • U.S. unemployment claims set to decline from 840K to 810K. Since August, the U.S labour market recovery has remained lethargic amid an absence of fiscal support from the U.S. government.
  • EU leaders will meet in Brussels today for the Euro Summit. On the top of the agenda is Brexit. Despite the U.K P.M’s self-imposed deadline today, December 21st is when negotiations formally expire. Ultimately, the U.K is arguing for the same agreement that is signed with Australia. Nevertheless, member states are expected to make no concessions during this summit.


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Antony Tan
Ben Li
Kevin Jock