Market Commentary – October 16, 2020

Kevin Jock

16th October 2020

    European indices and global futures tumbled amid London session as EU leaders refused to make concessions just hours before PM Boris Johnson was expected to announce whether the U.K. will walk away from negotiations. Brussels left the ball on Johnson’s court, of whom expressed his disappointment and will respond on Friday.

    Nonetheless, by the end of U.S. session most broad-based benchmarks recovered on improving stimulus sentiment. Speaker Pelosi re-iterated the urgency for a relief package before elections as she continued talks with Secretary Mnuchin. President Trump further voiced his willingness for a bi-partisan deal exceeding $1.8tn.

    Among the weaker performers of the day, Euro STOXX 50 settled 1.2% lower as investors were unnerved over accelerating COVID cases in Europe. In so far that Italy registered close to 9,000 daily cases, up from 7,000 while France jumped to 30,000, up from 22,500 the day before. Likewise, cases in Poland rose to a record 24% higher. With impending new restrictions, investors are growing weary the pandemic will continue into 2021 crippling Europe’s recovery.

    Despite U.S. threats to add China’s Ant Group to a trade blacklist, Hong Kong rallied 1.3% whilst Australia and Japan slumped. The prospect of Ant Groups dual listing in Hong Kong and Shanghai raising a record $35bn USD kept the market float.


Figure 1 (Source: Refinitiv): USDRUB Daily Chart : Russian ruble remains one of the worst performing EM currency against the U.S. dollar and prefers it.

    For the week thus far, risk-sensitive currencies were hardest hit. The Aussie dropping just over 140 pips over RBA’s dovish guidance to a 2-week low. Meanwhile, the pounds performance reflected whipsawing Brexit risk. Despite political turmoil as tens of thousands stage anti-government protests in Thailand’s state capital, the Thai baht remains unhinged just above the 31.00 level.

    Of peculiar interest, alongside a slump in global oil demand and the Russia ruble depreciating 20% against the greenback year to date. When questioned regarding this underperformance, Industry and Trade Minister Manturov stated it was “awesome”. Since sanctions, the nation began shifting policy to ensure local industries were less reliant on U.S. and European imports. The minister believes an ever-depreciating currency will benefit Russia as long inflation is kept under wraps.

Headliner to Review

  • The number of initial unemployment claims rose to 898,000 last week, an increase of 53,000 from the previous week, which was higher than the expectation of 810,000. People are worried that the new crown epidemic may cause permanent damage to the labour market.
  • Philadelphia Fed Manufacturing Index jumped to 32.3, compared with the previous figure 15.0, which was much higher than the forecast of 14.4. This is the highest reading since the pandemic. The sharp improvement in Philadelphia saw new orders and shipments making notable gains.

Headliner to Watch

  • U.S. retail sales expected to stay positive as the economy drags along. Analyst see the headline figure to edge slightly higher from 0.6% to 0.7 whilst core sales to lower from 0.7% to 0.4%.
  • American sentiment set to remain weak, just above the 80 level. Despite a recovery (though slow), consumer confidence has yet reach levels seen pre-pandemic.


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Antony Tan
Ben Li
Kevin Jock