Market Commentary – October 22, 2020

Kevin Jock

22nd October 2020

    Stimulus talks in America drag on resulting in a choppy Wall Street session overnight, ultimately edging the benchmarks lower. Despite Tuesday’s deadline, House Speaker Pelosi kept hopes alive stating she and the White House ‘has a prospect for an agreement’ but is unlikely to pass a relief bill before November elections. Senate Majority Leader Mitch McConnell has also shown a lack of interest in allowing the bill cross Senate floors before Amy Coney Barrett’s Supreme Court nomination.

    U.K and European indices struggle to post gains despite a more optimistic Brexit outlook after E.U’s chief negotiator Michel Barnier signalled a deal is within reach. Discussions will resume with negotiators meeting in London on Thursday, aiming for an agreement by mid-November. Upon the news hitting headlines, the pound rallied over 200 pips to a six week high ending the session at 1.3141 whilst the FTSE sank 2.2% weighed down by losses in exporters. The STOXX tumbled 2%, the FRANC down 2.1% and the DAX is lower by 1.6% amid intensifying lockdown protocols, hitting the healthcare and construction sector most.


Figure 1 (Source: IS Prime): Bitcoin Weekly Chart : PayPal’s bitcoin adoption see’s the cryptocurrencies demand soar.

    Asia opened mixed with futures and Japan sinking lower while Hong Kong gapped down 0.6%. Meanwhile Australia recovered from early losses, up 0.4% on the back of the Victorian government outlining plans to re-open the state by next week Monday.

    Among G7 currencies, the greenback weakened as the market prices in an eventual fiscal package. Gold remains above 1,900 though crude slid below $40. Bitcoin rallied 8.3%, briefly settling above the 13,000 level and hitting a 2-year high. The move driven entirely by PayPal announcing plans to accept cryptocurrency in use for merchant payments. The new follows remarks made by Fed Chair Powell endorsing digital alternatives of the U.S. dollar.

Headliner to Review

  • Canadian inflation numbers continue to be distorted by COVID as the economy steers itself out of the pandemic. CPI in September remained negative at -0.1%, unchanged from the month before.
  • Retail sales in Canada dropped from 1% to 0.4% while the core retail sales increased from -0.1% to 0.5%. It was the fourth consecutive monthly increase for retail sales since a record drop in April due to coronavirus pandemic.
  • CPI in UK rose from 0.2% to 0.5%, which was slightly better than the forecast of 0.4%. It moved off recent 4-year lows but well below Bank of England target.
  • Regarding UK monetary policy and economic outlook, MPC Member Ramsden said at the Society of Professional Economist Online Conference, “While there might be an appropriate time to use negative rates, that time is not right now.”

Headliner to Watch

  • U.S. unemployment claims expected to remain relatively unchanged at 860K. Since September figures, recovery in the U.S. labour market has stalled coinciding with expiration of first COVID relief package.
  • New Zealand CPI figures expected to rebound from negative territory. From -0.5% to 0.9% QoQ following the nations successful protocols in combating COVID-19’s spread and subsequent re-opening of the economy.

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Antony Tan
Ben Li
Kevin Jock