Market Commentary – September 3, 2020

Kevin Jock

3rd September 2020

    Momentum continues to push Wall Street higher with S&P and Nasdaq closing at record high. Gains were seen in the broader market and away from recent tech-focused firms like Apple, Tesla and Zoom signalling greater confidence in the overall economy’s recovery. Though lagging, Dow is now only 1.6% below historic highs made back in February. Following suit, European indices snapped a 4-day losing streak on the back of technology firms. Benchmarks gained on average 2.6% across the board. Asia off to a relatively mute start for the lack of data during the session.

    Elsewhere, the greenback held onto gains across major currencies despite disappointing ADP non-farm employment numbers. As inflation risk subside, gold dropped 1.3%. Recent deflationary data out of Europe and a rising Euro has the ECB’s chief economist Philip Lane concerned, implying potential measures might be taken. After briefly breaching 1.2000, EURUSD has retreated to the 1.1800 level.


Figure 1 (Source: IS Prime): Crude Oil Intraday – Crude Oil falls despite inventory data showing a 9.4M.

    Despite crude oil inventories recording a 9.4M deficit, price reacted poorly falling -3.3%. Comments from Iran and Iraq see both nations wanting to be exempt from export cuts after failing to comply with OPEC production restrictions between June – August. China oil purchases are also expected to drop 40% in September and October, as Chinese buyers exhaust import quotas and oil-laden tankers wait weeks off major ports for Chinese refineries to work through crude processing.

    Geo-politic tensions with China keep rising as India blocks 118 apps to safeguard civilian interest while the Trump administration now require Chinese diplomats request permission before meeting US government officials, visit local universities or host cultural events in the country.


Headliner to Review

  • ADP Non-Farm Employment Change increased by 428,000 jobs from July to August. That was far below the 1.17 million expectations. Leisure and hospitality led the way with 129,000 new workers, followed by education and health care with 100,000. It is expected that the governments nonfarm payrolls on Friday will show a gain of 1.32 million in August.
  • Crude Oil Inventories decrease by 9.4 million barrels, which was much worse than the expectation of 2.0 million barrels. U.S. crude oil inventories are about 14% above the five-year average for this time of year. A combination of OPEC oil production cuts and spurt in global demand has kept inventories in a deficit.
  • Testifying before the Treasury Select Committee, BOE Governor Andrew Bailey emphasized the downside risk from the coronavirus pandemic is much larger than for Brexit. Though consumer spending and housing market is on a healthy pace in recovery, the economy is still hampered by weak social spending and cautious private business investment.

Headliner to Watch

  • European final services PMI expected to remain unchanged MoM. Member States:
    • Germany and France will see figures the same as last month, however Spain and Italy look to decline below the 50-point level. Putting both EU states back in contraction territory.
  • Unemployment claims expected to decline below 1M to 955K. Despite coronavirus cases reaching above 6M, American businesses continue to remain open unfazed by the virus. Recent factory orders and manufacturing activity see a return to norm.
  • US ISM non-manufacturing PMI is expected to moderate from 58.1 to 57.0 after two months above historic averages.
  • Australian retail sales looking to post 6 months of consecutive gains, increasing another 3.3%. Demand for durable goods like furniture, electrical and cars is expected to stay strong.


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Antony Tan
Ben Li
Kevin Jock