Market Commentary – September 9, 2020

Kevin Jock

9th September 2020

    Tech-rout in Nasdaq leaves no markets unscathed, headlined by Tesla, as the company lost 34% of market cap since the stock split. Nasdaq losing 4% and down four consecutive days. Followed by S&P and Dow posting losses of 2.9% and 2.6% respectively. Brexit negotiations undermined UK and European indices as the deadline looms. U.K. PM Boris Johnson ratcheted up the notion, if a withdrawal agreement with respect to Northern Ireland is not agreed upon by today, he walks. If a no-deal Brexit occurs, at stake is $1tn in trade. As news spread of Masayoshi Son’s $4bn option gambit on U.S. tech through Softbank and the ensuing rout, the company declined 4.81% yesterday, dragging down the Nikkei a moderate 0.8%. Asia set to resume declines felt during U.S session, as Australia, Hong Kong and Japan edges lower on open.


Figure 1 (Source: Refinitiv): Bitcoin intraday – Of interest today, bitcoin finds strong report on the 10,000 level as attempts to breach were met with failure.

    Oil keeps tumbling, down over $2 as the price decline resonates weaker global growth prospects. Safe-haven alternatives gold and bitcoin continue to hold above psychological levels $1,900 and $10,000 respectively. The U.S. dollar remained strong as money flow left riskier currencies. More so, the pound, as the currency depreciated 1.2%. The BOE potentially grappling consequences of a no-deal Brexit, would see rate cut expectations moved forward. The Mexican peso also in a tough spot, as the government signal no further fiscal stimulus will be considered, instead the President Lopez Obrador will restructure the budget with an emphasis on social programs.

    On the coronavirus front, infection cases now stand at 27.4M with a 3.3% death rate as India overtook Brazil to exhibit the second-highest number of infections in the world. Most recent restrictions implemented is with the U.K banning social gatherings of more than 6 people. Vaccine hopes fizzled as AstraZenaca, one of the frontrunners in last stage of testing and developed by researchers from University of Oxford, announced a halt to trials. Concerns arose over adverse reactions U.K participants displayed from the vaccine.

Headliner to Review

  • Mixed sentiment out of Europe. Revised GDP showed better than estimations at -11.8% compared to -12.1% while final employment change worsened to -2.9% versus -2.8%. Nonetheless, figures only marked the impact COVID-19 on second quarter growth. Recent leading indicators reveal more optimistic prospects, though fragile as pandemic persist.
  • Aussie consumer confidence surprise as sentiment swings from -9.5% to 18%, despite lockdowns and border closures largely driven by households with an optimistic economic outlook that the economy will improve in 12 months.
  • As expected, inflationary pressure in China eased from 2.7% to 2.4%, while PPI improved slightly from -2.4% to –2.0%. Food prices which constitutes a third of CPI figures saw price increases of only 11.2% compared to 13.2% of previous month.

Headliner to Watch

  • No changes in monetary policy is expected out of today’s rate decision in Canada however a change in tone by BOC Gov. Tiff Macklem would surprise markets. Mr Macklem had previously reiterated the bank’s commitment in keeping interest rates at 0.25 percent for at least two years to ensure support for a long arduous economic recovery. Nonetheless recent macroeconomic figures, though dire, was better than previously thought. Second quarter GDP contracted 13% but not as bad as the central bank had anticipated. A recognition in today’s BOC rate statement of a stronger than expected rebound would move tightening expectations forward.

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Antony Tan
Ben Li
Kevin Jock