Archives of “November 2020” month

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European shares rebound after last week’s collapse

  
Analysis, Global Indices

German Dax up 1.9% after last week’s decline of -8.6%

The European indices are rebounding higher today after last week’s collapse. Last week the

  • German DAX fell -8.6%,
  • France CAC fell -6.2%
  • UK FTSE was down by around -5%.
Today the provisional closes are showing:
  • German DAX, +2.0%
  • France’s CAC, +2.0%
  • UK FTSE 100, +1.4%
  • Spain’s Ibex, +2.0%
  • Italy’s FTSE MIB, +2.2%
In the European debt market, the benchmark 10 year yields saw yields move lower on concerns about lower growth and potentially more stimulus by the ECB in December. The UK 10 year is down -4.2 basis points leading the way to the downside.
German Dax up 1.9% after last week's decline of -8.6%_
In other markets as London/European traders look to exit shows:
  • Spot gold is up $13 or 0.7% at $1891.96
  • Spot silver is trading up $0.23 or 0.97% $23.88
  • WTI crude oil futures are trading up $0.25 or 0.7% $36.04
In the US stock market, the major indices are higher led by the Dow industrial average (up 1.5%), but off there highest levels. The NASDAQ index lags with only a 0.37% gain.
  • S&P index up 1.23%
  • Dow industrial average up 1.53%
  • NASDAQ index up 0.35%
In the US debt market, yields are lower, despite the rise in equities today:
  • 2 year 0.152%, unchanged
  • 5 year 0.367%, -1.7 basis points
  • 10 year 0.835%, -3.8 basis points
  • 30 year 1.615%, -4.4 basis points

Russia discusses option of delaying OPEC+ taper until Q2

  
  Analysis

Oil higher on the headline

Oil higher to $35.26. Importantly, we’re now into this week’s opening gap.
oil
Crude closed at $35.78 on Friday and we’ve now nearly closed the entire 6% decline from when the market opened. It was prompted by lockdowns and reports that Libya has brought production back online faster than anticipated.
Given what’s happening in Europe, the odds that OPEC tapers are dwindling.

Citi revises slightly BOE forecast, sees £75 billion QE boost this week

  
  Analysis

No negative rates expected yet

The firm now expects the BOE to increase QE by £75 billion as opposed to its previous call of a £50 billion increase, saying that the new package should run until May 2021.
Adding to that, the firm sees a higher change of a £10 billion expansion in corporate bond purchases and a rate cut of 5-10 bps but insists that is not the base case for now with more action being possible, depending on Brexit.

“Negative rates are still unlikely for now, but remain our base case for mid-2021 as the recovery disappoints.”

Ahead of the Thursday decision, Deustche also revises its BOE forecast and now sees QE boosted by £100 billion instead.

What is the key risk for the market ahead of the US election tomorrow?

  
Analysis, Politics

What are the odds of the election result getting delayed?

Trump Biden

It is finally election week. It has been a long wait but this may not be all over in a jiffy when tomorrow comes. As much as the pollsters are pinning Biden for a win tomorrow, nothing is for certain and Trump may still be triumphant as he was back in 2016.

In my view, the key risk for the market is that we see a tightly contested election where there is no clear winner just yet. That could see neither side submit defeat and there might be a bit of a limbo that could take days – or even weeks – to settle.
It may very well be unlikely, but this is a scenario well worth considering.
In that lieu, let’s keep the focus on the six key swing states that both sides will be contesting tomorrow and branch out from there; that being Florida, Arizona, Pennsylvania, North Carolina, Michigan and Wisconsin.

(more…)

Eurozone October final manufacturing PMI 54.8 vs 54.4 prelim

  
Analysis, Economy

Latest data released by Markit – 2 November 2020

The preliminary release can be found here. A slight increase to the final reading, which is already predicated by the better revisions from France and Germany.
Markit notes that:

“Eurozone manufacturing boomed in October, with output and order books growing at rates rarely exceeded over the past two decades. However, while the data bode well for production during the fourth quarter, the expansion is worryingly uneven.

“By country, Germany was once again the star performer by a wide margin, as factories reported a surge in new orders that surpassed anything previously seen in the survey’s 25-year history. Italy, Spain and Austria also saw encouraging improvements in their recovery rates, but France, Ireland and the Netherlands all reported only modest growth and Greece has slipped back into contraction.

“Germany’s outperformance to a large extent reflects the recent pattern of demand growth. While orders for autos, business equipment and machinery have surged as the global economy has revived after lockdowns, benefitting German producers in particular, new orders for consumer goods came close to stalling in October, with exports even showing a renewed decline, blamed on rising COVID-19 infection rates, weakened labour markets and subdued consumer sentiment.

“The renewed weakness of consumer-facing businesses serves as a reminder that, while manufacturing as a whole may be booming for now, the sustainability of the recovery will depend on household behaviour returning to normal and labour markets strengthening. Given second waves of virus infections, this still looks some way off.“

The push and pull on copper

  
  Analysis

Copper vulnerable in the short term

The return to national lockdowns has been the catalyst for the recent stock sell off in Europe and beyond. This does leave Copper looking vulnerable to a correction in the near term as industrial demand should take a hit and reduce the demand for copper. The recent bull run in copper has been very strong and managed to easily brush off its original COVID-19 falls and make new ground:
Copper vulnerable in the short term
The long term picture for copper remains good
The move to electric vehicles is now well under way. Copper stands to gain from the green tech, so it is hard to see copper prices keep falling without seeing dip buyers step back in.
Where and when might they return?

(more…)

China reportedly set to ban Australian copper and sugar this week

  
  Analysis

SCMP reports on the matter

The report says that Chinese importers are readying themselves for another fresh round of curbs on Australian trade items, with bans on copper ore and copper concentrate, as well as sugar, expected to be introduced this week.
This comes after China has banned imports of Australian timber from Queensland and a second Australian grain exporter had its barley imports suspended over the weekend.
All of this of course is largely due to the ongoing escalation in tensions between the two that has taken a turn for the worse since the coronavirus crisis.
In the bigger picture, this isn’t good news for the aussie amid the rocky period for the economy in light of the pandemic. AUD/USD is at session lows around 0.6990-05 now.

Nikkei 225 closes higher by 1.39% at 23,295.48

  
Analysis, Global Indices

A more upbeat day for Asian equities

Nikkei 02-11
The Nikkei is also rebounding upon a test of its 100-day moving average and the 2 November low, with better Chinese factory data earlier helping with sentiment in the region. The Hang Seng is up 1.1% while the Shanghai Composite is up just 0.1%.
It is a bit of a quiet one to start the new week, with US futures keeping calmer and up by ~0.2% while major currencies are reflecting little change for the most part.
AUD/USD is testing the 0.7000 handle as commodity currencies struggle a little while GBP/USD is lingering close to 1.2900 as the UK goes back into lockdown, overshadowing murmurs of some headway made on the Brexit front.

China October Caixin / Markit manufacturing PMI 53.6 (vs. expected 52.8)

  
Analysis, Economy

A beat for the private survey PMI after the same for the official version released over the weekend

53.6
  • expected 52.8, prior 53.0
From the report, Key findings:
  • Output rises sharply amid quickest increase in total new work for nearly a decade 
  • Pandemic dampens growth of new export orders, however Business confidence reaches highest since August 2014
china pmi
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