In a week that saw a new US president on the same day that a working vaccine was announced, cyclical and COVID-damaged equities rose to all time highs, at the expense of tech stocks to a degree. European stocks did particularly well. On the vaccine announcement at 1145 Monday, DJIA futures shot up by 4% in a few seconds. The dollar and Oil followed the rally at the expense of Gold.
The rotation had started to unwind by the end of the week, and it is likely that tech will outperform in the coming days, as the market separates the vaccine view (all good) from the election view, and in particular whether the outgoing Congress will agree a stimulus package, or carry on fighting.
President-elect Biden has won in Georgia this weekend, but the Senate race in that state seems certain to go to January run-offs. However, the Democrats would have to win both to control the upper chamber, and this is seen as extremely unlikely.
Today PFE announced that their vaccine candidate was 90% successful, the best progress report so far in COVID vaccine research. The response was immediate but not across the board, with DJI futures leaping 4% in seconds, and rising quickly to 5% but there was no equivalent move from NDX futures, which in fact fell. This was a clear rotation into COVID-damaged stocks, and was also seen in Europe in DAX and FTSE. There was a clear risk-on aspect, Gold, bonds and JPY fell sharply, as the dollar also surged, as did Oil. Later in the day SPX and DJI gave up some of these gains, although the other asset classes did not.
Co-incidentally of course, Joe Biden became 46th US President over the weekend, and who knows, history may record that markets surged on his election. But that was not the reason.
Tuesday November 10
More rotation today, with a flat SPX being flanked by a rising RUT (small caps) versus a further fall in NDX. DAX was also flat, although FTSE managed another rise, even against a rising pound. Oil was up, anticipating a transport recovery. Pandemic winners such as AMZN and ZM fell particularly hard, as investors imagined an end to the COVID world. The dollar was also flat, allowing Gold to recover slightly, but bonds continued to fall.
Wednesday November 11
Two days of rotation out of tech was reversed today as NDX rose 2% against only 0.8% for SPX. In Europe DAX was flat like yesterday, but once again FTSE managed to rise, this time against a falling pounds. Oil was up in line. The dollar took another leg up pushing Gold down. Bonds rose in line with the equity reversal.
Thursday November 12
After three days of rising markets took a breather today, following a US CPI miss, traders were reminded that COVID is still with us, and cases are not falling, meaning a rising second wave (and its costs) may come before the vaccine. All indices and Oil were down, and Gold, JPY and bonds were up. The dollar was flat overall with a slight uptick in EUR balanced by a sterling fade.
Friday November 13
Markets rallied again today, with the rotation back into tech continuing, again on the vaccine, but maybe also an election relief rally, as SPX and DJIA made new closing all-time highs for the first time since Sep 2. Oil and yields were up in line. Gold was up on a weaker dollar down across the board.
WEEKLY PRICE MOVEMENT
Another strong week with FTSE outperforming, without the help of the currency. The strongest currency was NZDJPY up 2.4%, but crypto although rising, did not outperform stocks. FANGS were definitely out of fashion and underperformed NDX as a whole.
My GBPUSD short failed. However the pair was only up 0.21%, taking my total to 9.09% (21 wins out of 38). I still think sterling will come unstuck and I am shorting cable again.
Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.
NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold)
- UK, Eurozone and Canada inflation
- UK, US and China Retail sales
- Heavy CB speaker roster
- Option Expiration week
Monday November 16
BoJ Masai speaks today, as does RBA Kent, and BoE Haskel. Markets are closed in India.
23:50 Japan GDP Q3 (QoQ e4.4% p-7.9%) (Sunday)
02:00 China Retail Sales (YoY e5.0% p3.3%)
08:40 RBA Governor Lowe speech
19:00 Fed Deputy Chair Clarida speech
Tuesday November 17
BoE Ramsden and Fed Williams speak today. There is a rate decision in Hungary. Markets are closed in Czechia and Slovakia.
00:30 RBA Meeting Minutes
13:30 US Retail Sales (Control MoM e0.5% p1.4%)
14:00 BoE Governor Bailey speech
14:15 US Industrial Production (MoM)(Oct)
19:00 BoC Governor Macklem speech
22:00 RBA Governor Lowe speech
23:50 Japan Imports/Exports/TB
Wednesday November 18
BoE Haldane, Fed Williams and BoC Wilkins speak today, and there is a DE10Y bond auction, and a large US auction of $27B on. Markets are closed in Latvia, Morocco, and Oman.
07:00 UK CPI (YoY e0.6% p0.5%)
10:00 Eurozone CPI
13:30 US Building Permits/Housing Starts
13:30 Canada CPI (BoC Core YoY e0.9% p1.0%)
Thursday, November 19
There is an EU leaders virtual summit meeting today
00:30 Aus NFP/UnEmployment (Jobs e-30k p-29.5k)
13:30 US Jobless Claims
13:30 Philly Fed Mfr Survey
15:00 US Existing Home Sales
23:30 Japan National CPI
Friday, November 20
Today is November option expiration date. A physical G20 meeting starts today in Riyadh and lasts all weekend. today and tomorrow. Markets are closed in Brazil.
00:30 Aus Retail Sales
01:30 PBoC Rate Decision/Statement (e3.85% hold)
07:00 UK Retail Sales
07:00 Germany PPI
13:00 German Buba President Weidmann speech
13:30 Canada Retail Sales
15:00 Eurozone Consumer Confidence
No comments:
Post a Comment
Please leave a comment. They are moderated and spam (links to your site) will not be published.