The election came and went and by Friday night, we were no wiser as to the result. The failure of the Biden camp to produce a landslide means that a Democratic Senate is looking increasingly unlikely, and this potential future ‘brake’ on Democratic policy legislation helped stocks, particularly in energy, rise all week. In general price/action was a reversal of last week in all asset classes, meaning the COVID/election uncertainty consolidation continues. The dollar fell hard, with DXY’s Friday close the lowest since August, and the second lowest close since April 2018.
The Biden win came in over the weekend, but the Senate color is still unknown because of the Georgia results. Note that the Georgia special election will certainly go to runoff as there were no primaries and thus multiple GOP and Democrat candidates. This is all priced in, so once again, something new (a vaccine, the next stimulus package, a post-Trump Republican policy shift) is needed to push markets out of the SPX (3230-3580 10%) and DXY (92.00-94.50 2.8%) ranges they have been in for months.
Mon Nov 2
We mentioned previously that a Republican Senate was regarded as good for markets, to water down any left-wing Democrat policy ideas, and as polls start to show this as a real possibility, markets started to fall, helped by a string of manufacturing PMI beats today. The dollar was flat today, as a slightly declining euro was balanced by a sharp uptick in CAD, following Oil’s 4% rally. The rally did not prevent haven assets Gold and bonds from counterintuitively also rising, and JPY was flat.
Tuesday November 3
More of the same today, with SPX up 1.8% and other indices following suit, with Oil up in line. Yields rose to 0.882% after briefly touching a four month high of 0.896%.The dollar had its worst day since August down 0.6%, causing Gold to rise. All due to increase election volume and therefore volatility.
Wednesday November 4
As the election night went on, there was surprisingly little equity futures volatility as you can see from the chart. The only noticeable move was at 0220GMT when Trump won Florida, which caused a sharp uptick in USD and bonds (and drop in Gold), although this was quickly reversed. Overall, it was a third strong day on risk-on, with NDX outperforming, and Oil up in line. The dollar spike meant the greenback closed flat overall as did Gold, whereas bonds held onto their gains.
Thursday November 5
The lack of volatility in equities was quite surprising given such a momentous event as the election. SPX and the others continued to gently rise today, although Oil topped out and pulled back to close the day slightly down. The dollar took another sharp leg down, meaning a big (2.3%) move up in Gold. Bonds were flat on the day.
Friday November 6
Despite a blowout NFP, the markets took a breather today, and SPX was flat, as were most other indices, although Oil came off slightly. The dollar continued to push down, and closed at a three month low, and the second lowest close since April 2018, giving Gold another slight boost. Bonds also came off slightly. The week ended with SPX new the top and USD at the bottom of the consolidation ranges seen since early summer.
WEEKLY PRICE MOVEMENT
A huge recovery for DAX but the top-performing index in this very strong week was NDX up 9.39%. The strongest currency was AUDUSD, and crypto had its best week for months, with moves reminiscent of the old days. FANGS were up broadly in line with NDX.
My CADJPY pick (a risk on pair) worked and added 0.72% to my running total, now 9.3% in 21/37 wins. This week I am selling GBPUSD. The dollar is at support, and Brexit fatigue must kick in at some point.
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)
- Senate race undecided
- COVID still dominates
- US, German and Chinese inflation
- 11 Central Bank speeches
Monday November 9
A new week without an Senate election result, and nothing much on the calendar to affect things.
07:00 Germany Trade Balance s.a.(Sep)
10:35 BoE Governor Bailey speech
14:00 BoE Haldane speech
Tuesday November 10
Another day with no significant US news. Again the election will dominate.
01:30 China CPI (YoY e0.8% p1.7%)
07:00 UK Claimant Count/UnEmp (UnEmp e4.8% p4.5%)
10:00 Germany ZEW Sentiment Surveys
19:00 Fed Quarles speech
22:00 Fed Brainard speech
Wednesday November 11
Today is Veterans Day, and markets trade for a half-day in Canada, but the US and Europe trade as normal, although banks are closed, so some markets (forex) might be quieter.
01:00 RBNZ Rate Decision (e0.25% hold)
Thursday November 12
The busiest news day of the week, with US inflation being the key print. Dow giant DIS and NDX heavyweight CSCO report after the bell. There are rate decisions in Mexico and Egypt.
00:00 Aus Consumer Inflation Expectations
07:00 UK GDP Q3 Prelim (QoQ e15.8% p-19.8%)
07:00 Germany CPI (YoY e-0.5% p-0.5%)
08:00 BoE Governor Bailey speech
09:00 Eurozone Economic Bulletin
10:00 Eurozone Industrial Production
13:30 US CPI (Core YoY e1.7% p1.7%)
13:30 US Jobless Claims
18:30 BoC Wilkins speech
19:00 Fed Williams speech
19:00 US Monthly Budget Statement
Friday November 13
End of a lacklustre week on data, but an enormous one in politics.
10:00 Eurozone Q3 GDP Prelim (QoQ e12.7% p12.7%)
10:00 ECB Weidmann speech
12:00 Fed Williams speech
13:30 US PPI
14:00 BoE Tenreyro speech
15:00 Michigan CSI (e82.0 p81.8)
16:00 BoE Governor Bailey speech
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