Markets Overview - United Overseas Bank
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Tuesday, 8 December, 2020
Lee.SueAnn@uobgroup.com
Global Economics & Markets Research
Email: GlobalEcoMktResearch@uobgroup.com
URL: www.uob.com.sg/research
Markets Overview
HIGHLIGHTS AHEAD
Hopes for US fiscal stimulus stalled as the US lawmakers now plan to vote for a one-week stopgap legislation this Wednesday
(9 Dec) to temporarily avert the Friday deadline for US government funding. As for the G7 data docket for Tuesday (8 Dec),
Japan kicked off the releases with the household spending which rose 1.9% y/y in October (falling short of Bloomberg Est +2.4%
y/y from -10.2% y/y in Sep) while the 2nd print for Japan’s 3Q GDP was revised higher to 5.3 q/q, 22.9% q/q SAAR (much better
than Bloomberg estimates of +5% q/q, +21.5% q/q SAAR). But the focus for Japan will be the expected unveiling of PM Suga’s
first stimulus package on Tuesday. According to Bloomberg (which saw a draft of the stimulus package), it will have an overall
value of JPY 73.6 trillion (US$707 bn) and will be partly financed by JPY 19.2 trillion from a third extra budget. The key European
data will be the German ZEW Survey expectations for December (Bloomberg Est 46 from 39 in Nov) and the final print for 3Q
GDP for Eurozone (Bloomberg Est to be unchanged at -4.4% y/y, -12.6% q/q from prelim estimate) while in the US, we get the
NFIB Small Business Optimism for November (Bloomberg Est 102.5 from 104 in Oct) and the 3Q final nonfarm productivity
(Bloomberg Est +4.9% from prelim +4.9%), 3Q ULC (Est same from prelim 8.9%).
US COVID-19 pandemic stimulus/relief package did not make further progress on Monday and US lawmakers are set to
postpone the Friday night (11 Dec) deadline for passing both a gigantic government spending bill and COVID-19 relief. It was
reported that the US House of Representative will vote Wednesday (9 Dec) on a one-week stopgap to avert a 11 Dec government
shutdown as work continues on the US$1.4 trillion government funding legislation into 2021, to which the bipartisan proposal of
a US$908 billion aid package would be attached. Key details that need to be resolved include state and local aid and liability
protections for businesses. Senate Majority Leader Mitch McConnell said his chamber would pass the funding extension
“whenever we get it” from the House but McConnell again did not directly address the bipartisan US$908bn compromise proposal.
The EU-UK trade deal negotiations which restarted on Sunday (6 Dec) ended on Monday with a joint agreement between UK
PM Boris Johnson and European Commission President Ursula von der Leyen to meet in person in the coming days as both
leaders said conditions are not there yet for an accord. They have asked their chief negotiators to prepare a summary of the
remaining differences. Of all the main sticking points, UK Cabinet Office Minister Penny Mordaunt said the issue of a level playing
field is proving the most difficult to resolve. EU negotiator Barnier was reportedly telling members of the European Parliament in
a separate briefing that negotiations could go on until Wednesday, but no further.
It was also separately reported by Bloomberg that the UK government announced Monday (7 Dec) that PM Johnson is prepared
to back down on his threat to break international law by unilaterally ripping up parts of the Brexit divorce deal he signed with the
EU. The plan to retreat on the UK Internal Market Bill, was first reported by Bloomberg in October, is another sign that Johnson’s
government is trying everything it can to smooth the path to a new post-Brexit trade agreement with the EU.
As for the COVID-19 pandemic developments, global cases has now exceeded 67 million, with record infections sweeping across
US and its hospitalizations rising by almost 2,000 a day. The director of the National Institute of Allergy and Infectious Diseases,
Anthony Fauci, warned that the Christmas season could be worse than Thanksgiving for spreading the COVID-19 and lead to a
"real dark time" in mid-January. Meanwhile, the UK is slated to start its vaccination campaign today, while news reports said
Germany plans to vaccinate 10 million citizens by 1Q 2021.
The surge in China’s exports and trade surplus for November is probably unwelcomed amidst rising US-China trade tensions
and will add further to on-going CNY strength. However, it does provide comforting hints of potential strong recovery in global
goods demand, especially during the upcoming year-end holiday season. Separately, the World Economic Forum (WEF)
organizers announced that they will hold next year’s special annual meeting in Singapore instead of Davos as a positive
endorsement of Singapore’s successful containment of the COVID-19 outbreak.
FX
The US dollar was broadly stronger against most of the major currencies on Monday (7 Dec) as COVID-19 infections rose across
the country while fiscal stimulus talks stalled. The US Dollar index (DXY) ended higher at 90.870 (from the previous close of
90.701). The euro ended weaker after the EUR/USD traded to an intraday range of 1.2079-1.2166, before ending the NY session
at 1.2109 (from 1.2121). The UK pound, whipsawed on the back of Brexit headlines as it traded within a broad range of 1.3225
and 1.3437 and the GBP/USD pair closed lower at 1.3380 (from 1.3441).
Markets Overview
Tuesday, 8 December, 2020
1|P a g e In comparison, the yen strengthened slightly against the dollar and USD/JPY pair ended the day higher at 104.05 (from 104.17).
The Aussie and the kiwi dollar again followed the majors depreciating marginally against the dollar with the AUD/USD ending
lower at 0.7421 (from 0.7425) and the NZD/USD also lower at 0.7044 (from the previous day close of 0.7048).
The strong showing in the latest export figures from China ensured that the US Dollar ended weak against both the onshore
CNY and offshore CNH. After drifting higher from 6.53 to 6.54 across most of the day, USD/CNY encountered renewed selling
towards the end of the trading session and pulled back to just under 6.53. Similarly, USD/CNH traded up to an intra-day high of
about 6.5350, before pulling back to 6.5180 by the end of yesterday’s session. There was little surprise in the USD/CNY central
parity fixing rate yesterday as it was guided down to 6.5362, from 6.5507 last Friday.
It was a similar case of USD weakness across North Asia as well as USD/KRW was pinned down and spent most of the day just
above 1,080 while USD/TWD consolidated just above 28.25. In South East Asia, USD/THB drifted lower in quiet trading from
30.20 to 30.15 as the nation was away for holiday, while USD/IDR was little changed at 14,120.
The MYR in the meantime stabilized after the initial knee-jerk sell-off on Monday morning following the news of Malaysia’s
sovereign rating downgrade by Fitch. As such, USD/MYR consolidated at 4.07 after briefly spiking from 4.06 to just under 4.09.
Finally, USD/SGD drifted higher from 1.3340 to 1.3370 after briefly hitting an intra-day high of almost 1.34. Overall, the Asia
Dollar Index (ADXY) was relatively unchanged just under 109 after a brief intra-day slip to 108.75.
EQUITIES
US stock markets was mixed on Monday (7 Dec) as investors worried that resurgent COVID-19 infection levels could weigh on
economic growth through winter while fiscal stimulus package talks stalled. The Dow Jones Industrial Average (DJIA) ended
lower by nearly 149 points (-0.49%) at 30,069.79 while the S&P 500 index was down by 0.19% to 3,691.96. In comparison, the
NASDAQ hit a new record as it gained by 0.45% to end at 12,519.95. The CBOE volatility Index (VIX) or “fear index” climbed to
21.30 (from 20.79 previously).
Asian equities had a mixed showing yesterday as investors worry about the sustainability of the rally on Wall Street. In addition,
renewed tensions between US and China resulted in a -1.2% pullback in Hong Kong’s Hang Seng to 26,506, followed by -0.8%
retreat in China’s SHCOMP and -0.3% slide in SZCOMP.
Elsewhere in Asia, Indonesia’s JCI led the gains with a strong 2.0% jump to 5,930 as the government announced that it had
received the first shipment of COVID-19 vaccines from China. While the rest of Asian equities benchmarks closed with modest
gains of under 1.0%. Singapore’s STI was the exception as it eased -0.5% to 2,825 on profit taking after investors digested the
weekend news of the government’s announcement of new digital banking licenses. Thailand’s SET was closed for local holiday.
US TREASURIES/BONDS
The US Treasury yields fell across the curve on Monday (7 Dec) as US fiscal stimulus stalled while COVID-19 infections
continued to rise. The 10-year UST yield was lower by 4.3bps to close at 0.923% while the 30-year bond yield closed down by
5.3bps to 1.680%. The UST 2-year yield was down by 1bps at 0.141% while the 5-year yield was lower by 3bps to 0.386%. The
2-year and 10-year yield spread narrowed (by 3.3bps) to 78.5bps.
The Treasury will conduct a 3-year UST note auction on Tuesday (8 Dec).
There was little excitement in local SG money market rates with both 3M Sibor and 3M SOR unchanged at 0.40% and 0.18%
respectively. While the overnight SORA pulled back 7 bps to 0.07%, returning to the lower end of its periodic trading range from
0.05% to 0.20%. The longer dated Singapore Government Securities (SGS) yield was also relatively stable as10Y SGS yield
was unchanged just above 0.90%.
COMMODITIES
US and global crude oil prices declined on Monday (7 Dec) as the surge in COVID-19 infections threatens near term oil demand
while US fiscal stimulus continued to be bogged down. The NY WTI ended the session lower by US$0.63 (-1.3%) to US$45.63,
while the London Brent oil future closed down by US$0.62 (-1.3%) to US$48.63.
The oil ministry of Norway said the country does not plan to curb oil production in 2021 and will end its current curtailments
starting in January if everything goes as planned. Norway had earlier cut its June production by 250,000 barrels a day following
the previous OPEC+ agreement.
Markets Overview
Tuesday, 8 December, 2020
2|P a g e Gold price was one of the beneficiaries in a risk-off day as COVID-19 infections worsened across the US. It ended higher by
nearly US$24 to US$1,862.73 per troy ounce on Monday (7 Dec).
ECONOMIC NEWS & DATA
Japan’s preliminary October leading index rose more than expected to 93.8 (versus Bloomberg Est 93.3 from an upwardly revised
93.3 in Sep).
German industrial production rose a faster 3.2% m/m in Oct (versus Bloomberg Est 1.6% m/m and 2.3% m/m in Sep) and this
translated into a smaller decline of -3.0% y/y (versus Bloomberg Est of -4.6% y/y while the contraction in Sep was revised smaller
to -6.7% y/y from the prelim estimate of -7.3% y/y).
Eurozone’s Sentix investor confidence survey improved markedly to -2.7 for December (versus Bloomberg Est -7.8, up from -
10.0 Nov).
US October consumer credit rose by a smaller US$7.2bn (well missing Bloomberg Est US$16.1bn, from a downwardly revised
US$15bn in Sep).
According to data released by mortgage lender Halifax on Monday (7 Dec), UK house prices surged by 7.6% y/y in November,
the most since 2016. On a sequential basis, prices rose by 1.2% m/m. Reasons for the strong price increases were attributed to
1) realtors had remained open for business even as much of the rest of the economy entered a second coronavirus lockdown
during the month, 2) housing market has been bolstered by city dwellers looking to move out of urban centers, 3) , a temporary
tax break on purchases and 4) government promises of more generous loans for young buyers. However, going forward, there
are concerns that the upswing in prices will be hard to maintain as unemployment in UK is rising and that the tax incentive will
expire at the end of March 2021.
Other Japanese data that was released today include October labor cash earnings which declined 0.8% y/y (from -0.9% in Sep),
October current account balance which came in at JPY 2144.7bn (versus Bloomberg Est JPY 2120.4bn from JPY1660.2bn in
Sep), November bank lending (+6.3% y/y from 6.1% in Oct) and Eco Watcher Survey for November later in the afternoon.
World Economic Forum (WEF) announced that the Special Annual Meeting for 2021 will be held in Singapore from 13 to 16 May
next year and will then return to Davos for 2022. WEF president Borge Brende said that Singapore was chosen because the city
state has been successful in dealing with COVID-19 as the current pandemic situation in Europe “made it impossible” to hold
the annual meeting in Davos as originally planned. For more details, please refer to the following official Davos statement:
https://www.weforum.org/press/2020/12/special-annual-meeting-2021-to-take-place-in-singapore-in-may
Singapore’s Ministry of Trade and Industry (MTI) said in a statement that the decision to hold the annual Davos meeting in
Singapore “reflects confidence in the country’s management of COVID-19 pandemic” and will be a boost to Singapore’s meetings,
incentives, conferences and exhibitions (MICE) as well as hospitality sector. MIT also added that health and safety of local
community and event attendees will be its “utmost priority”.
China’s exports surprised with a strong jump of 21.1% YoY in November after gaining 11.4% YoY in October as imports growth
eased to 4.5% YoY in November from 4.7% YoY in October, resulting in a record trade surplus of USD 75.4 bn in November
from USD 58.4 bn in October. This is the latest single month of trade surplus for China since the trade data was released since
the 1990s. The surge in China’s exports reflected the return in global demand as well as the seasonal goods demand ahead of
the year end Christmas and New Year holidays. The jump in trade surplus adds pressure for further gains in the CNY.
Indonesia’s November foreign exchange reserves stood at USD133.6 bn, relatively unchanged from USD133.7 bn in the previous
month. The latest reserve level was equivalent to 9.9 months of import financing or 9.5 months of imports and payments of
government external debt. For more details, kindly refer to Macro Note: “Indonesia: Foreign Reserves Stable at USD 133.6 bn
in November” dated 07 Dec 2020.
For follow up economic analysis of the downgrade of Malaysia’s sovereign credit rating, kindly refer to Macro Note: “Malaysia:
Sovereign Rating Revised To BBB+ By Fitch Ratings” dated 07 Dec 2020.
There is no major macroeconomic data release of note for Asia today.
Markets Overview
Tuesday, 8 December, 2020
3|P a g eMarkets Overview Tuesday, 8 December, 2020 4|P a g e
Markets Overview Tuesday, 8 December, 2020 5|P a g e
Markets Overview Tuesday, 8 December, 2020 6|P a g e
Markets Overview Tuesday, 8 December, 2020 7|P a g e
Markets Overview Tuesday, 8 December, 2020 8|P a g e
Markets Overview Tuesday, 8 December, 2020 9|P a g e
Markets Overview Tuesday, 8 December, 2020 10 | P a g e
Markets Overview Tuesday, 8 December, 2020 11 | P a g e
Markets Overview Tuesday, 8 December, 2020 12 | P a g e
Disclaimer This publication is strictly for informational purposes only and shall not be transmitted, disclosed, copied or relied upon by any person for whatever purpose, and is also not intended for distribution to, or use by, any person in any country where such distribution or use would be contrary to its laws or regulations. This publication is not an offer, recommendation, solicitation or advice to buy or sell any investment product/securities/instruments. Nothing in this publication constitutes accounting, legal, regulatory, tax, financial or other advice. Please consult your own professional advisors about the suitability of any investment product/securities/ instruments for your investment objectives, financial situation and particular needs. The information contained in this publication is based on certain assumptions and analysis of publicly available information and reflects prevailing conditions as of the date of the publication. Any opinions, projections and other forward-looking statements regarding future events or performance of, including but not limited to, countries, markets or companies are not necessarily indicative of, and may differ from actual events or results. The views expressed within this publication are solely those of the author’s and are independent of the actual trading positions of United Overseas Bank Limited, its subsidiaries, affiliates, directors, officers and employees (“UOB Group”). Views expressed reflect the author’s judgment as at the date of this publication and are subject to change. UOB Group may have positions or other interests in, and may effect transactions in the securities/instruments mentioned in the publication. UOB Group may have also issued other reports, publications or documents expressing views which are different from those stated in this publication. Although every reasonable care has been taken to ensure the accuracy, completeness and objectivity of the information contained in this publication, UOB Group makes no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accept no responsibility or liability relating to any losses or damages howsoever suffered by any person arising from any reliance on the views expressed or information in this publication. Markets Overview Tuesday, 8 December, 2020 13 | P a g e
You can also read
