Lockdown Woe Vs Vaccine Relief

COVID-19 is likely to remain the dominant market theme in the coming, holiday-shortened week. The rising trajectory of the pandemic versus ongoing progress toward a vaccine will cause investors to whipsaw wildly between pessimism and optimism, driving markets lower or higher depending on prevailing sentiment.

Last week played out much as we predicted, when positive vaccine news dominated headlines, stocks advanced. But when the focus shifted to the unbridled rate of global and domestic contagion and stricter lockdowns, stocks sold off. Proving the point yet again on Friday, US coronavirus infections were headed toward the 12 million mark, with nearly 200,000 new cases reported on Friday, and stocks were mostly sold-off to finish the trading week.

Here are the key market moving factors for the week:

 The US

• The haven-linked US Dollar aimed broadly lower against ASEAN currencies such as the Malaysian Ringgit and Singapore Dollar this past week. Capital seemed to continue flowing into developing economies, with the MSCI Emerging Markets Index (EEM) registering a 1.51% 5-day gain. This is compared to weakness in US equities, with the exception of the tech-heavy Nasdaq Composite as the Dow Jones and S&P 500 declined.

 EUROPE

• EUR/USD ekes out gains on coronavirus vaccine optimism.
• The pair is up over 1% this quarter despite renewed virus crisis across the Eurozone.
• Euro’s resilience may end if Eurozone PMIs due on Monday miss expectations.
• EUR/USD has shown uncanny resilience to adverse developments across the Eurozone over the past few weeks. The common currency’s ability to stay bid will be tested on Monday as a survey-based indicator is set to reveal the true extent of damage to the economy caused by the resurgence of coronavirus.

The UK

• The UK is planning to lift coronavirus-induced travel restrictions during Christmas and allow families to travel to high-risk “red list” countries to visit relatives.
• The UK transport secretary will be annoucing the decision on Monday, according to The Telegraph report.
• Restrictions will be slashed from 14 days to five if holidaymakers test negative five days after returning to the country.
• The regulations will be changed to enact the new five-day regime on Dec. 15 or 16, with people freed from quarantine as soon as they get their test results.

 

AUSTRALIA

• AUD/USD is currently trading above 0.7310, representing a 0.16% gain on the day.
• While the pair is flashing green, it is yet to exit a two-week ascending triangle, as seen on the 4-hour chart. As such, the immediate bias remains neutral.
• A break above the upper end of the triangle, currently at 0.7340, would imply a continuation of the rally from the Nov. 2 low of 0.6991 and open the doors for 0.7413 (Sept. 1 high).

NEW ZEALAND

• The New Zealand Dollar seems poised to continue outperforming its haven-associated counterparts, on the back of better-than-expected economic data and a less dovish stance from the Reserve Bank of New Zealand.
• The RBNZ had been one of the more dovish central banks since the coronavirus crash in March, hinting at the imposition of a negative interest rate policy (NIRP) and potentially intervening in the FX market to stymie NZD’s recent appreciation.

CHINA

• Early Monday, Reuters came out with the news suggesting the blacklisting of 89 Chinese aerospace and other companies by the Trump administration, as per the list seen by the reporter.
• The news mentions that the list is included in a draft rule that identifies Chinese and Russian companies the US considers “military end-users,” a designation that means US suppliers must seek licenses to sell a broad swath of commercially available items to them.
• Investor buy risk on prospects of an early rollout of coronavirus vaccines.
• COVID-19 shots could reach first Americans by mid-Dec, according to top health official.

Market Overview:

 Gold

• Gold is consolidating Friday’s bounce from the long-held support at $1850, buoyed by a broadly weaker US dollar, courtesy of the covid vaccines-led optimism. Expectations of imminent vaccines weigh on the safe-haven dollar, offering some support to gold.
• Further, rekindling of the US fiscal stimulus hopes by the Treasury Secretary last Friday also helps the metal.

 Oil

• Oil prices extended gains on Monday as traders eyed a recovery in crude demand thanks to successful coronavirus vaccine trials, although prices were contained by renewed lockdowns in several countries.

Below are the major market moving events for the week:

 All times listed are EDT

Monday

Japan’s markets closed for the Workers Day holiday

3:30: Germany – Manufacturing PMI: seen to decline to 56.5 from 58.2.

4:30: UK – Manufacturing PMI: anticipated to remain flat at 53.3.

4:30: UK – Services PMI: expected to stay at 52.3.

9:45: US – Manufacturing PMI: likely slipped to 53.0 from 53.4.

 Tuesday

2:00: Germany – GDP: expected to have remained steady at 8.2% in Q3.

4:00: Germany – Ifo Business Climate Index: probably slipped to 90.7 from 92.7

9:00: Eurozone – ECB President Lagarde Speaks

10:00: US – CB Consumer Confidence: seen to decline to 98.0 from 100.9.

 Wednesday

8:30: US – Core Durable Goods Orders: anticipated to drop to 0.4% from 0.8%.

8:30: US – GDP: likely to have remained flat at 33.1% in Q3.

8:30: US – Initial Jobless Claims: expected to slacken to 725K from 742K.

10:00: US – New Home Sales: forecast to increase to 975K from 959K.

14:00: US – FOMC Meeting Minutes

 Thursday

US markets closed for the Thanksgiving Day holiday

6:30: Eurozone – ECB Publishes Account of Monetary Policy Meeting

7:30: Eurozone – ECB Monetary Policy Statement

20:00: Japan – Tokyo Core CPI: seen to have dropped to -0.7% from -0.5%.

 Friday

2:00: UK – Nationwide HPI: anticipated to have contracted to 0.2% from 0.8%.

Based on the above factors and the events lined up for the week, the analyst at RvR Ventures suggests you to Trade responsibly; invest only as much as you can lose. All the profits and losses due to the above data are your own personal responsibility. Kindly practice money management & risk mitigation while trading.

 

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