Times Ahead of Election

On Saturday, the media called the US presidential election for Joe Biden, but President Donald Trump rejected the outcome and won’t concede. Additionally, he will continue with legal challenges, claiming fraud. So far, his demand made no progress in courts, as he failed to add prove to his accusations, except for those asking for observers in counting processes.

Joe Biden is expected to keep stocks running, despite early fears that a Democrat’s victory will mean tax hikes. Nevertheless, hopes for massive stimulus have arisen, as Biden has already announced he’s working on a COVID-19 task-force that will be announced on Monday. He made it clear through his campaign that the federal government has a key role in leading the virus response.

Here are the key market moving factors for the week:

 The US

• The US Dollar sank against its ASEAN counterparts such as the Singapore Dollar, Indonesian Rupiah, Malaysian Ringgit and Philippine Peso this past week.
• This is as it became increasingly clear that Democratic nominee Joe Biden could win the presidential election against incumbent Donald Trump. Global market sentiment improved, with Wall Street finishing off the best week since early April.
• Going forward, all eyes remain on the direction the nation is heading with more fiscal aid. A divided government is likely, with Georgia’s senate race in a runoff.
• The composition of the upper chamber of the United States Congress will likely be unknown until early January. Senate Majority Leader Mitch McConnell, referencing October’s rosy jobs report, hinted at a smaller fiscal package than what Democrats are proposing.

 EUROPE

• France is preparing to cut its forecast for an 8% rebound in economic growth in 2021 in the wake of new lockdown measures imposed to contain the second wave of coronavirus, Finance Minister Bruno Le Maire said in an interview with Sunday paper Journal Du Dimanche.
• The number of contagions in Europe was roughly 300K in the same day, with the second wave hitting hard the northern hemisphere. Hopes are that vaccines will start rolling in the first half of 2021. Still, the economic damage will likely be tougher in the EU, where most countries have imposed severe restrictions to try curbing the spread.

The UK

• The end of the week saw UK PM Johnson’s credibility take a further blow when the latest YouGov poll showed Labour opening up a five-point lead over the Conservatives.
• The poll showed headline voting intention favor Labor by 40 to 35, while Sir Keir Starmer was seen as the best choice as Prime Minister by 34 to 29 percent.
• The Bank of England this week left interest rates unchanged but ramped up the UK bond-buying program by much more than expected as the UK economy looks set to fall into a double-dip recession.
• Another GBP150 billion was added to the QE program, compared to analysts’ expectations of GBP100 billion, boosting the program up to GBP895 billion in total.

JAPAN

• An official from the Japanese Finance Ministry said on Monday, they will keep monitoring the forex developments with a sense of urgency.
• The official, however, said that he cannot comment on the reasons behind FX moves, on the US election impact as well as on the level of FX itself.
• These comments from the Japanese policymakers keep flowing in, as they turn cautious about the recent appreciation of the yen.
• The Japanese government wants to work with President-elect Joe Biden to strengthen the Japan-US alliance, Prime Minister (PM) Yoshihide Suga said on Monday.
• He added that he wants to secure peace and prosperity in the Indo-Pacific region.

AUSTRALIA

• The total number of building permits issued in Australia in September was up a seasonally adjusted 15.4 percent on month at 15,827.
• Permits for private sector houses rose 9.7 percent to 10,238 and permits for private sector dwellings excluding houses spiked 23.4 percent to 5,189.
• On a yearly basis, total permits rose 8.8 percent, while private sector houses surged 20.7 percent and private sector dwellings excluding houses tumbled 12.1 percent.

CHINA

• The discussion of monetary policy stimulus withdrawal is on the table and it should be done sooner rather than later, the People’s Bank of China Vice Governor Liu Guoqiang said in a Bloomberg interview.
• Meanwhile, the Chinese economy is faring better than its American and European peers, which remains CNY-supportive.

Market Overview:

 Gold

• One-month risk reversals on gold (XAU1MRR), a gauge of calls to puts, have surged from 0.275 to 1.35 (the highest since Aug. 10) in the past five trading days, indicating increased demand for call options or derivative contracts that give the purchaser the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date.

Oil

• Key members of OPEC would miss President Trump, who helped the cartel along with Russia bring about a record output cut, and are worried that strains in the OPEC+ alliance could reemerge under Joe Biden’s leadership, sources told Reuters.
• OPEC+ is a group of major producers led by Saudi Arabia and Russia.
• Biden prefers multilateral diplomacy to Trump’s unilateral approach and could relax sanctions on Iran if Tehran resumes compliance with the nuclear pact. That would allow Iran to boost its oil supplies.
• There is the risk of Russia leaving the OPEC+ deal too which means a collapse of the agreement, as it was Trump who brought Moscow on board, the source said.

Below are the major market moving events for the week:

 All times listed are EDT

Monday

4:25: Eurozone – ECB President Lagarde Speaks

5:35: UK – BoE Gov Bailey Speaks

20:30: China – CPI and PPI: the first is expected to remain flat, the latter to show a miniscule gain.

Tuesday

2:00: UK – Claimant Count Change: predicted to have jumped to 78.8K in October from 28.0K.

5:00: Germany – ZEW Economic Sentiment: seen to drop to 40.0 from 56.1.

10:00: US – JOLTs Job Openings: anticipated to decline to 5.590M from 6.493M.

20:00: New Zealand – RBNZ Interest Rate Decision: expected to remain steady at 0.25%

Wednesday

2:00: UK – Manufacturing Production: the previous reading came in at 0.7%

 Thursday

2:00: UK – GDP: anticipated to surge to 15.8% from -19.8% QoQ.

8:30: US – Core CPI: seen to remain flat at 0.2%.

8:30: US – Initial Jobless Claims: came in last week at 751K.

11:00: US – Crude Oil Inventories: showed a drawdown of -7.998M in the previous week.

 Friday

8:30: US – PPI: to fall to 0.2% from 0.4%

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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