Weekly Market Wrap 02-November to 06-November/2020

Marius Paun | London, UK | Senior dealer | Friday 06th November 2020


The US Election Still Undecided

We had a busy week with plenty of economic data releases and the seemingly never-ending US presidential election results. Nonfarm payrolls numbers were released on Friday showing a rise of 638,000 jobs in October which beat expectations of 600,000. The reading followed September’s increase of 672,000. The unemployment rate fell to 6.9%. The biggest gains were in hardest-hit sectors during the pandemic, leisure and hospitality increased by 271,000 with bars and restaurants accounting for 192,000.

On the US election front, Joe Biden seems to be consolidating his lead now holding 253 electoral votes (needs 270 to win) after he went in front in Georgia going into the weekend and recouping ground in Pennsylvania. It happened because mail-in ballots are largely in his favour but get counted last. It does not look well for the incumbent Donald Trump who threatened to go to the Supreme Court saying he ‘wants all voting to stop’. A Georgia judge has already dismissed the Trump campaign lawsuit. Many will now hope there will be no clashes in the street between sympathisers.

Elsewhere, we had the FOMC meeting where members left interest rates and bonds buying program unchanged, as widely anticipated. They also made no changes to the statement stressing the financial conditions remain accommodative.

China released its October Caixin manufacturing PMI figures showing 53.6 (numbers above 50 indicate expansion territory) versus 52.8 forecast. The report detailed that the output jumped sharply because of the ‘quickest increase in total new work for nearly a decade’. Business confidence reached the strongest level since August 2014 but new export orders are still lagging due to the coronavirus outbreak.

The European Central Bank reported that PEPP – Pandemic Emergency Purchase Programme, a non-standard policy measure initiated in March 2020, is likely to remain the main channel for its monetary intervention. The PEPP is a more flexible tool which helps highly-indebted countries as opposed to the APP – Asset Purchase Programme, which mirrors asset purchases by the size of the individual economies. Meanwhile, Covid infections in Europe show records on a consistent basis with Germany now reaching 20,000 cases daily.

In the UK, Prime Minister Boris Johnson reiterated there is no alternative to lockdown, which started this Thursday, for the next 4 weeks. However, the Times reported that some UK Cabinet members have already warned that the restrictions could extend into the next year if confirmed cases and hospital admissions keep rising. On the other hand, Nigel Farage is to relaunch his famous Brexit Party as an anti-lockdown party called Reform UK. Talk about a man who is adept at spotting opportunities!!!

Bank of England also had its meeting this week and left the benchmark interest rate unchanged at 0.1%. The surprising part was that it raised the Quantitative Easing facility to £875 billion worth of gilts purchases versus £825 billion expected. Furthermore, it added that it stands ready to increase that figure again ‘if market functioning worsens’. Not sounding very confident as the Brexit saga could get even more complicated given possible the US election result!

Stock Markets across the world, but in the US particularly, rose impressively all week, as highlighted in our earlier analysis, with the Dow and S&P index both up over 7% and the Nasdaq rising an even more impressive 9.4% on the week!

Gold prices followed equities higher this week rising sharply from a low of $1873 to $1952 going into the weekend as investors were happy to sell US dollar despite lingering uncertainty regarding the US election. A softer greenback also helped crude oil prices which rebounded from $33.81 to $37.36 on Friday afternoon.