Weekly Market Wrap 23-November to 27-November/2020

Marius Paun | London, UK | Senior dealer | Friday 27th November 2020

 

Dow hits 30,000

Big news on Tuesday from the US stock market with the Dow breaking and closing above the 30,000 marks for the first time ever. At the same time, S&P 500 and Russell 2000 (small caps) closed at record levels as well. Testimony to high expectations for the equities markets going into the new year is BlackRock’s (world’s largest asset manager) turning bullish on big-cap technology stocks as well as small-cap cyclical. Interestingly, they also added that they had turned rather bearish on Europe!

We also learned the US President-elect, Joe Biden, nominated Former Fed Chair Janet Yellen as his Treasury Secretary, who is thought to be in favour of more stimulus. The General Services Administration in the US has informed President-elect Biden it is ready to start the transition. The media reacted that this is as close as possible to Donald Trump conceding the election.

FOMC meeting minutes came out this week showing that investors are increasingly focused on a potential change in the asset purchases program. It pointed policymakers thought the Fed ‘should implement outcome-based guidance on QE because of uncertainty over the economic outlook’. There are now growing expectations there will be changes in guidance next month.

China warned that it does not expect its relations with the US to get better under Joe Biden, echoing the Western press which has been saying that for quite a while. Meanwhile, Chinese President Xi Jinping has come out and congratulated Joe Biden as the next US President. And as ever when one door closes…. President Xi and German Chancellor Angela Merkel had a phone conversation and agreed to strengthen cooperation on Covid-19 vaccine. Furthermore, Xi said both sides are ‘advocating multilateralism, international cooperation and jointly tackling global challenges’.

China’s Global Times also reported that Beijing is likely to approve a coronavirus vaccine by the end of the year.

On that front, the European Commission also announced a vaccine-supply deal with Moderna to receive up to 160 million doses. Reuters said Italy will get 16 million shots of AstraZeneca sometime next year.

The EU Chief negotiator Barnier admitted that fundamental divergences still remain on a UK-EU trade agreement and both sides are working hard for a deal. The Telegraph added that both sides are on the cusp of a deal. Nothing new there, they have been saying that for months.

Against this backdrop, we heard the EU negotiators will come to London for talks next week. But the gaps on fisheries, governance and level playing field are now getting bigger, as Brussels seems to be pushing for an automatic review in 10-15 years, something the UK side says it will not entertain. The UK Prime Minister Boris Johnson is adamant he’s not going to extend the Brexit transition period whilst the Bank of England Governor warned that a no-deal Brexit will be worse than the virus… have we heard this gloomy prediction before at the BoE? New Governor, same rhetoric..Hmmm.

The UK Government is now ready to give approval to the Pfizer vaccine and has told the NHS to be ready to start to administer it by December 1st. That would mean Downing Street is approving the drug before Washington.

On Wednesday, going into the long Thanksgiving weekend in the US, despite some profit-taking in equities, oil prices continued their rally, driven by a surprise fall in US crude inventories by 750,000 barrels versus expectations for a 100,000 barrels build. The US crude had another good week, fourth in a row, trading around $45.5 going into the weekend. Not the same fate for gold prices which continued their selloff dropping from $1876 to a low of $1774 reached on Friday afternoon. Does it seem investors are preferring those riskier assets and worrying about rising inflation later?

Bitcoin neared its all-time record high around 19,600 this week. As a result of just falling short on achieving those new levels, it plunged by more than $2,000 in a few hours and made a low of $16,200. It still lives up to its notoriously high volatility it seems.