Market Reviews • 4th Jan, 21
The Dollar slipped and a gauge of global stocks edged towards a record Monday as the roll-out of vaccines and stimulus support eased concerns about the escalating pandemic. Gold and Treasury yields climbed.
Shares jumped in South Korea and Australia, but underperformed in Japan after Prime Minister Yoshihide Suga said he’s considering declaring a state of emergency for the Tokyo area to stem a surge in virus infections. S&P 500 futures and European contracts posted modest gains. The US benchmark closed at an all-time high on 31 December. Gold climbed more than 1% to the highest level in almost two months.
The Dollar fell against all its Group-of-10 peers amid optimism about a global growth recovery. The offshore Yuan strengthened to the highest since mid-2018. Equity indexes in China and Hong Kong advanced, shrugging off the New York Stock Exchange’s move to delist China’s three biggest telecommunication companies.
Equities are beginning the new year at rich valuations amid expectations that widespread vaccine distribution in 2021, Central Bank support and government aid will reignite economic growth and boost corporate profits.
Purchasing Managers Indexes showed factory activity across Asia continued to gain momentum in December, spurred by strong demand for the region’s exports, though China’s recovery is starting to moderate.
Oil advanced, exceeding $49 a barrel. OPEC+ will decide on Monday whether it can continue to restore crude supplies without capsizing the price recovery. Elsewhere, Bitcoin held onto much of its weekend gains after topping $34,000 for the first time on Sunday. On the Coronavirus front, global infections climbed above 85 million, after US daily cases soared to a record of nearly 300,000 after the New Year holiday. The UK is poised to give the first shots of the vaccine from AstraZeneca Plc and the University of Oxford on Monday, in a race against a faster-spreading variant that’s prompted new lockdowns across much of the country.
What to watch this week:
- OPEC+ alliance energy ministers hold their monthly virtual gathering Monday to decide whether to add as much as 500,000 barrels a day to production
- In the US on Tuesday, the state of Georgia holds a run-off election for two US Senate seats that will decide control of the chamber
- US Congress meets to count electoral votes and declare the winner of the 2020 Presidential election Wednesday
- FOMC minutes out Wednesday
- US unemployment report for December is due on Friday
These are the main moves in markets:
- S&P 500 futures rose 0.40% as of 7.18 am in London. The S&P 500 Index advanced 0.60% Thursday
- Japan’s Topix Index declined 0.60%
- Australia’s S&P/ASX 200 rose 1.50%
- Hong Kong’s Hang Seng Index climbed 1.00%
- South Korea’s Kospi Index jumped 2.50%
- Shanghai Composite Index rose 0.90%
- Euro Stoxx 50 futures added 0.40%
- The Yen climbed 0.20% to 102.95 per Dollar
- The offshore Yuan rose 0.90% to 6.4442 per Dollar
- The Bloomberg Dollar Spot Index fell 0.40%
- The Euro climbed 0.40% to $1.2267
- The British Pound climbed 0.20% to $1.3695
- The yield on 10-year Treasuries rose three basis points to 0.94%
- Australia’s 10-year bond yield rose one basis point to 1.02%
- West Texas Intermediate Crude added 2.10% to $49.55 a barrel
- Gold rose 1.30% to $1,923.81 an ounce
The S&P 500 was holding near a record high early in the last trading session of the year, with most sectors lower.
Nine of 11 industry groups were lower as of 9.55 am in New York. Energy stocks notched the biggest declines. Materials also slipped. The communications services sector gained, boosted by tech megacaps Facebook Inc. and Netflix Inc.
The US stock market is ending an extremely volatile year on a quiet note, with early trading volume about 40% below the 30-day average. The S&P 500 is up almost 16% in 2020, after having plunged as much as 34% during the outset of the pandemic in the first quarter. That puts the annual return of the Index above both its long-term recessionary and non-recessionary medians.
Western Digital Corp., Micron Technology Inc. and Netflix Inc. were among the biggest gainers in the S&P, while Carnival Corp. and Norwegian Cruise Line Holdings Ltd. were among the biggest decliners.
Sectors in Focus:
- Watch Rapid7 and Ping Identity Holding. The pair could advance as a result of the SolarWinds hack, according to a Raymond James report
- Keep an eye on crypto-linked stocks. The group extended gains as Bitcoin prices hit above $29,000, bringing its year-to-date climb to 300%-plus
- Monitor the energy sector. Crude Oil futures in New York slid in the last trading session of the year as traders looked to OPEC+’s meeting next week
- The Pentagon has put a decision on approving full-rate production of Lockheed Martin Corp.’s F-35 on indefinite hold, as officials remain unable to say when the fighter jet will be ready for combat testing that’s been delayed repeatedly since 2017
- Senator Lindsey Graham said he’ll listen to Republican colleague Josh Hawley’s objection to the certification of Electoral College votes for Joe Biden but doubts it will succeed
- US claims for unemployment benefits unexpectedly fell to a one-month low, though the recent increases in Coronavirus cases and business closures threaten to keep lay-offs elevated through early 2021
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Source: Sanlam Private Wealth
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