Financial markets summary: good news from the new coronavirus vaccine has returned this week, but financial markets are only cautiously optimistic. As the outbreak worsens around the world, with the United States leading the way, it will take time for vaccines to be widely available and a new round of fiscal stimulus runs into obstacles in Europe and the United States, raising concerns about the fragile prospects for economic recovery. Meanwhile, Despite another state declaring Biden the winner, Trump continues to complain that the election was rigged and refuses to concede. A complex mix of factors is pulling the market from multiple directions, causing risk assets to continue to rise, but only modestly, gold to take a significant hit but also to recover, as investors split their outlook and major assets wait for clearer signals.
Forex: THE DOLLAR edged lower this week, opening at 92.57 and closing at 92.43, after a choppy week, touching as high as 92.73 and as low as 92.21.
The euro/dollar was largely driven by the dollar, rising slightly this week to open at $1.1849 and close at $1.1854 despite setbacks to the European economic outlook and the EU recovery fund.
Sterling fell before rising against the dollar this week as the brexit news continued to move the pound. There has been little progress in the brexit talks this week and they were briefly halted when some members of the EU negotiating team confirmed the corona-xi, but the new optimism expressed by the EU on Friday left most markets expecting an eventual deal.
Commodities: Gold continued to tumble last week after Pfizer announced positive test results for its vaccine. If coVID-19 is brought under control, most of the factors that have underpinned gold’s rally so far this year will dissipate. But multiple risk factors remain and ultra-loose monetary policy is expected to remain in place for a long time, supporting gold and limiting its downside. In this context, spot gold opened at $1,886.62 an ounce this week, closing at $1,870.45 an ounce, falling choppily to as low as $1,852.54 an ounce.
Oil prices were supported this week by hopes of an effective vaccine and the prospect of further Opec + production cuts, ending the week up 5.03 percent on THE U.S. side and 5.09 percent on the U.S. side, the third straight week of gains.
World stocks: Despite Monday’s boost from the Modena vaccine news, stocks didn’t see the big gains seen Monday when Pfizer’s vaccine was announced, with investors looking more cautious. Subsequently, the severe epidemic situation in the United States, with the death toll exceeding 250,000, disappointing economic data such as initial request and worrying fiscal and monetary policies, caused the global stock market led by the US stock market to fall back.
Take stock of the week’s highlights
Vaccine news: Following Pfizer’s lead last week, drug company Merck announced preliminary phase iii trial results on Monday of the novel coronavirus vaccine, showing 94.5 percent efficacy and lower storage temperature requirements than Pfizer’s vaccine. Pfizer’s vaccine, released on Wednesday, is better than initial estimates released last week and 95 percent effective. The U.S. Food and Drug Administration said Friday it will approve the vaccine for sale in the first half of December. These are certainly great news for risky assets.
The market followed suit, with risky assets rising and U.S. stocks briefly breaking record highs. Prices for safe-haven assets such as bonds fell. But optimism seems to have dissipated faster than it did after Pfizer’s vaccine announcement last week. Spot gold plunged as much as $30 on Monday, but then quickly rebounded into a “deep V” trend. Global stocks also retreated after a brief boost.
Mohit Kumar at Jefferies, a financial services group, explains: “The vaccine news is welcome and will change the economic outlook for 2021 as well as the long-term function of the central bank’s response. But given the reality that the outlook will remain hot through the winter, the central bank also needs to continue to support the economy.”
Terror data: Tuesday’s “terror data” from U.S. retail sales helped dissipate optimism faster. Us retail sales fell short of expectations in October. Following September’s surprise surge in retail sales, analysts expected growth to slow significantly in October, but the actual figures were worse, with overall RETAIL sales up just 0.3 per cent month-on-month (forecast at 0.5 per cent) and growth significantly revised down last month (from +1.9 per cent to +1.6 per cent month-on-month).
“Weak US retail sales have also dampened risk sentiment,” explained Richard Hunter, director of markets at Interactive Investor. The second wave is clearly having an impact on consumer spending. Any continued blockade would also limit the ability of the public to travel. Recent data suggest that fiscal stimulus still needs to be stepped up to boost the recovery.”
Severe outbreak: Wednesday’s outbreak in the United States has investors even more worried. On that day, Johns Hopkins reported more than 250,000 coVID-19 deaths and more than 11 million confirmed cases, with more than 76,000 coVID-19 patients still hospitalized. New York has announced temporary school closures, with infection rates at their highest level since the spring.
New coVID-19 cases in the United States hit a record high of 187,833 on Thursday, according to Johns Hopkins University. The single-day peak brought the average number of new infections across the country to 165,029 over seven days, more than 24 percent higher than last week, according to an ANALYSIS of the data by CNBC. On Thursday, 2,015 people died in the United States, with the seven-day average topping 1,300 for the first time since May 21.
There are fears that the outbreak in the US could escalate as the Thanksgiving holiday approaches.
Stephen Innes, chief global market strategist at Axi, said the decision to close classes in New York and switch back to distance learning had taken markets by surprise. “The rolling average of positive seven-day test rates in New York City reached a safety threshold of 3 per cent, triggering the closure of school systems and renewing fears of a lockdown. “Investors are increasingly concerned about the economic damage that has been done and what will happen as they await the launch of the vaccine. Although the vaccine did provide light at the end of the tunnel, it became more spongy and longer. I’m no medical expert, but statistically speaking, the third wave in the US is likely to get worse. “
Economic data warning: On Thursday, U.S. jobless claims unexpectedly came in higher than expected. Regular state jobless claims totaled 742,000 in the week ended November 14, up 31,000 from the previous week, labor Department data showed on Thursday. An increase of about 18,000 on an unadjusted basis. The figure was also higher than economists had expected.
Analysts say this shows the U.S. economy is struggling. Applications for US state unemployment benefits rose for the first time in five weeks, Bloomberg reported, in a sign that the Labour market recovery is slowing amid a surge in covid-19 cases and new business restrictions.
Daniel Zhao, senior economist at Glassdoor, said the high number of jobless claims is unhealthy. He also warned that gains were being exhausted and that the programs to support the economy approved earlier this year were about to expire.
A rare clash between the Treasury and the Federal Reserve: On the same day, the markets were also shocked by news out of the US. U.S. Treasury Secretary Steve Mnuchin announced that some of the Federal Reserve’s emergency lending programs will expire after the END of the CARES stimulus act on December 31. On Thursday, Mr. Mnuchin asked the Federal Reserve to return more than $400 billion in unspent funds from its massive epidemic rescue plan in March so That Congress could redeploy the money to stimulate the economy. The Fed quickly responded publicly to Mnuchin, saying: “The Federal Reserve expects that all emergency tools established during the outbreak will continue to play an important role in providing a backstop to the still-strained and fragile U.S. economy.”
Isaac Boltansky, head of policy Research at Compass Point Research and Trading, said it was absurd for the Fed to be weakened at a time when the U.S. economic recovery was still fragile, adding “a completely unnecessary injection of uncertainty and instability into the market.”
Mr. Mnuchin continued his remarks on Friday, saying that the Treasury and the Fed were working closely together on loans; It is clear that Congress intends for the Fed’s lending facility to expire at the end of December. He says parts of the economy are recovering, but many people are still in trouble. As for the Fed’s lending facilities, Mr. Mnuchin emphasized that the Fed always wants to keep its tools as good as possible; The Fed has always said that these are emergency tools, and that when an emergency is over, we will take them back; I want Congress to refund it.
The dispute between the US Treasury and the Federal Reserve is rare and untimely, the Oxford School of Economics says in a report published today. “Emergency lending funds are not used much, but their existence is key to ensuring protection for financial markets under stress. “As coVID-19 worsens, economic activity slows and there is no new fiscal support, the decision to block the Fed’s powers will unsettle markets and add to economic pressures.”
Us election: Mr Trump continues to refuse to concede and to complain that the election was rigged. Rudy Giuliani and other lawyers representing US President Donald Trump on Thursday defended what they said was widespread voter fraud.
Among the charges are that Republican observers were not allowed to observe vote counts in Philadelphia and Detroit, and that Trump’s lawyer, Sidney Powell, alleged that U.S. voting machines made by Dominion Voting Systems Inc., used Software made in Venezuela.
President Trump is taking the unusual step of reaching out directly to Republican state lawmakers in an attempt to overturn the Electoral College process, inviting Michigan lawmakers to meet with him at the White House on Friday, the New York Times reported on Thursday.
The trump campaign’s latest strategy is to persuade Republican-controlled legislaturesin swing states like Michigan, won by Democratic presidential candidate Joe Biden, to set aside the results to determine a Trump victory, according to three people familiar with the plan.
According to sources in Michigan, two Republicans — Senate Majority Leader Mike Shirkey and House Speaker Lee Chatfield — will visit the White House at Mr. Trump’s request.
Market Outlook for next week
Financial data intensive next week, including on Monday November purchasing managers’ index released by the European countries, Germany in the third quarter GDP released on Tuesday, on Wednesday announced a series of important U.S. economic data (the third quarter of the personal consumption expenditures price index, the personal consumption expenditures in October, durable goods orders in October, the third quarter of the real GDP, jobless claims, new home sales in October). Investors will pay close attention to the economic situation and prospects of countries hit by the epidemic.
Meanwhile, the Federal Reserve will provide more clues on the outlook for its monetary policy when it releases the minutes of its November meeting on Wednesday. On monetary policy, a number of central bankers will also speak next week. The Bank of Korea and the Riksbank will announce their latest interest rate decisions.
In addition, the market will focus on the progress of the epidemic, vaccines, and government support policies. Political developments in Europe and the US will also be watched. This includes the US election and the progress of the Brexit negotiations. Armin Peter, head of debt capital markets at UBS, points out that markets are “currently defined by three interrelated themes”: blackouts, vaccines, and policy support.