The Catch Up
• Markets in Asia continued to rise this morning, with investors placing their hopes on a vaccine-driven global economic recovery, despite a possible tightening of Covid-related rules in Japan.
• Stock indices were led by the KOSPI, which rose by 2.47% to a record high, while the CSI300 and the Hang Seng were up by 1.1% and 0.75% respectively. The ASX was also up by 1%, while the Nikkei dropped 0.7% as a result of the potential for more Covid-related measures, as the government was considering a state of emergency for Tokyo and three surrounding prefectures.
• With regards to futures trading, the US500 was marginally up 0.1%, while the DAX was 0.56% higher.
• In addition to the hopes of a vaccine-driven recovery, investors are still expecting that central banks will maintain their "cheap money" policies. That said, it appears that much of the optimism has already been priced in.
• In the US, the fight for the Senate continues, as the elections in Georgia for two Senate seats will determine which party controls the Senate. If the Republicans win one or both, they will retain a slim majority and can potentially block President-elect Joe Biden's legislative goals and judicial nominees.
• On the other hand, if Democrats win both seats, Vice President-elect Kamala Harris would be the tiebreaking vote, effectively giving the Democrat party control of both the White House and Congress. As analysts note, this could raise the likelihood a material US infrastructure spending package gets fast-tracked through Congress.
• Still in the US, minutes of the Federal Reserve's December meeting are due on Wednesday and are widely expected to give more details with regards to the discussions about making their forward policy guidance more explicit and the chance of a further increase in asset buying this year.
• In addition to the Fed minutes, the US December payroll is expected on Friday, where the consensus forecast stands at 100,000. On the other hand, analysts at Barclays are suggesting a fall of 50,000 in jobs, which would be a shock to market hopes of a speedy recovery. As they wrote in a note, "a number of incoming indicators on activity point to slower momentum as the economy closes out the year, including data on labour markets where initial claims rose during the December survey period."
• A drop of such an extent could add pressure to the Fed for further easing, which would imply another burden for the US Dollar which is already losing heavily under the weight of the massive US budget and trade deficits.
• In the UK, Prime Minister Boris Johnson is also hinting at the possibility of tougher lockdown restrictions. However, on the vaccine front, the UK will become the first country to roll out AZD1222, the Covid-19 vaccine developed by AstraZeneca. The vaccine, approved by the Medicines and Healthcare products Regulatory Agency on Dec. 30, is more easily transportable and will be low-cost.
• Earlier today, Chinese factory activity continued to accelerate in December, though the PMI missed forecasts at 53.0. Japanese manufacturing stabilised for the first time in two years in December, while Taiwan picked up.
• The Dollar continues to lose steam as a result of the easing policies, as the Euro has moved up to $1.2252, after the profit-taking that took place late last week when it reached the highest since early 2018 at $1.2309. The currency gained almost 9% over 2020.
• The dollar slipped to 103.02 yen, and looked in danger of testing key support at 102.55. Sterling firmed to $1.3690, levels last seen in mid-2018.
• At the same time, the Aussie and the Kiwi were also up against the USD by 0.16% and 0.03% respectively.
• In the cryptocurrency space, Bitcoin steadied at $33,102, after touching an historic top at $34,800.
Oil & Gold
• Oil prices touched multi-month highs on Monday on expectations that OPEC and allied producers may cap output at current levels in February. Brent futures moved to $53.17 per barrel and WTI was playing with the $50 level at $49.71.
• The OPEC secretary general noted that while crude demand is expected to rise by 5.9 million barrels per day, to reach 95.9 million this year, the group sees plenty of downside demand risks in the first half of 2021. Prices ended 2020 about 20% below 2019's average.
• The decline in the dollar as well as the potential for more measures in the UK and Japan has been a support for gold, as the world's most popular yellow metal rose to $1,926 per ounce, surpassing the $1,900 mark and reaching the highest level in eight weeks.