Market Quick Take - December 2, 2020 Market Quick Take - December 2, 2020 Market Quick Take - December 2, 2020

Market Quick Take - December 2, 2020

Macro 6 minutes to read
John Hardy

Head of FX Strategy

Summary:  Asian equity markets traded sideways overnight after tepid gains yesterday in major markets. In FX, the euro blasted above the 1.2000 level, although its move seemed out of step with the action in other US dollar pairs, which have yet failed to confirm broader US dollar weakness. Fed Chair Powell testified yesterday but gave no clues on his stance on further easing at the December FOMC meeting.

What is our trading focus?

  • Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - S&P 500 futures were grinding to a new all-time high on the close showing no immediate fear of an explosive session in US Treasuries with the US 10-year yield spiking almost 9 basis points to 0.926%. The rising US yields came on news that congress is close to a new fiscal deal worth almost $1trn. The most sensitive segment to rising rates is long duration equities which are Nasdaq 100 and other related high growth companies, but this segment also did not see weakness despite rising rates.

  • EURUSD – the EURUSD jumped above 1.2000 and rallied well above the level to close at its highest daily close since early 2018. Earlier in the day, some comments regarding the ECB meeting next week could be interpreted as hawkish (see below) but the move didn’t seem triggered by any specific news item, but perhaps was down to order flow as the pair crossed that key 1.2000 threshold. This theoretically opens for follow through into the 1.2500 region that held back the rally in early 2018, – with next week’s ECB meeting, the status of risk sentiment (EURUSD generally positively correlated with risk) and the December 16 FOMC meeting as the next tests.

  • USDCNH – The Chinese yuan rose close to its highest level versus the US dollar yesterday on a day that finally saw EURUSD breaking through the 1.2000 level, although that move was not fully supported in a number of other USD pairs, as euro strength was the major driver. USDCNH is a major component in the US dollar picture and for EM, particularly Asian EM, so the degree to which USDCNH participates in any further USD weakness could provide a further sense of how powerful a potential USD weakening move proves.

  • Salesforce (CRM:xnys) and Slack Technologies (WORK:xnys) - the rumored deal finally came true last night when Salesforce announced the acquisition of Slack Technologies in a cash and stock deal worth $27.7bn paying a negative premium to the recent valuation and a steep EV/sales (CY2021) ratio around 25x. This was too much for investors sending Salesforce shares down 5% in extended trading despite strong FY21 Q3 numbers (ending 31 October) showing EPS $1.74 vs est. $0.75 and revenue of $5.42bn vs est. $5.25bn, while lifting the FY21 guidance on revenue.

  • Moderna (MRNA:xnas) - after soaring some 20% on Monday on the news that company would seek emergency FDA approval for its Covid-19 vaccine, the stock suffered tremendous volatility yesterday, rising another 15% before losing all of those gains and then closing more than 6% lower on the day relative to the prior close. Moderna also filed for authorization of its vaccine in Europe yesterday.

  • Blackberry (BB:xnys) - saw an incredible spike yesterday after Amazon Web Services (AWS) announced a deal with the company to partner on the development and marketing of its vehicle data platform IVY. Already, some 175 vehicles use QNX, a service from a prior collaboration between Blackberry and AWS. The heavily shorted Blackberry stock was up as much as was up as much as 65% intraday before closing the day up 19%.

  • Brent crude oil (OILUKJAN21) and WTI crude oil (OILUSJAN21) have stumbled further ahead of Thursday’s postponed OPEC+ meeting. This as the market worry the group may not reach an agreement to maintain current production levels into the new year. Being so close to a vaccine rollout and a recovery in global fuel demand, we still expect an agreement will be reached leaving the price risk skewed to the downside. Additional weakness emerged last night after the API reported a bigger-than-expected increase in U.S. crude and fuel stockpiles. If confirmed by the EIA today at 15:30 GMT it may reflect the current challenges due to lockdowns and reduced mobility.

  • Gold (XAUUSD) and silver (XAGUSD) recovered most of last Friday’s sell-off as the dollar weakened (see above), and U.S. 10-year Breakevens (inflation) rose to at 19-month high at 1.82%. Having found support at $1763.50/oz on gold and $21.68/oz on silver, two key technical levels, the question is whether the vaccine-focus is slowly losing its negative grip on the investment metal market. While the move back above $1800/oz is a good sign, gold will break above $1850/oz before returning to relative safety while ETF holding - down 3.7 million ounces since November 9 - must stabilize.

What is going on?

  • The copper-gold ratio has broken away from treasury yields thereby highlighting, either a new normal or the risk of a major adjustment. Since November 9 and the first vaccine news, the copper-gold ratio has moved sharply higher and given its relatively close correlation with U.S. 10-year notes it suggest bond yields should be much higher or copper may have outrun current fundamentals while gold is too cheap. Central banks have indicated that growth can run hot before they step in and change rates or perhaps, as the linked article suggests, it is the ongoing shift in the engines of growth toward Asia, at the expense of the West -- a long-running trend accelerated in the wake of Covid-19.

  • Fed Chair Powell testimony yields no clues on December FOMC meeting – US Fed Chair Powell and Secretary of Treasury Mnuchin both testified before a Senate committee yesterday, and both agreed that further stimulus is necessary, with the some $455 billion in funds that the Treasury recently clawed back for weakly-utilized Fed emergency lending facilities providing a portion of that stimulus if Congress can agree on a stimulus plan.

  • US bipartisan fiscal stimulus plan of $908 billion circulating in the Senate – said to have bi-partisan sponsorship, a $908 billion stimulus package plan is making the rounds in the Senate, one that is said to include funding for paycheck protection and extension of unemployment insurance, some $250 billion for local and state governments and $50 billion for vaccine distribution, but no new stimulus checks. Senate Republican majority leader Mitch McConnell continues to argue for a far smaller plan with many provisions Democrats find unpalatable, while Democrat House Speaker Nancy Pelosi continues to argue for a far larger, if newly modified, plan.

  • The initial phase of the Ethereum 2.0 upgrade launched yesterday through the roll-out of the Beacon Chain. The intention with the upgrade is to increase the transaction processing speed significantly while also making the network more secure and sustainable – read more here.

What we are watching next?

  • US yields suddenly came alive yesterday – any higher, and the become center of market’s attention. A steep sell-off in treasuries took the 10-year yield sharply higher to above 0.90% level for the first time in two weeks and the 30-year yield above 1.65%. The 1.00% level in the US 10-year Treasury benchmark is clearly a major sticking point after being tested on the initial Pfizer vaccine news. A move above that level could set markets on edge, particularly some of the US megacap and other stocks, where valuations are only justified based extremely low long-term rates.

  • Can the US pass a stimulus package? The clock is ticking, and it would be useful to support the current market narrative of a fairly smooth path to a post-Covid-19 economy, if the US Congress could pass a stimulus deal soon that is then signed by lame duck president Donald Trump. The $908 billion proposal looks about “as good as it gets” for a deal that can find agreement between the two parties, with the chief remaining question whether Trump is in the mood to sign anything that he sees funding local governments in mostly Democratic jurisdictions.

Earnings releases this week are running low as we are off season. But the releases below are worth following:

  • Today: Royal Bank of Canada, National Bank of Canada, Snowflake, Synopsys, Crowdstrike, Splunk, Okta, Zscaler
  • Thursday: DocuSign, Marvell Technology, Dollar General, Kroger

Economic Calendar Highlights for today (times GMT)

  • 1000 – Euro Zone Oct. Unemployment Rate
  • 1315 – US Nov. ADP Employment Change
  • 1500 – US Fed Chair Powell to testify before House panel
  • 1530 – US Weekly DoE Crude Oil and Product Inventories
  • 1800 – US Fed’s Williams (Voter) to hold press briefing
  • 1900 – US Fed Beige Book
  • 0030 – Australia Oct. Trade Balance
  • 0145 – China Nov. Caixin Services PMI

Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:

Apple Sportify Soundcloud Stitcher


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.