Market Quick Take - November 13, 2020 Market Quick Take - November 13, 2020 Market Quick Take - November 13, 2020

Market Quick Take - November 13, 2020

Macro 6 minutes to read
John Hardy

Head of FX Strategy

Summary:  A low energy day for global markets yesterday in large part, although Chinese equities suffered a weak session overnight. The resurgence of Covid-19 in the US is reaching a level that is raising fears of new restrictions on activity, with the crude oil market certainly taking note. The Trump attempt at denying the election result is seeing pushback from some officials.


What is our trading focus?

Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - a rather low energy session as the market mulls the risks from lack of stimulus during the lame duck period of the Trump presidency until inauguration on January 20 and the risk that the Covid-19 resurgence is becoming sufficiently grave to dampen activity. The technical area to the downside that may usher in more selling in the Nasdaq 100 comes in just above 11,500, with the next moving average of note the rapidly rising 100-day moving average, currently at 11,230. The broader S&P 500 index is farther from notable downside swing levels, with 38.2% Fibo support from recent rally wave at 3,499 and a cluster of moving averages and the 61.8% retracement coming in from 3,432 down to 3,394.

STOXX 50 (EU50.I) - European equities are holding up well despite French lockdown is prolonged into late December with the 3,400 in STOXX 50 being the key support level to watch if risk-off resumes today going into the weekend.

EURUSD – the US dollar is keeping its intentions well-hidden as it edged a bit stronger versus riskier currencies yesterday, while EURUSD found support just ahead of the key local downside retracement support (1.1725), never breaking 1.1750 - which looks the tactical swing level of note. The EURUSD managed to find support even as ECB president Lagarde indicated the intent for heavy new easing measures at the December ECB meeting and even mentioned the risk that the EUR exchange rate presents for the inflation outlook.

USDCNH – we continue to watch the USDCNH pair for signs that the strong trend of the last several months is set for some degree of consolidation after the broader CNY basket reached a major range high last week. The 6.65 area could open up for a run higher toward the next interesting waystation on the recent way down at 6.70-6.75, with the USD likely having to do the weakening if the pair is to fall farther from here, if the basket has any relevance (I.e., if there is an assumed hand guiding the CNY to stay within the basket band, USDCNH would be a low beta trade to USD direction).

Brent crude (OILUKJAN21) and WTI crude oil (OILUSDEC20) trade lower for a second day following another gloomy monthly oil market report and a surprise U.S. stock build. The IEA cut its Q4 demand outlook by 1.2 m b/d at a time where Libya’s production has risen by close to one million b/d while a vaccine is unlikely to have a meaningful impact on demand until H2 2021. The EIA meanwhile reported a surprise oil stock build as refinery demand remains weak with implied gasoline demand still trailing last year by 1 million b/d. In Brent the break below $43.50/b may signal a move back towards $40/b with the first level of support at $41.65/b.

Gold (XAUUSD) continues to find support ahead of key support at $1850/oz with the focus firmly on the dollar and U.S. bond yields which are lower after challenging 1% on 10-year Notes earlier in the week. As the number of new coronavirus cases in the U.S. and Europe continue to surge, three of the world’s top central bankers cautioned that a vaccine would not end the economic challenges. Yesterday ETF investors cut total holdings by the most since March 20. Resistance at $1895 and $1908. Platinum (XPTUSD) has outperformed gold this week with its discount falling to $988/oz, a two-month low.

Treasuries’ rally leaves bonds bears wondering whether the steepening of the yield curve will resume (10YUSTNOTEDEC20). Yesterday’s 30-year Treasury auction was awarded a higher yield than When Issued (WI), but by the end of the day the yield curve flattened. The 10-year yields closed the day at 88bps which is 10bps below the highs on Wednesday as Covid-19 cases rise and Trump steps away from stimulus talks. We still believe that the yield curve will steepen with the 10-year hitting the 1% level and risking to rise up to 1.5%.

Italy to issue USD government bonds today (10YBTPDEC20). According to Bloomberg, Italy is going to issue $3bn of sovereigns paying around 165bps over 10-year euro-denominated bonds. It seems that the government is looking to diversify its client base, which heavily rely on domestic investors. We still believe that there is upside for Italian BTP ahead of December ECB’s stimulus, with 30-year BTPs to benefit the most.

Disney (DIS:xnys) - shares 3% higher in extended trading on strong FY20 Q4 earnings result (3 October). Revenue was $14.7bn vs est. $14.2bn and EPS at $-0.20 vs est. $-0.73. But the positive for future growth was the subscriber numbers on Disney+ showing global subscribers of 73.7mn vs est. 65.5mn showing much better momentum than Netflix.

Pinduoduo (PDD:xnas) - Q3 revenue was $14.2bn vs est. $12.2bn growing at 89% y/y with active monthly users hitting 643mn up 50% y/y. The company is still operating at a loss but the current trajectory we profitability by late 2021. Pinduoduo is the fourth largest e-commerce company out the 48 e-commerce companies that we track globally.

What is going on?

Covid-19 continues to rage in the USA and Europe - the lockdowns in France will cause the country to enter a double-dip recession in Q4, with hospitalizations reaching a record both there and in the UK. Elsewhere, the case count is accelerating badly in the US with almost daily new records and hospitalizations of Covid-19 patients nationwide is expected to reach a record there as well, with local areas running out of capacity to treat.

Republican backing for Trump’s challenge of US Election results waning - some Republican senators are calling for president-elect Biden to begin receiving intelligence briefings and one even threatened to intervene if this was not done before the end of the week. A board of officials, including a Trump appointee in the Department of Homeland Security, signed off on a statement that the 2020 election was the most secure in US history and that there was no evidence of fraudulent voting.

What we are watching next?

Will we get any Brexit news ahead of the weekend? - November 15, this Sunday, was meant to be a deadline for this latest round of Brexit talks, but there are no signs that the two sides are set for any dramatic announcements. In the meantime, UK Prime Minister Boris Johnson is dealing with new Covid-19 lockdowns and the prospective exit of key advisor Dominic Cumming at the end of this year and recent departure of his communications director Lee Cain. EURGBP has crept back higher toward the 0.9000 level after a plunge this week on the uncertainty.

Q3 earnings season continues this week. Below list shows the largest companies reporting on the final day of the week:

  • Today: JD.com, Nippon Paint Holdings, SMC Corp/Japan, Japan Post Bank, Japan Post Holdings, Mitsubishi UFJ Financial Group, Engie, Sumitomo Mitsui Financial Group

Economic Calendar Highlights for today (times GMT)

  • 1000 – Euro Zone Q3 Employment
  • 1000 – Euro Zone Q3 GDP
  • 1200 – US Fed’s Williams (Voter) participating in FT webinar
  • 1330 – US Fed’s Bullard (Non-voter) to speak on US Economy and Monetary Policy
  • 1500 – US Nov. Preliminary University of Michigan Sentiment
  • 1530 – US Weekly Natural Gas Storage
  • 1600 – UK BoE Governor Bailey to Speak

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

Apple Sportify Soundcloud Stitcher

Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo 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 or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

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. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site 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 are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

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