News & Analysis

Overnight on Wall Street: Thursday 03 December 2020

December 3, 2020

By Deepta Bolaky
 @DeeptaGOMarkets

Equity Markets

The US stimulus talks and vaccine updates were the main drivers of risk sentiment on Wednesday. The performance of the global stock market was mixed. 

The FTSE index rose by more than 1% following the UK’s approval of the COVID-19 vaccine developed by Pfizer and BioNtech. The UK is officially the first country in the world to provide its approval for a COVID-19 vaccine which will likely be made available to care home staff and residents within the next couple of days. 

Pfizer and BioNTech first authorisation updates:

  • U.K. regulator, MHRA, authorizes supply of COVID-19 mRNA vaccine for emergency supply under Regulation 174; Companies are ready to deliver the first doses to the U.K. immediately
  • First authorization for a COVID-19 vaccine represents a breakthrough scientific achievement to help combat this devastating pandemic
  • The companies previously signed an agreement to supply a total of 40 million doses to the U.K. with delivery in 2020 and 2021
  • U.S. FDA and EU EMA decisions on authorization are expected in December

Wall Street ended on a mixed note amid new stimulus negotiations and vaccine updates: 

  • The Dow Jones Industrial Average gained 60 points or 0.2% to 29,884.
  • S&P 500 rose by 7 points higher or 0.2% to 3,669. 
  • Nasdaq Composite ended relatively flat with 6 points lower to 12,349.

Currency Markets 

In the FX space, major currencies remained mixed against the US dollar. The US dollar index which tracks the performance of the greenback against a basket of currencies fell to the lowest in more than two years.


Source: GO MT4

The vaccine updates, stimulus talks, economic data and Brexit drove the price action in the currency markets. The Aussie dollar and the Euro performed better on the back of upbeat economic data while the British Pound and the Pound slipped on geopolitics.

Australia – Third-quarter bounce

As COVID-19 related restrictions eased across most states and territories to the exception of Melbourne which is Australia’s the second most-populated and largest city, the Australian economy emerged from a recession and rose 3.3% in September quarter. The GDP figures came above expectations of a 2.5% growth. Given the havoc created by the pandemic, the level of economic activity still remains low and GDP has declined by 3.8% in the year to September 2020.

However, given that Melbourne which was the only state to record a fall driven by declines in household spending and investment has now eased restrictions, policymakers are expecting the economy to continue to grow in the fourth quarter, unlike some other major economies which are still battling a second wave of the outbreak.

As of writing, the AUDUSD pair is trading firmer and broke above the key level of 0.74.


Source: GO MT4

Germany – Retail Sales

In October 2020, the turnover in retail rose by 8.2% (real) and 9.4% (nominal) compared to the same month of the previous year. In comparison to February 2020, the month before the outbreak of Covid 19 in Germany, the turnover in October 2020 was 5.9% (in real terms, calendar and seasonally adjusted) higher. The EURUSD pair traded at a high above the 1.21 level. 


Source: GO MT4

United States

Private sector employment was softer than expected in November. ADP Employment Change came at 307K below the expectations of 410K in November.

For the chart of the day, Adam Taylor takes a look at the EURGBP pair – Sterling Aiming For Long-Term Recovery.

Pound Sterling hit hard during today’s London session as senior EU diplomats suggested significant barriers still exist around trade deal negotiations. The unfavorable news sent the cross rallying to a three and a half week high of 0.9084.

Coinciding with these three weeks is how well EURGBP has tracked the 200 MA (Blue line) as resistance. We see several attempts from buyers to breach above this level before today’s unfoldment provided the catalyst to complete the move above this line.

Despite pushing the pair into overbought territory on the RSI, this behavior seems to suggest increasing demand rather than a typical reversal pattern, with price action consistently ebbing above 70 compared to a steady incline.

Short-term upside targets would include the recent highs of 0.9107 and 0.9148, respectively. To establish potential downside targets, we need to take a look at the daily chart below.

I’ve included the Ichimoku cloud indicator as it provides a possible roadmap for the pair. We see price action is approaching the top of some cloud resistance that could potentially hinder any chances of more accelerated climbs in the longer-term.

While there is always a possibility that the price breaks above and continues trending upwards, the likelihood of this occurring before the end of December deadline is slim. We see the Ichimoku cloud resistance increasing in strength as the month passes. The downside targets to keep in-mind are 0.8865 (held multiple times as a support level), followed by the 0.82 regions last seen in February this year.

Finally, let’s not forget that the market has had plenty of time to digest these Brexit trade negotiations, so we probably won’t be in for any shocks or surprises, regardless of the outcome. While the pair appears bullish in the short-term, the charts hint at the Pound finding value medium to long-term.

Commodities

Crude oil prices remained firm in familiar levels ahead of the critical update toward a deal that would lay out the oil production’s plan for 2021. On the inventory side, the United States EIA Crude Oil Stocks Change registered at -0.679M above expectations (-2.358M) on November 27. As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading at around $45.28 and $47.98 respectively. 

Gold

The precious metal reclaimed the key level of $1,800 following stimulus talks. As of writing, the XAUUSD pair was trading around $1,829. 


Source: GO MT4

By Deepta Bolaky
 @DeeptaGOMarkets

Key upcoming events

  • Commonwealth Bank Services PM, Imports, Exports, and Trade Balance (Australia)
  • Caixin Services (China)
  • Markit PMI Composite (Germany)
  • Markit PMI Composite and Retail Sales (Eurozone)
  • Jobless Claims, ISM Services New Orders Index, Services PMI, Services Employment Index, and Prices Paid (US)
Friday, 04 December 2020 
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0 10.034 0.218 0.042 0 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 0


Disclaimer:  The articles are from GO Markets analysts,  based on their independent analysis or personal experiences. Views or opinions or trading styles expressed are of their own;  should not be taken as either representative of or shared by GO Markets.  Advice (if any),  are of a ‘general’ nature and not based on your personal objectives, financial situation or needs.  You should therefore consider how appropriate the advice (if any) is to your objectives, financial situation and needs, before acting on the advice.  If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.

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