As investors are about to enter the final month of the pandemic year 2020, the attention will remain on the vaccine updates, Brexit and the global economic data to gauge the recovery which has the potential to bring more volatility to the markets.
Recently, the vaccine updates and US politics have driven the stock market rally and we can expect the same driving forces to continue to steer the markets.
The US and the UK are stepping up preparations to facilitate the distribution of the vaccine once it has received the necessary approvals. As of writing, healthcare workers could be vaccinated as early as December 7th for the UK and December 10th for the US. Investors will intensely await for the CDC’s Advisory Committee on Immunisation Practices on Tuesday to approve for healthcare professionals and long-term care facilities to get the initial vaccine.
The pressure is mounting for Brexit as the transition period is due to end in almost a month. All eyes will remain on the state of the negotiations leading up to the Brexit deadline. After months of intense discussions and a deadlock of certain rights and conditions, investors will monitor the progress to see if a late deal or compromise is still possible.
China, Australia, New Zealand, Japan and another 11 countries in the Asia-Pacific region have signed one of the biggest free trade agreements in history. The Asian-Pacific stock market will likely get a boost as it is the world’s largest regional free-trade agreement, encompassing nearly a third of the world’s population and gross domestic product.
As every other Nonfarm payroll week, employment and jobless readings will be important for traders to see whether the central bank will have to step up their efforts in stabilising the economy given the gridlock in Congress and the lack of timely stimulus support. Any readings on the downside will likely add further downward pressure on the US dollar.
The renewed confidence in the Australian economy seen recently was primarily boosted by the ongoing support from the government and central banks. The Australian budget and the additional quantitative easing program alongside a series of positive news; easing of lockdown measures, promising vaccine updates, and Asia-Pacific trade deal have well-supported the optimism in the Australian markets.
On Tuesday, while we expect the RBA to keep interest rates unchanged, the attention will remain on the bond-buying program. After the Australian economy shrunk by 7% in the second quarter ending June 2020, the country battled a second wave of coronavirus outbreak forcing the second most populated and largest city to go into stricter lockdowns.
The third-quarter GDP figure is expected to turn positive and take the economy out of recession given that the situation in other states was under better control.
The oil market has remained pressurised by the uncertainty on the demand outlook and a supply glut. The broad optimism in the markets triggered largely by vaccine updates and hopes that the pandemic may soon be under control, has been providing support to a fundamentally battered energy market.
Crude oil prices have firmed to the upside in the last few weeks in the anticipation that the global activities might be back to a new normal with the vaccine. On the supply side, the meeting scheduled to be held on Tuesday by major oil producers will be key for the oil markets. OPEC and its non-OPEC allies will discuss the extension of the production cuts.
As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading at around $45.13 and $47.66 respectively. Traders will likely keep monitoring weekly oil reports and OPEC commitments to production cuts for fresh trading impetus.
Gold plummeted below the psychological mark at $1,900 on the first announcement of Pfizer and BioNTech that its vaccine has a 90% efficacy rate. For the remaining month, the precious metal stayed underpinned by vaccine trials news and the US stimulus gridlock.
From the health crisis point of view, the vaccine updates are fuelling the hopes of a quicker recovery and providing reassurance to investors. However, the amount of stimulus injected into the global economy over the last couple of months is evidence that the economic and financial recovery might take some time.
Despite the recent sell-off seen, the precious metal was currently holding above the $1,800 mark until last Friday which triggered a deeper sell-off. There is no fundamental catalyst other than a technical one that drove the price of the metal below that mark. As of writing, the XAUUSD pair has dropped to its lowest point in four months and is currently trading around $1,786.
|Tuesday, 01 December 2020
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