In the Know

In the Know

By 4 December, 2020 No Comments
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4 Dec 2020

Brief
The new paradigm creates funny friends: the search for risk benefits equities, which are at the verge to break up the most recent resistances, and also make traders to sell the USD, which at the same time trigger bond and gold price recoveries.
So risk-on goes today hand to hand with bonds and gold.
If the US manage to approve the stimulus package over the weekend a new rally, even short term, is guaranteed.
Complicated Brexit talks affect the GBP, which lost against the EUR.

Agenda
Fri:         UK Construction PMI, US Unemployment rate.

Bonds
The Spanish Bono future rose, probably on investors looking for refuge on the approval yesterday of the left wing national budget, which will probably make life of the companies more difficult and increasing taxes across the board.
US weekly jobless
claims 712k versus 780k estimate. Important monthly data today. The stimulus proposal of USD 908B is getting more supports from Reps and Dems. Rumors that it can be approved over the weekend. The UST future found support on a weaking USD.
Credits
S&P calls default to Europcar and downgrades the rating on the 2026 and 2026 bonds to D, afgter the end of the 30 days grace period.
For Moody’s the European retail sector is an attractive investment for 2021 on rising volumes an margings.
The US airliners papers benefit from the news that Delta and Ryanair placing new orders for Boeing 737s..
Emergings
China
is back in the spotlight on fresh tensions with the US after a bill was passed which threatens to delist Chinese companies from US stock exchanges.
Indian mining giant Vedanta Resources bonds dropped after a credit rating cut deeper into junk territory by Moody’s to B2. The 2026 USD bond is priced now at 58%. The issuer is sounding debt holders about extending maturities to reduce refinancing pressures.

Equities
After a consolidation session yesterday, markets open in green today in the verge of breaking to the upside. Some analysts want to see exhaustion signs, but we still don’t see why it should reverse the uptrend. We don’t discard a temporary profit taking retracement but only big news from Trump (don’t discard) would stop the rally, in my opinion.

Currencies
A senior British official said that last-minute demands from the EU have set back efforts to reach a deal in the next two days. Talks don’t go well with the main sticking point being differences over the level playing field concept. The GBP  fall to EUR 1.1050 and looks ugly today.
The USD weakens to EUR 1.216 and GBP 1.3425 ahead of the job report and on risk-on sentiment.
The Bitcoin hovers around 19,500, finding difficult to reach the very important psychological level of 20,000.

C
ommodities
OPEC+ finally agreed to roll back cuts in oil output more gradually than planned, giving the market more time to absorb the extra supply: 500k bd will be added in January, a quarter of what was scheduled. Crude futures goes to USD 42.15, getting close to previous resistance at 44.
The Gold recovers from 1,770 to 1,840 on weak USD, but it can well be a resumption of purchases as a technical retracement in a longer term down trend. Note it comes from 2,070 in summer. Silver looks better at 24.2 as it consolidates around this level since end of Sept. It benefits from its industrial use so if the US stimulus package is approved it will definitively benefit from this.

Best regards