Global Overview
Tesla Files for Recall of Over 9,000 Vehicles for Safety Hazards
According to the U.S. Transportation Safety Administration, Tesla has requested a recall of 9,136 Model X and 401 Model Y vehicles from the U.S. The reason for the recall is that the roof trim may have separated from the body and that some bolts may not have been properly tightened. Tesla will be inspecting and testing the recalled vehicles to remedy the situation, as no related accidents or injuries have been found yet.
U.S. Inflation Coming After Epic Expansion of Tables?
After the Federal Reserve’s epic expansion of the table this year, the scale of U.S. M1 and M2 has shown a rapid upward trend, in contrast to the 2008 subprime mortgage crisis, the trend of the money supply has been very flat. In addition, from the perspective of the three factors negatively correlated with the money multiplier, the cash ratio, the statutory reserve ratio and the excess reserve ratio, all three variables are currently in a downward trend, undoubtedly increasing inflation expectations in the United States. The Fed has provided unlimited liquidity to financial institutions in a timely manner during the epidemic, and although interest rates are guaranteed to remain stable, the money supply will be subject to some degree of volatility.
The UK is in fear of falling into the worst recession in 300 years
In addition, UK Chancellor of the Exchequer Donald Sunac said that the UK economy will shrink by 11.3% due to the new crown epidemic, the biggest drop in more than three centuries, and unemployment will reach 7.5%, meaning 2.6 million people face unemployment, while at the same time, Sunac announced a multi-billion pound infrastructure program aimed at increasing employment and supporting low-wage earners, as well as cutting overseas aid spending and suspending the public sector. Salary increase, UK debt expected to reach £394 billion this year, equivalent to 19% of GDP, highest on record
[Market Review]
The US economic data was mixed. The U.S. initial jobless claims rose further last week, suggesting that a surge in cases and business restrictions were undermining the labor market’s recovery. However, other data showed that the U.S. economy got off to a solid start in the fourth quarter, with consumer spending and business investment in equipment exceeding analysts’ expectations in October. According to some analysts, U.S. economic data was mixed and had little impact on the U.S. dollar, with traders seemingly more concerned about adjusting positions ahead of the Thanksgiving holiday. On the bond-buying front, Federal Reserve officials intend to increase easing, but there is disagreement on the exact approach. Many officials expect to revise the bond-buying guidelines soon. As for the rumor that the U.S. Treasury and the Federal Reserve have a disagreement on the epidemic relief tools, Treasury Secretary Nuchin once again denied it.
Gold prices came down. Next, let’s focus on gold. The price of gold came down to a high of $1,817.58 per ounce during the session, then fell back to around $1,810. Preliminary data from Bloomberg Statistics showed that gold ETFs continued to shrink, which also weighed on gold prices. However, the dollar index remained weak, limiting the decline in gold prices.
Silver rebounded slightly. Silver, on the other hand, rebounded slightly. The silver price opened as low as $23.26 per ounce, then fluctuated upward, reaching as high as $23.5 per ounce, before moving in a narrow range in the range.
The euro climbed slightly. In non-U.S. currencies, the U.S. dollar continued to weaken while the euro continued to rally, with the euro climbing slightly against the dollar during the day. Restrictions in Europe appear to have eased. Germany and the United Kingdom announced plans to allow Christmas gatherings with restrictions. France, on the other hand, eased its blockade from late in the week. This will help the European economy recover strongly during this time.
The British pound maintains its upward stance. Let’s move on to the British pound. The British pound has maintained an upward stance against the US dollar in recent trading days, mainly because the market remains optimistic about the outcome of the Brexit negotiations. The trade negotiations between the EU and the UK will continue until this week, although no clear news has come out, but there has not been any negative news either.
FXSTREET’s view: GBPUSD focus on 1.3340. So what’s next for the pound? FXSTREET points out that on the 4-hour chart, GBPUSD shows a potential divergence in momentum indicators, as the pair is advancing while the price keeps falling, and is currently breaking through the midline. The bullish 20-day moving average is providing support around 1.3340, and if it breaks below that, we could look at 1.3290 and 1.3250; if we see an upside, we could keep an eye on 1.3410, 1.3460 and 1.3500.
US oil continues to rise. Finally, let’s look at the oil market. Buoyed by a weak dollar, an unexpected drop in U.S. crude oil inventories, and optimism triggered by the recent progress in the neocrown vaccine, U.S. oil continued to rise, reaching a high of $46.23 per barrel, the highest since early March. It should be noted that news that OPEC may be inclined to extend the production cut agreement for three months, but it is unlikely to increase the intensity of production cuts to support oil prices. TD Securities believes that the market may be too optimistic about the outlook for crude oil demand. The latest data suggest that oil prices may be skewed to the downside.
In the bond market
Overnight, the yield on China’s 10-year Treasury note rose by 1.21%, while the yield on the US 10-year Treasury note fell by 0.57% and the yield on the US 3-month Treasury note fell by 5.69%.
In the stock market
U.S. stocks closed mixed, with the S&P 500 down 0.16%, the Nasdaq up 0.48%, and the Dow Jones down 0.58%; by this morning, China’s stock market opened mixed, with the Shanghai Composite down 0.07%, the ChiNext up 0.05%, and Hong Kong’s Hang Seng up 0.1%.
[Risk Alert]
Gold: Bank of America lowers gold price forecast to 1775 by year-end
Bank of America expects the yellow price to fall to $1,775 by the end of 2020 and rebound to $2,063 by the end of 2021. Earlier, the bank once bet that the price of gold would rise to a high of $3,000 in the next few years.
Euro: European epidemic prevention and control better than the U.S. Euro may still move upward
Westpac says Europe is doing better than the U.S. when it comes to controlling the outbreak. U.S. states and counties have re-imposed blockades, so U.S. traffic could be hit further in the coming weeks. The euro still has room to rally in the coming weeks.
Swiss franc: risk appetite picks up, Swiss franc fears pressure
The Bank of Tokyo-Mitsubishi UFJ said that the recent continued pickup in global economic risks has been a source of pressure on the safe-haven currency, the Swiss franc. The bank suggested that in the global vaccine research and development news, the economic outlook for further improvement, risk sentiment significantly warmed, should be considered relative to the Swiss franc to further short high-risk commodity currencies, especially the Canadian dollar and Norwegian krone.
[Key Outlook]
20:30 ECB minutes or emphasis on further action
At the end of October, the ECB left its three key interest rates unchanged, and the Governing Council expects the ECB’s main interest rate to remain at its current level or lower. The statement noted that economic risks were clearly to the downside and that the instrument would be readjusted as needed, and the Governing Council agreed to take action at its next meeting. Lagarde also said in a subsequent conference that the epidemic has impacted the economy and that the recovery is losing momentum faster than expected.
Taken together, the ECB minutes may indicate that risks to the economy are on the downside and that further action will be taken in December to support the economy. Taken together, the minutes may be supportive for the euro.
Also of note today are the following data.
13:00 Japan September Synchro Indicators final value: previous value of 80.8.
13:00 Japan Sept. Leading Indicators final value: previous value 92.9.
15:00Germany Dec Gfk Consumer Confidence Index: previous -3.1, forecast -5.
17:00 Eurozone October Three-Month Money Supply M3 annual rate: previous value 10%.
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