[Market Review].
U.S. hopes to raise bailout subsidies dashed. The U.S. House of Representatives voted to increase the cash handout to Americans to $2,000, but Senate Republican Leader Mitch McConnell objected to it. Affected by this, the U.S. stock market was lower. Among them, the S&P 500 index closed down 0.22%.
The U.S. index fell below the 90 mark. The U.S. dollar index narrowed its losses, but the overall performance is still weak, and has now fallen below the 90 mark.
Gold rose slightly. Gold rose slightly during the day, closing near $1880. The weaker dollar supported gold prices, but against the backdrop of increased epidemics in several countries, market expectations for the U.S. to raise the bailout amount receded, limiting gold price gains.
Silver oscillated in a narrow range. As with gold, silver’s intraday movement was relatively flat. Silver prices rose to $26.58 near the beginning of the session, then gave back some of the gains, back to the $26 mark and in the position of the sideways oscillation.
The euro approached the 1.23 mark. Non-U.S. currencies. The dollar continues to weaken, while the euro is oscillating upward. The euro rose more than 30 points against the dollar during the day. By this morning, the euro’s rise seems to be more rapid, once pulled up to 1.2280 above.
The British pound is shaking higher. Let’s look at the British pound again. The British pound is still hovering at high levels against the dollar. The EU government formally approved the UK-EU trade deal. Senior British negotiators say the trade deal is good news for the rebuilding of the British fishing industry. But EU chief Brexit negotiator Barnier said the UK-EU agreement does not cover areas such as foreign policy cooperation and differences remain. Nonetheless, the deal avoids a damaging no-deal Brexit outcome.
U.S. oil edged up slightly. Finally, a look at the oil market. Failed hopes for higher bailout subsidies in the U.S. weighed on oil prices, to the detriment of oil demand. However, given that API crude oil inventories recorded a big drop of 4.785 million barrels, a much higher than expected drop, US oil spiked to $48.28 at one point. For now, we need to focus on the fact that OPEC+ will meet next week to decide on production levels for February. The alliance will raise production by 500,000 barrels per day starting in January. The Russian deputy prime minister has already indicated that his country will support a further small increase in production in February. This threatens to depress oil prices.
▼Bond Markets
Overnight, the yield on China’s 10-year Treasury note fell 0.15 percent, while the yield on the U.S. 10-year Treasury note rose 0.43 percent and the yield on the U.S. 3-month Treasury note fell 3.44 percent.
▼In stock markets
U.S. stocks closed down in unison, with the S&P 500 down 0.22 percent, the Nasdaq down 0.38 percent and the Dow Jones down 0.22 percent; by this morning, Chinese stocks opened mixed, with the Shanghai Composite Index down 0.12 percent, the Growth Enterprise Market Index up 0.53 percent and Hong Kong’s Hang Seng Index up 0.48 percent.
[Risk Warning
U.S. dollar: the United States is expected to expand the scale of easing, the dollar is still likely to weaken
The U.S. is expected to further expand the scale of easing, and market risk sentiment has turned warm, allowing the safe-haven dollar to continue to be sold off. In addition, investors are more worried about the future fiscal health of the United States, and fear that the Fed may introduce more aggressive debt financing policies in the coming year, thus further undermining the purchasing power of the dollar, in this context, the dollar’s decline is still difficult to reverse.
British pound: the British economic recovery or exceed expectations, the pound is expected to break through 1.40
Danske Bank analysts pointed out that the impact of Britain’s exit from the European Union will continue to exist for a considerable period of time, and sway the pound’s movement. Because the current agreement resolution still has some difficulties, the variables of which also remain. However, the bank pointed out that the British economy in 2021 is expected to exceed expectations of recovery, overlaid with investors selling safe-haven dollars, the pound against the dollar or rise to 1.40 above.
Gold: multiple factors support gold is expected to move up in the short term
The dollar index is weak, supporting gold. Market participants expect that the United States can finally pass a stimulus package to raise the standard of subsidies for the new crown epidemic. This also favors gold. Together with the two factors of low yields and rising upper inflation expectations, gold is expected to continue to rise in the short term.
[Key Forecast].
17:00 UK House of Commons probable to pass the trade deal
Yesterday, the EU formally approved the post-Brexit UK-EU trade deal, paving the way for the agreement to take effect on January 1 next year. The agreement will come into force provisionally at the beginning of next year, but the European Parliament still needs to approve it, probably in February or March next year to make a decision.
Today, the British House of Commons will vote on the UK-EU trade agreement. According to the latest news from the Daily Telegraph, some members of the British Labour Party plan to oppose the Brexit deal. However, the leader of the British opposition Labour Party said that the Labour Party will support the trade agreement reached in the parliamentary vote.
On balance, the British House of Commons is likely to pass the current UK-EU trade deal, which will support the pound.
But need to be alert to the possibility of negative news in the voting process, which will perhaps short term depression of the pound. The current agreement does not cover the services sector, especially in the financial services sector, which is important to the UK, and the EU has not committed to giving the “reciprocal status” expected by UK companies in the industry.
The British Chancellor of the Exchequer said on Sunday that the UK Treasury will prioritize negotiations with the EU on a memorandum of understanding in 2021, and that discussions between the UK and the EU on “reciprocity” in the financial sector will continue.
And according to the agreement, if the UK and the EU can prove in the future that quota adjustments in the fishing industry have a negative economic and social impact on themselves, both sides have the right to impose tariffs on each other’s fish products. The media expects that the UK is likely to take a tough stance on fisheries issues in the next round of negotiations. Overall, the negotiations between the UK and Europe will continue to affect the pound, and the subsequent volatility of the pound is still likely to be high.
23:30 EIA crude oil inventories may decrease
Moving on to the upcoming release of US EIA crude oil inventories. The EIA crude oil inventory released last week decreased by 562,000 barrels, a decrease less than expected. In the early hours of this morning, API crude oil inventories have been released, decreasing by 4.785 million barrels, much more than expected.
According to past experience, API inventory data and EIA inventory data have a relatively strong positive correlation, so EIA crude oil inventories may also decrease.
Even so still need to pay attention to the current market expectations, the United States to December 25 week EIA crude oil inventories or reduce 2.1 million barrels, if the release of data more than expected, oil prices may short term dip; if the inventory data is less than expected, oil prices are expected to strengthen.
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