Daily Market Analysis and Forex News

Asian stocks are set to enter the weekend on the back of four consecutive days of gains, after their US counterparts extended their advances overnight. It’s taken just two weeks for the Dow Jones index to go from a bear market to a bull market, at least technically, while the S&P 500 recorded its steepest 3-day climb since 1933!

Stock markets appear content to dismiss signs of the economic carnage left in the coronavirus’ wake for now, even ignoring the record high US jobless claims data which rose by over three million during the span of a single week. This print is the highest on record by a factor of nearly five, and up over 1000% on the week before. The delivery of economic rescue packages and unlimited quantitative easing has apparently been enough to send equities higher for the time being.

Gains in equities this week do not truly reflect market confidence that the coronavirus outbreak has peaked and that the economic turmoil is over. While the stimulus measures being rolled out around the world can mitigate the initial negative fallout from the coronavirus outbreak and help support the eventual recovery, Covid-19’s economic toll could be more severe.  It is this that would then test policymakers’ ability to push against the virus’ drag on their respective economies.

It remains doubtful whether the recent surge in global equities can be sustained. The wild price swings put an artificial gloss over valuations, with prices disconnected from the economic realities of the coronavirus impact. This rebound in stock markets may eventually prove to be a false dawn, one fueled by volatility rather than fundamentals and we feel this warrants caution and vigilance on the part of investors.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Asian stocks are mirroring the climb in US equities, after all three US benchmark indices posted fresh record highs. Investors are clearly in high spirits during this year-end season, with the 2020 global economic outlook turning brighter in anticipation of the US-China “phase one” trade deal. The buying momentum is likely to be sustained, amid expectations that the manufacturing sectors around the world as well as global trade conditions can take advantage of the expected rollback of tariffs, while major central banks persist with their accommodative stance.

Brent trades at highest level since September

The risk-on mode is also clearly evident in Brent Oil, which is carving a path towards the psychologically-important $67/bbl mark. Investors will be closely eyeing the EIA US inventories data, due later today, to see whether Oil prices can be justified higher. With Brent’s 50-day moving average having already broken above its 100-day moving average earlier this month, Oil prices could climb another leg higher on signs that OPEC+ supply cuts will be extended past March 2020, falling US inventories, as well as evidence of demand-side improvements stemming from thawing global trade tensions.

Risk appetite needs to kick into another gear for USDJPY to push higher

The current risk-on momentum however doesn't appear enough for USDJPY to punch above the 109.6 level for the time being, with the currency pair adhereing to its low-volatility character. As long as risk appetite can hold up, the expected bias for USDJPY is to the upside through Q1 2020, as it carves out slow and steady steps towards the 111.0 level.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Asian stocks followed Wall Street higher after U.S. mid-term elections produced a divided Congress on Wednesday. All major U.S. indices climbed more than 2% yesterday, with the Healthcare and Technology sectors leading the rally. Although a divided Congress will make it tougher for President Trump to pass new bills over the next two years, the market’s initial reaction suggests that investors do not expect any reversal of previously enacted legislation.  However, there’s still a high chance to get some middle-class tax cuts as Democrat opposition to them will increase the probability of another four-year term for President Trump in 2020.

This explains why U.S. 10-year Treasury yields rallied after an initial decline of 8 basis points. Ten-year yields have returned to levels where the markets crashed in early October. However, the CBOE’s volatility index declined 17% yesterday in a sign that investors are less worried about the latest spike in interest rates. It will be very interesting to find out what levels of the 10-year bonds will scare the markets again, and I don’t think we are too far away from it. Breaking above 3.25% again will likely bring in some anxiety, but above 3.5% may leave many investors to consider a heavy rotation from equities to fixed income.

The recovery in U.S. Treasury yields also helped the dollar bounce back after touching a 2.5 week low. The Dollar’s index fell to 95.68, but gradually appreciated throughout the day and is trading at 96.20 at the time of writing. Traders focus will now shift to the Federal Reserve which will conclude its two-day policy meeting. While no rates hikes are expected to take place today, the tone of the statement is what matters. Last week’s employment report showed the economy remained on a solid footing with jobs increasing by 250,000 and wage growth reaching a near decade high. However, the housing market started showing signs of cracks, consumer spending slowed, and business investment decelerated. So, expect the statement to reveal a more dovish than hawkish tilt.

In commodity markets, Oil came under pressure as rising U.S. production and inventories outweighed talks of OPEC production cuts. The Energy Information Administration reported that Oil production will surge towards 12 million barrels-per-day by mid next year. Meanwhile, crude and gasoline inventories rose more than expected in the week ending November 2. Although China’s October crude imports hit a record of 9.61 million barrels-per-day in October, this trend is not likely to continue given the latest signs of economic weakness. So expect to see more willingness from OPEC and friends to cut production again to keep prices supported above $70.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.