Written Commentary
STOCK INDEX FUTURES
Global equities were all higher overnight with a-number-of markets gaining in excess of 1.0%. Overnight economic news of importance included a significant jump in New Zealand retail sales of 28% in the 3rd quarter, sharp gains in Australian bank services PMI and manufacturing PMI readings for November and generally better-than-expected European and UK manufacturing PMI readings for November. However, France saw its manufacturing PMI for November contract while services PMI readings in Germany and the overall Euro zone came in disappointing. The markets are clearly deriving fresh optimism from additional favorable vaccine and treatment news from over the weekend. The bull camp has a fundamental edge from stimulus, vaccine and treatment story lines, but as usual the surging infection counts are hindering the bull camp!
CURRENCY FUTURES
The Dollar has technically broken out to the downside with the lowest trade since the early September low. Obviously, the latest vaccine news adds to the likelihood that the pandemic will be ended or seriously curtailed in the first quarter of 2021. We know that contradicts a-number-of views, but a growing list of very effective vaccines should also increase the number of doses produced. The 92.00 level would appear to be a key pivot point that could provide temporary cushion to the dollar, but we now see a decline back into the lowest levels since the outbreak began. The November 17th Commitments of Traders report showed Dollar Non-Commercial & Non-Reportable traders net sold 176 contracts and are now net short 365 contracts.
INTEREST RATES
While the markets have already seen a series of treasury bearish developments from the vaccine front in the last several week, yet another vaccine has entered the fray this morning which in turn should theoretically increase the speed and number of doses available. It would appear as if pressure has been turned up on Congress to act to implement a fresh stimulus package, but Washington has been unable to do “the right thing” and certainly can’t be expected to act fast but that news is a minor bearish force for Treasuries to start the week. Unfortunately for the bear camp, today’s US PMI data is projected to be a little soft and we suspect that a Chicago Fed national activity index reading will also be soft given the flare in infections over the past 4 weeks in that area. In our opinion, traders should look to sell a scheduled data induced rally looking for bond and note prices to mount a moderate correction of the last 3 weeks gains.
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