In a short week for the US, there were several headlines to keep everyone on their toes. Joe Biden selected former Fed Chairman Janet Yellen as his pick for Treasury Secretary, the US Dow Jones Index rose above 30,000 for the first time, and It was another week of stalled negotiations for a Brexit trade deal, while this week face to face talks resume in London. Positive news from Pfizer and AstraZeneca early in the week eventually faded as AstraZeneca later said data may not have been as strong as initially reported (which may have been the cause of Bitcoin’s 10% decline on Thursday!) However, on Friday the R rate in the UK fell to between 0.9 and 1.0, and indication that the lockdowns are working. This week watch for more headlines on Brexit, the RBA, and the US Non-Farm payroll release for November.
Although President Donald Trump has yet to concede to Joe Biden, he has ok’d Biden to begin receiving daily briefings and begin the transition. On Friday, Trump said “Certainly” he will leave office if the electoral college votes are given to Biden. However, he still claims the election was a fraud and will battle until the end. Meanwhile, Joe Biden has selected former Fed Chairman Janet Yellen as his Treasury Secretary. As Fed Chairman, Janet Yellen tended to lean dovish. This, combined with a dovish Fed, are the perfect combination for more Fiscal and Monetary stimulus. More stimulus equals more US Dollars in the system, which means a lower price for the US Dollar and higher prices for stocks. Therefore, its really no surprise that the Dow Jones Industrial Average crossed the 30,000 mark for the first time ever and closed +2.5% for the week.
A Brexit trade deal has still not been reached and as late as Friday, UK Prime Minister Boris Johnson said that “substantial differences” remain. The lead EU negotiator, Michael Barnier, also told national diplomats that he was not able to say if a trade deal will be done by the end of the year. Face-to-face talks are set to resume on Monday in London. However, for every deadline we hear, they all have been meaningless. The final date meeting of the year for the EU Parliament to ratify a trade deal is December 14th-17th. (Note: on Friday, after the US close, The Telegraph put out a headline that the EU is ready to concede on Brexit Fishing Rights. Watch for volatility on the reopen in EUR and GBP pairs on the Monday re-opening).
Early in the week, markets were excited by the news that Pfizer applied for Emergency Approval for its Covid-19 vaccine. Pfizer said that the vaccine can be deployed within hours of approval to those who are most in need and frontline workers. In addition, pharmaceutical company AstraZeneca had positive news regarding their own coronavirus vaccine early this week. However, on Thursday, the company acknowledged mistakes in the vaccine trials, which may result in a new study. The news was negative for the markets and hit Bitcoin for negative 10% on Thursday. As for the virus itself, it appears that with one week left in the UK lockdown, that the drastic measures may be working to slow the spread of the virus. The R rate in the UK fell to between 0.9 and 1 from between 1 and 1.1 previously. This means that for every person who gets the virus, they are now spreading it to less than 1 person at a time. This is a sigh of relieve for those who enacted the lockdown on November 5th. The 4-week lockdown will end on December 2nd and England will return to its tiered system to monitor the virus. Europe is still fighting the second wave; however, the lockdowns and restrictions are helping slow the spread in many countries. In the US, the numbers continue climbing. The next 2 weeks will be important to monitor as it will show if the virus spread over the Thanksgiving holiday.
Monday is the last day of November and with that we may see some volatility, especially in stocks. Month end rebalancing, window dressing, and profit taking may take place after the S&P 500 is up nearly 11.4% so far for the month. In addition, the RBA meets Tuesday to discuss monetary policy, Powell and Mnuchin testify before the Senate Banking Committee on Thursday, and Non-farm Payrolls for November will be released on Friday. Other important economic data is as follows:
- Japan: Retail Sales (OCT)
- Japan: Industrial Production (OCT)
- China: NBS Manufacturing PMI (NOV)
- China: Non-Manufacturing PMI (NOV)
- Germany: Inflation Rate Prel (NOV)
- Canada: PPI (OCT)
- US: Chicago PMI (NOV)
- US: Pending Home Sales (OCT)
- Global Manufacturing PMIs Final (NOV)
- Japan: Trade Balance (NOV)
- Australia: Building Permits Prel (OCT)
- China: Caixin Manufacturing PMI (NOV)
- Australia: RBA Interest Rate Decision
- Germany: Unemployment Rate Harmonized (OCT)
- EU: Inflation Rate Flash (NOV)
- Canada: GDP Growth Rate (Q3)
- US: ISM Manufacturing PMI (NOV)
- New Zealand: Trade Balance
- Australia: GDP Growth Rate (Q3)
- Australia: RBA Chart Pack
- Japan: Consumer Confidence (NOV)
- EU: Unemployment Rate (OCT)
- EU: PPI (OCT)
- US: ADP Employment Change (NOV)
- Crude Inventories
- Global Services PMIs Final (NOV)
- Australia: Trade Balance (OCT)
- Australia: Home Loans (OCT)
- China: Caixin Services PMI (NOV)
- EU: Retail Sales (OCT)
- US: ISM Non-Manufacturng PMI (NOV)
- US: Fed Chairman Powell and Treasury Secretary Mnuchin testify before the Senate Banking Committee
- Australia: Retail Sales Final (OCT)
- Germany: Factory Orders (OCT)
- EU: Construction PMI (NOV)
- UK: Construction PMI (NOV)
- Canada: Trade Balance (OCT)
- Canada: Employment Change (NOV)
- US: Non-Farm Payrolls (NOV)
- US: Factory Orders (OCT)
Chart of the Week: Daily XAU/USD
Source: Tradingview, FOREX.com
On Friday, the yellow metal fell 2.8% below horizontal support from 2012. In addition. spot gold closed -4.43% for the week. Gold is approaching the 50% Fibonacci retracement from the lows of March 19th to the highs of August 7th, near 1762. There is horizontal support just below at 1747.5. Bulls may be watching this support area to add to long positions and the RSI has moved slightly into oversold territory at 29.91. Further support below is at the 61.8% Fibonacci retracement level of the previously mentioned timeframe near 1688.4. There is horizontal resistance just above near 1852, November 16th highs near 1899 and November 9th highs near 1965.5. There are many reasons gold could be selling off, including month-end selling, China halting opening of new investor accounts, and “selling gold to buy stocks”, but buyers will be watching the 1750/1764 support level as a possible entry.
Tuesday is December 1st already! With that, brings beginning of month data such as PMI finals and Non-Farm Payrolls. The Brexit “deadline” is fast approaching, and an agreement needs to be reached soon, if there is going to be one. Along with Brexit, vaccine headlines, the Mnuchin/Powell testimony, and the Biden cabinet selection should gain the attention of the markets this week.
Have a great weekend and please remember to always wash your hands!