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First Plus Market Update 1H December 2020

1H December Global Market Recap

 

1st December 2020 – 15th December 2020

 

The U.S. added 245k new jobs in November, the smallest number in since the rebound in May and sharply missed analysts’ forecast of 469k. The unemployment rate dropped to 6.7% from 6.9% a month earlier, slightly lower than analysts’ estimates of 6.8%. The unemployment rate in Europe was reported at 8.4% in November, falling for three straight months. Industrial production in the U.S. rose 0.4% in November from a month earlier, while 5.5% lower on a year over year basis. The industrial production is still 5% below its pre-pandemic levels according to the Fed.

China continues to recover from the pandemic with both retail sales and industrial production growing at the fastest pace this year. Retail sales in November rose 5% from a year ago, expanding for 4 months in a row. Industrial production gained 7% year on year, higher than 6.9% in October. The urban unemployment rate was reported at 5.2% in November, 0.1% lower than that of October. The unemployment rate has decreased for a fourth consecutive months.

The S&P 500 pulled back slightly after hitting fresh record on 8th December, as investors awaited the latest development of the stimulus bills. Stock market in China was lagging in the first half of December. All major indexes except for Shenzhen Component Index and ChiNext Index registered losses this month. Most stock indexes in Southeast Asia rose over 5% in first half of December, as the region is upbeat on ongoing vaccination rollout. The FTSE Bursa Malaysia KLCI was up 7.1%, being the biggest winner in the first half of December.

U.S. treasury yields rose in the first half of December as investors keep an eye on stimulus talks. Chinese government bond yields registered its 8th consecutive month of increase and the 10-year yield rose by 3.0bps, hitting a high of 3.36% the previous month. Across the board, major CDS indices and OAS indexes dropped in the first half of December as the global economy continues to recover. The sentiment remains positive as credit spreads head towards pre-COVID levels and the market anticipates the upcoming decisions over another economic relief package by the US.

Most major international currencies appreciated against the dollar in the first half of December on the back of a series of positive vaccine news, as demand for havens like the greenback decreases. The Chinese Yuan continues to strengthen against the dollar with onshore and offshore currencies appreciating by 0.7% and 1.1% respectively. Chinese Yuan has been appreciating against the dollar for the 7th consecutive month and hit its strongest level since June 2018. The AUD strengthened by 3.6%, rising to its highest in more than two years as iron ore prices continues to climb due to increased demand from China and the dwindling supply and disruptions caused by storms hitting Australia. The Euro rise to its highest in two years as investors focus on the decision of the economic relief package and Brexit negotiations.

Amid a series of positive vaccine news, Brent and WTI crude oil prices continue to rise in December, increasing by 8.0% and 6.4% respectively. US natural gas price fell by 7.7% as consumption is expected to decline year over year in 2020 according to the EIA. Silver price rise sharply by 14.4% while Bitcoin price surge by 22.1% as investors continue to bid up and has close to double in the past 2.5 months.