1H November Global Market Recap
1st November 2020 – 15th November 2020
The US Markit manufacturing PMI Index for October edged higher to 53.4 from 53.2 last month, showing the manufacturing sector continues to strengthen at the beginning of the fourth quarter. The euro zone Markit manufacturing PMI Index increased to 54.8 in October, marking the highest reading since July. However, the lockdowns in major European countries starts to weigh on the expansion. India’s GDP shrank 8.6% in the third quarter, marking an unprecedented recession after the country’s economy shrank for a second straight quarter. China’s manufacturing industry has been expanding since May as the country’s coronavirus outbreak was largely under control. China’s exports have been largely resilient amid the pandemic, boosted by strong demand for medical supplies and limited manufacturing capacity in other countries, while tougher lockdowns in major Europe countries are likely to weigh on the export growth in the coming months.
Major stock indexes recorded strong growth in the first week of November, while the second week was a mixed one. U.S. stocks registered their biggest four-day rally in the first week since September on hopes that Congress will pass a fresh fiscal stimulus once the election is decided. The Dow and the S&P 500 registered two straight weeks of rally and rose 4.1% and 2.2% respectively, boosted by vaccine hopes in near future as investors shifted toward cyclical stocks. While the Nasdaq slipped 0.6% in the second week as investors rotated out of defensive technology name. Shanghai Composite Index and Shenzhen Composite Index closed 0.8% and 1.5% lower in the second week after big rally in the first week of November. The fintech giant Ant Group was forced to suspend the world’s largest IPO after China tightened its control of online lending. Tech stocks tumbled after the authorities unveiled regulations designed to curb the growing influence of internet sector.
The U.S. treasury yields rose across the tenors in the first half of November on the back of the commencement of the US general elections and promising vaccine results. The 10-year treasury yield hit 0.92% on 10 November, highest since the previous peak back in June. Chinese government bond yields continue to rise since April and the 10-year yield climbing for a seventh month in November. Behind the weak demand are worries that the Chinese government will tighten the monetary policy amid the economic recovery.
The credit market has remained relatively stable and the outlook is positive as spreads continue to tighten and head towards pre-COVID levels. Across the board, major CDS and OAS indices dropped in the first half of November as the global economy continues to recover. LIBOR-OIS spread continued to remain stable despite LIBOR’s slow decrease since June.
Most major international currencies appreciated against the dollar on the back of US elections and positive vaccine news, as demand for havens like the greenback decreases. The Chinese Yuan has continued to strengthen against the dollar with both onshore and offshore currencies appreciating by 2.1%.
Brent and WTI crude oil prices surged by 16.5% and 15.1% respectively as the market expects demand to be back quicker on hopes of a faster pace of economic recovery. US natural gas prices fell by 17.8% as the US Energy Information Administration (EIA) reported that supply rose in the first half of November. Bitcoin prices continues to surge by 26.5% since the start of the month after Paypal announced that it would allow its 346 million customers to use bitcoin and other cryptocurrencies to shop on its network.