2H November Global Market Recap
16th November 2020 – 30th November 2020
US Markit manufacturing PMI in November rose to 56.7 from 53.4 in October, reaching the highest level in six years and boosted by encouraging vaccine news, as well as expectation on increased stimulus spending and infrastructure investment following the election. In Europe, business activities contracted sharply in November as renewed lockdowns started to impact the overall economy. The service industry has been hit the hardest as more firms in the service sector were forced to close temporarily amid the resurgence of the virus. China continues to show steady and stable recovery. The Caixin manufacturing PMI increased to 54.9 in November from 53.6 a month earlier, rising for seven straight months. China’s official PMI index rose to 52.1 in November, rising for nine consecutive months and marking the highest level in 38 months.
Global stock markets registered strong growth in November, with most stock indexes having their best month ever. All the major US indexes registered record highs in November. The rising sentiment was fueled by positive developments from vaccine trials from Pfizer, BioNTech, Moderna and AstraZeneca, and monetary policy has remained extraordinarily supportive. There has been an apparent rotation towards cyclical stocks and underpriced value stocks over large cap tech and internet related highfliers which dominated the market’s growth since March.
Most of the ten-year government bond yields rose except the Japanese and Vietnamese yields. The U.S.10-year treasury yield hit an 8-month high of 0.92% on 10th November but has since fallen to 0.85%. Chinese government bond yields continue to rise since April with the selling off and the 10-year yield rose by 6.9bps in November, registering its 7th consecutive month of increase and the longest upswing since 2007. Behind the weak sentiments are worries that the Chinese government might tighten its monetary policy amid the economic recovery. Several defaults by Chinese state-owned companies spark a series of decline in bond prices among other state-owned companies as default fears start to spread.
Across the board, major CDS indices and OAS indexes dropped in November as the global economy continues to recover. Overall, the credit market remained relatively stable and since the announcement of a series of potential vaccine in November, spreads have begun to tighten even further and head towards pre-COVID levels.
Most major currencies appreciated against the dollar on the back of the US elections and a series of positive vaccine news, as demand for havens like the greenback decreases. The Chinese Yuan has been appreciating against the dollar for the 6th consecutive month and hit its strongest level since June 2018.
Brent and WTI crude oil prices surged in November, rising by 27.3% and 26.3% respectively as the market expects demand to be back quicker on hopes of a faster pace of economic recovery. Another key driver behind oil’s rally was that investors are expecting the OPEC + to delay production hikes scheduled in January for another 3-6 months. US natural gas prices fell by 15.7% as consumption is expected to decline year over year in 2020 according to the EIA. Bitcoin prices surge by 38.9% in a month after Paypal announced that it increased the limit on how much customers can trade, buy, and hold Bitcoin.