It's been a pretty chilled start to the week, with a little more profit taking kicking in as we bring an end to a bumper November.
More vaccine news from Moderna, as they applied for emergency regulatory approval in the US and Europe. That could see the vaccine distributed before the end of the year and provide a massive boost to the economic recovery next year as we all emerge from our houses following a year-long hibernation. There was no impact on the markets from the announcement though, with it coming weeks after their incredibly positive results.
What a month it's been. The US election lived up to the hype, with Trump storming to an early lead - as many warned would happen - before Biden made a late postal surge to take the key swing states and reverse Trump's election lead from 2016. It really was a game of two halves, with Trump taking it to extra time through legal challenges and recounts. While challenges continue, the transition is underway which is providing some certainty for markets.
While markets responded surprisingly well to the election, perhaps comforted by the prospect of a Republican Senate and trust in the US institutions to prevent any prolonged uncertainty, it was the vaccine news that took it to another gear. And while we may have seen some profit taking, equity markets have held onto those gains very well. Cause for optimism going into year-end.
Despite it being an action-packed November, there's still so much to come before the end of December so there'll be no coasting into the new year. This week its OPEC+, next week ECB, Fed the week after. All the while, the UK and EU are desperately trying to avoid no deal Brexit in a little over four weeks and the US Presidential transition is underway. The vaccine news has been great but it was one of many market risks in the coming weeks.
On top of that, while lockdowns and other restrictions appear to be working in reversing the trajectory of Covid cases and fatalities, the final weeks of the year carries massive risks of a second peak in quick succession, given how families inevitably gather around Thanksgiving and then Christmas. Restrictions well into the first quarter look highly likely.
The Chinese PMIs earlier in the day failed to give the broader market much of a lift. The recovery in the world's second largest economy has been extremely impressive but it's been long priced in and, what's more, it's not having a majorly positive impact on other nations, particularly those that are still battling Covid-19 so it's very much just a domestic success story.
Brexit talks are continuing and we are starting to hear more and more from those involved in the discussions, which suggests we're still seeing a lack of progress on the really contentious points. While my belief in a deal being reached is still in-tact, time is fast running out and you have to wonder how long it can go on before we see a wobble in the markets.
Sterling is remarkably steady under the circumstances. Just over a month until the end of the transition and a deal is yet to be reached. Either the markets have become far more comfortable with the prospect of no deal or the downside risk is huge in the unthinkable event that both sides walk away from the negotiating table so late in the day.
Traders take profit as OPEC+ meets to discuss 2021 production plans
Pre-meeting talks between a select few key OPEC+ ministers failed to generate a consensus on productions plans for next year. This includes plans for January, when cuts had planned to be reduced by tow million barrels, to 5.7 million. Those plans were put in place before the second wave hit and countries re-imposed heavy restrictions.
But with oil prices having bounced back following a triple whammy of vaccine successes, there may be more of a discussion to be had regarding delays to the changes. A more gradual phasing in may be deemed to be the best approach under the circumstances. Whether traders will be satisfied with that is another thing.
There's a significant buffer in oil prices following the vaccine bounce and that may be why some nerves are creeping in ahead of the talks. After hitting their highest levels since March, crude prices have pulled back a little. A little profit taking perhaps in case producers capitalize on price moves to push ahead with planned increases. Brent and WTI are still finding support around $47 and $44.50, respectively - the summer highs - though, suggesting traders remain hopeful of a delay of some kind. A break below could be a bad signal near-term.
Gold sell-off hitting interesting point
Gold continuing to suffer in the post-vaccine world. The Pfizer announcement took the wind out of its sails last month just as it broke higher and was preparing a run at $2,000. It's been all down hill since then, despite the dollar not performing particularly well and US yields pulling back.
The break of $1,850 was a massive psychological and technical blow. This was the late summer/early Autumn lows and had been strongly supported on multiple occasions throughout that time. The loss of it was a blow and its still suffering the consequences, even as the dollar plunges to its lowest levels in two and a half years and yields ease off.
The combination, maybe, of stimulus expectations being pared back and better prospects for the economic recovery are weighing on the yellow metal. After months of being aligned with risk assets, we may also be seeing the re-alignment with other safe havens which is proving a further drag. The next support is $1,750-1,760, with $1,700 below here being key. This represents a correction of between 50% and 61.8% of the whole pandemic move so will be an interesting test of golds bullish credentials over the medium term.
Bitcoin heading for rollercoaster end to the year
The bitcoin correction didn't last long, with the cryptocurrency having sights set on new highs once again, with $20,000 the ultimate goal in the short-term. A move into uncharted territory and the psychological boost that would come with a move like this could propel bitcoin aggressively higher. We've seen before what bitcoin can do once it develops a head of steam. Agree with the moves or not, I have no doubt it's going to be a rollercoaster end to the year for cryptos.