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The Race is Over, But Is the Trumpist Era?


November 10, 2020
After a long and drawn out battle for the presidential chair of the world’s largest economic power (or at least, so the image of the United States passed for the rest of the world before Trump), the Democratic duo Joe Biden – Kamala Harris came out victorious. And it couldn’t have been a more auspicious moment for the Democrats, but especially for Kamala Harris to accede to the Vice Presidential Office, who will go down in history as the first woman of colour with Jamaican and Indian roots to take over the Office of the Vice President. A momentous result for a nation exhausted by political mayhem.
The Race is Over, But Is the Trumpist Era?

Yet, the former president Donald Trump refuses to concede and support the President Elect throughout the transition period. Instead, he continues to challenge the result of the elections in court and file countless recount petitions (pun intended). This is a reaction definitely not easy to digest… not even by Trump’s closest kin. Mary Trump, the niece of 45th president of the United States said in a statement “This is what Donald’s going to do: he’s not going to concede, although who cares. What’s worse is he’s not going to engage in the normal activities that guarantee a peaceful transition. All he’s got now is breaking stuff, and he’s going to do that with a vengeance.” Shall we keep an eye on Twitter?

Nevertheless, the Republicans may have lost the US Presidency through Trump’s defeat, but they did not lose the Senate, where they hold the majority. Surprisingly, the markets positively reacted to what may have otherwise come across as “political polarisation” in a hybrid Democrat-Republican government.

Wall Street Welcomes Biden

 

Wall Street hailed Joe Biden as he became the 46th president of one of the world’s most powerful economies. When the news came out on Saturday, prominent investors and bankers on Wall Street said they were happy with the result of the elections, ending days of uncertainty during which Trump made false accusations of unfounded fraud claims.

“Now is a time for unity”, said JP Morgan’s Chief Executive Jamie Damon. “We must respect the results of the U.S. presidential election and, as we have with every election, honor the decision of the voters and support a peaceful transition of power”.

Among the main topics on Biden’s agenda are economic stimulus, taxation and interest rate policy (with looming prospects for any rate hikes), healthcare, and climate change.

Stock Markets Soar on Positive Vaccine News

 

US Stocks jumped to record highs on Monday after Pfizer (PFE) and BionTech (BNTX) communicated 90% positive results on their coronavirus vaccine. The two companies are the first drug makers to release positive data from a large-scale clinical trial of a vaccine for coronavirus. Health experts from both pharma companies said they haven’t found any alarming safety concerns so far, and will seek to obtain emergency FDA authorisation for immediate use of the vaccine.

Sensitive to the news, Pfizer’s share price jumped 8.32% higher, hovering above $39.43, while BionTech gained 13.95%, trading above $104.80 on the day. With this in mind, it might be worth watching these two stocks in the coming weeks.

But this is only one side of the coin, as the saying goes. The vaccine news spurred a risk-on sentiment on Wall Street, pushing key benchmarks higher. That said, Dow Jones (DJI) surged 3.95%, followed by the S&P500 which was up 2.60%, and the NASDAQ which rose by 0.33% on Monday. Are we heading into a new era of bullish markets?

Speaking of bullish markets, fast food giant McDonald’s (MCD) share price edged 3.6% higher in pre-market trading on Monday on higher-than-expected earnings. The company reported a third-quarter net income of $1.76 billion, up from $1.61 billion in the same period a year earlier, and net sales of $5.42 billion, higher than the expected $5.4 billion. However, the rally was not sustainable as the company’s global same-store sales tumbled 2.2%, weighed down by sluggish recovery of its international markets, as well as expected further restrictions   across various markets as the pandemic remains a high risk.

US Dollar Picks Up the Pace on Stronger T-Bond Yields

 

Amid a roaring Biden victory awakening the bulls, the US Dollar Index (DXY), measuring the greenback’s performance against six major currencies, rose to 92.84 on Monday, as 30-year US Treasury Bond yields hit their highest level since early March.

Upward momentum in the Buck was also quickly obvious in EURUSD, which despite its rally to 1.19 as soon as the vaccine news hit the wires, tumbled below 1.182 later in the day. However, the ZEW Survey due on Tuesday will likely provide more impetus in the pair.

GBPUSD is yet another major pair that kept investors on edge on Monday, edging lower at 1.31 amid Brexit frictions as the transition period nears deadline set at 31 December.

However, while EURUSD and GBPUSD might be among the most frequently talked about and traded currency pairs, none compares to EURTRY, which made waves in the media as the Turkish President ousted the Governor of the Central Bank after the lira plummeted against the US Dollar and the EUR.

Murat Uysal was only 16 months into his tenure as the Governor of the Central Bank of Turkey on Saturday, when Recep Tayip Erdogan decided to dismiss him without presenting any reason. Uysal will be replaced by Naci Agbal, who served as Erdogan’s Finance Minister between 2015 and 2018 and is currently the president of the presidential budget office.

Perceived as a reckless act by the markets, Erdogan’s decision pushed the Lira even lower across the board on Monday, closing the day in the red against both the US Dollar and the Euro. Whether Erdogan’s totalitarian approach will talk the Turkish currency up remains to be seen.

Commodities: Oil Rockets. Gold Dips on Cure Hopes

 

The main gainer on the vaccine news from the commodities’ sector was Oil, with WTI crude rose $3.56 per barrel, to $40.70. Brent Crude went up $3.10, trading around $42.55 on the day.

By comparison, the all-time safe haven, Gold slipped on cure hopes, hitting its lowest level since early August ($1.865).

 

Key Market Events

The following events decorate this week’s economic agenda:

10 November:

  • German ZEW Survey which analyses the 6-month German economic outlook based on responses gathered from 300 German institutional investors and analysts. Higher than forecast is generally good for the single currency.
  • UK Jobless Claims which looks at the number of people claiming unemployment benefit. Lower than forecast is good for the currency, showing signs of economic growth

11 November:

  • RBNZ Interest Rate Decision is the main tool used by the Royal Bank of New Zealand to communicate any change in monetary policy. Hawkish is positive for the currency.
  • UK NIESR GDP Estimate is released by the National Institute of Economic and Social Research, approximately 10 days after the end of each month, and it represents an estimation of the government-issued data regarding the change in the value of all goods and services generated by the economy in the previous 3-month period.

12 November:

  • UK GDP MoM is the actual value of the goods and services generated by the     economy on a monthly basis. There are two sets of releases: Preliminary and Final, published 45 days apart. Usually the first release tends to have the highest impact. Also known as “the GDP First Estimate”, it is the broadest measure of economic activity.
  • BOE Governor Bailey Speaks
  • US Inflation measures the rate at which the average price level of goods and services   has changed within the span of 12 months. “Higher than expected” is an indicator of a weaker currency.
  • ECB President Christine Lagarde & Fed. Chair Jerome Powell Speak

13 November:

  • EU Flash GDP reflects the change in the inflation-adjusted of all goods and services generated by the Eurozone economy. An actual figure higher than the estimate is good   for the currency.
  • BOE Governor Bailey Speaks
  • US Preliminary Consumer Sentiment reflects the American’s buying potential. Hence,   a higher actual figure than the estimate is always good for the currency.

 


Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.

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