Stock Markets

The holiday shortened trading week saw the S&P set a fresh record high on Monday as another round of unemployment benefits and stimulus checks were announced. The market has increasingly focused on the size and magnitude of the stimulus bill as well as the rising coronavirus case count and initial stages of the vaccine rollout. Even as the vaccine is rolled out, England has extended its toughest coronavirus restrictions to three quarters of the population. This week also saw the signing of a long-awaited Brexit deal between the U.K. and the E.U. On the economic front, the Bureau of Labor and Statistics released initial jobless claims that were sizably below consensus estimates and the prior period. Although positive, the levels are still firmly elevated from pre-pandemic levels and point to a job market that is still under stress. As we enter the new year, analysts expect GDP growth to slow in Q1, but eventually recovering. They also expect bouts of volatility in the equity market as investors balance rising case counts and continued vaccinations, however, they say that markets will be supported by historic monetary and fiscal support and has a positive long-term outlook.

US Economy

Stocks finished 2020 with a gain of more than 15%, a welcome figure but one that doesn’t begin to tell the story of the market’s path to get there. Nevertheless, this was fifth year in the past decade in which the S&P 500 posted a return of more than 15%, doing so in a year that contained a global pandemic, record-breaking recession and a contentious presidential election. This highlights;

1. the importance of staying calm when the markets seem to be panicking,

2. the value of a disciplined investment strategy and diversified portfolio, and

3. the forward-looking nature of the stock market.

Analysts anticipate tepid expansion in the early portion of the year, stunted by lingering measures to slow the spread of COVID-19. Growth should accelerate as the vaccine becomes widely available, allowing consumer, work, leisure and travel habits to return toward more sustainable levels. They widely agree that 2021 will begin a multi-year economic expansion, with widespread distribution of the vaccine sparking progress toward a new normal for the U.S. economy. Meanwhile, the one-two punch of monetary and fiscal policy stimulus will keep a tailwind at the economy’s back.

Metals and Mining

Gold and silver prices entered the final week of 2020 edging higher, with both metals receiving support from US President Donald Trump’s signing of a coronavirus relief bill.  Trump had initially refused to okay the bill, saying that the US$600 allocated for citizens needed to be topped up to US$2,000; although the bill wasn’t adjusted, he signed it into law on Sunday. Conversations have continued around increasing the payments to US$2,000, and prices for gold and silver have stayed elevated. Gold was trading just under US$1,900 per ounce at the end of the day on Thursday, while silver was at about US$26.40 per ounce. Both metals have had stellar performances in 2020, with gold adding about 21 percent to its value-year-to-date and silver seeing a price increase of around 45 percent over the course of the year. The precious metals did see drops in March, when global markets reacted swiftly and negatively to COVID-19 restrictions. Gold and silver sunk to US$1,498 and US$11.94, respectively, at that time. A strong rebound off investor sentiment pushed gold to a record high by August, and for its part silver rallied to a seven-year high.

Looking back on 2020, FocusEconomics economist Steven Burke explained that the precious metal’s price growth was closely tied to the global reaction to COVID-19. “The pandemic invoked unprecedented economic uncertainty, which led to a surge in safe-haven demand and, in turn, boosted gold prices,” Burke told the media. He anticipates that prices for the yellow metal will be rangebound into 2021. Aside from the health crisis, there are US fiscal measures like stimulus that will work as tailwinds for a higher gold price, he explained. “A (Joe) Biden administration is expected to bring about stronger public spending, which is projected to boost US domestic demand and economic growth — more than was anticipated under a Trump second term,” said Burke.

As for silver, the white metal was unable to break its previous 2011 price high of US$47.94 but was still able to outperform gold. The dual metal rose as much as 147 percent from its March low of US$11.94 to its August high of US$29.85. In fact, demand for silver exchange-traded products drove global holdings to more than a billion ounces for the first time. Physical silver investment climbed 27 percent in 2020 to a five year high as well.

Energy and Oil

Oil has seesawed back and forth over the past week, sandwiched between very strong bullish and bearish forces on each side. Covid-19 is at its worst in many parts of the world, but vaccinations are picking up in earnest as well. Brent edged back above $51 per barrel after the house passed a major stimulus bill on Monday evening. “Markets feel very rangy into the New Year but should find support today from broader risk markets as stocks are soaring on the prospects of larger stimulus checks,” said Stephen Innes, chief global market strategist at Axi. The terms of a new OPEC+ production pact could be revised if oil demand recovers next year faster than currently expected, Russian Deputy Prime Minister Alexander Novak, who is still in charge of coordinating Russia’s oil policy with OPEC, told Rossiya TV news channel in an interview on Monday. Rising JKM prices for LNG in Asia brighten the outlook for U.S. LNG exports. “We assume near-max utilization rates of US LNG export facilities next year,” Bank of America said. Meanwhile, oil and gas companies in North America and Europe wrote down around $145 billion in assets in the first three quarters of 2020, the most since 2010. Prices are rebounding, but the write-downs also reflect long-term concerns. “They are coming to grips with the fact that demand for the product will decline, and the write-downs are a harbinger of that,” KPMG’s Regina Mayor told the WSJ. Natural gas spot prices rose at most locations this week. The Henry Hub spot price rose from $2.45 per million British thermal units (MMBtu) last week to $2.67/MMBtu this week. At the New York Mercantile Exchange (Nymex), the price of the January 2021 contract increased 24¢, from $2.442/MMBtu last week to $2.677/MMBtu this week. The price of the 12-month strip averaging January 2021 through December 2021 futures contracts climbed 20¢/MMBtu to $2.780/MMBtu.

World Markets

Shares in Europe rose, lifted by the UK-European Union (EU) trade accord and the approval of a U.S. fiscal stimulus package. The UK’s FTSE 100 Index recorded modest losses, partly due to the stronger British pound, which reached USD 1.3675, its highest level in a year. UK stocks tend to fall when the pound rises because many companies that are part of the index are multinationals with overseas revenues. Most European markets closed early due to the New Year’s Day holiday.

Finland’s Central Bank Governor Olli Rehn said that the European Central Bank was monitoring the euro exchange rate very closely. The euro climbed to its highest level in 2020, to around USD 1.2300, partly due to underlying weakness in the greenback and the post-Brexit trade deal.

The UK government extended its strictest restrictions to additional areas, seeking to curb a surge in infections, hospitalizations, and deaths caused, in large part, by a new variant of the coronavirus. Three-quarters of the country is now in a de facto lockdown. After regulatory approval, the authorities began deploying a second vaccine, one produced by AstraZeneca and Oxford University, enabling the government to accelerate its inoculation program. EU countries began to distribute the Pfizer/BioNTech vaccine to those most at risk. The EU also exercised its option to buy another 100 million doses of the vaccine.

Chinese stocks finished a holiday-shortened week at multiyear highs as investors anticipated stronger growth in 2021. The country’s benchmark SSEC Index rallied Friday to its highest close since February 5, 2018, while the blue chip CSI300 Index recorded its highest close since June 15, 2015, according to Reuters. For the year, the SSEC Index advanced 14% and the CSI300 Index rallied 27%, buoyed by signs of an accelerating economy as China became the first major world economy to successfully contain the coronavirus.

In a week devoid of major economic releases, Ant Group stayed in the spotlight as the Chinese financial technology giant remained the target of a growing regulatory crackdown. The People’s Bank of China (PBOC) is considering plans to force Ant Group to shed equity investments in some financial companies, a move that would curb its influence over the sector, Bloomberg reported Thursday, citing unnamed individuals. Over the previous weekend, the PBOC summoned Ant executives and told them to “rectify” violations in the company’s lending, insurance, and wealth management businesses, though the central bank stopped short of calling for a widely feared breakup of the company.

The Week Ahead

The upcoming week will see the PMI composite, Unemployment Rate, and Factory Orders data being released.

Key Topics to Watch

• Markit manufacturing PMI
• Construction spending
• ISM manufacturing index
• Varies  Motor vehicle sales
• ADP employment report
• Markit services PMI
• Factory orders Nov.
• FOMC meeting minutes                                             
• Initial jobless claims (regular state program, SA)
• Initial jobless claims (federal & state, NSA)
• Continuing jobless claims (regular state program, SA)
• Continuing jobless claims (federal & state, NSA)
• Trade deficit
• ISM services index
• Nonfarm payrolls
• Unemployment rate
• Average hourly earnings
• Wholesale inventories
• Consumer credit

Market Summary

Stock Markets

Stocks were mixed last week as investors weighed lawmakers’ approval of a long-awaited relief bill against ongoing virus concerns and new U.K. travel bans. Small cap and technology stocks were up, with both the Russell 2000 and Nasdaq indexes finishing the week higher. The U.S. has continued its vaccination effort, with over 1 million people receiving the first dose of the new vaccine. The president has cast doubt over the passage of the new relief bill, but analysts think it is likely to pass because it contains key funding for vaccine distribution. Consumer confidence has seen a short-term dip, and weekly jobless claims rose unexpectedly, pointing to continued strain from economic restrictions across the country.

US Economy

The year 2020 will go down in history as one of the most memorable and unpredictable years of our lives. The pandemic and resulting health crisis upended everyone, creating unique challenges for individuals, businesses and governments. From a financial-markets perspective, 2020 was a year of unprecedented change but eventual resiliency. As governments imposed strict lockdowns to buy time for the health care systems that were threatened to be overwhelmed, the economy plunged into a deep self-induced recession. However, swift and aggressive policy support helped prevent this health crisis from evolving into a prolonged, full-blown financial crisis. With a week left to go in the year, the light at end of the tunnel is brighter as a result of the medical breakthroughs around vaccine development. Major market indexes are trading near record highs, reflecting a positive 2021 outlook, an outcome that was hard to envision during the early days of the pandemic.

Energy and Oil

Crude oil prices moved higher as the week ended after the Energy Information Administration reported an inventory draw of 600,000 barrels for the week to December 18. This compared with a draw of 3.1 million barrels estimated for the previous week and an inventory build of 2.7 million barrels for the week to December 18, as estimated by the American Petroleum Institute and reported Thursday. Analysts had expected the EIA to report an inventory draw of 3.25 million barrels for last week. Oil prices have been on the rise the past two weeks on positive vaccine news and hopes for a rebound in demand once vaccinations started on a large scale. However, earlier this week, oil reversed its climb on the news about a new, more virulent variant of the coronavirus infecting thousands in the UK and prompting new travel restrictions in Europe and other parts of the world. The news saw oil traders exit their positions in droves, driving prices down. A decline in crude oil buying by Asian refiners also contributed to the most recent reversal of oil prices’ fortunes. Meanwhile, the EIA reported an inventory decline in gasoline, to the tune of 1.1 million barrels, with production last week averaging 8.8 million bpd. This compared with an inventory build of 1 million for the week before last and average production of 8.5 million bpd. Natural gas spot prices rose at most locations this week. The Henry Hub spot price rose from $2.45 per million British thermal units (MMBtu) last week to $2.67/MMBtu this week.  At the New York Mercantile Exchange (Nymex), the price of the January 2021 contract increased 24¢, from $2.442/MMBtu last week to $2.677/MMBtu this week. The price of the 12-month strip averaging January 2021 through December 2021 futures contracts climbed 20¢/MMBtu to $2.780/MMBtu.

World Markets

Shares in Europe were roughly flat for the week ended Thursday, as hopes for a UK-European Union (EU) trade deal helped reverse sharp losses caused by the emergence of a new variant of the coronavirus.

The UK and the EU finally agreed on a post-Brexit trade deal, with the announcement coming after UK markets closed. The accord still must be approved by all EU member states. The agreement’s terms would represent a significant change in the relationship with the UK’s major trading partner and, some say, amounts to a “hard” Brexit in all but name. The Office for Budget Responsibility has forecast that Brexit will cost the UK 4% of its gross domestic product (GDP) over 15 years.

The EU approved the Pfizer-BioNTech vaccine for COVID-19, the disease caused by the coronavirus. The companies said they would supply 12.5 million doses to the EU by the end of the year, Reuters reported. The EU Commission also doubled its orders for Moderna’s vaccine to 160 million doses, with delivery expected to start in early 2021.

China’s benchmark stock index fell for the week ended Thursday as a flareup in Sino-U.S. tensions weighed on sentiment. The Shanghai Stock Exchange (SSE) Composite Index shed 1.0% over the four days ended Thursday, while the large-cap CSI 300 Index was nearly flat. On Monday, the Trump administration published a list of Chinese and Russian companies that it alleged had ties to their countries’ militaries. The list of 58 Chinese and 45 Russian companies requires a license for anyone seeking to sell them items that could be used for military purposes, according to a Commerce Department statement. The SSE Index recorded its biggest one-day percentage drop since September after the list was published, which marked the latest instance of U.S. actions targeting Chinese companies as President Trump prepares to leave office.

In corporate news, Alibaba Group made headlines after China’s top antitrust regulator announced Thursday that it started an investigation into the e-commerce giant. Separately, Chinese regulators said that they have summoned Ant Group, the world’s largest financial technology company and Alibaba affiliate, to a high-level meeting regarding financial regulations. The coordinated actions show that Beijing is ramping up efforts to rein in the domestic tech companies that it sees as a threat to political and economic stability as the companies have grown larger and more powerful in just a few years.

The Week Ahead

Important economic data being released next week include pending home sales and the Chicago PMI.

Key Topics to Watch

• S&P Case-Shiller home price index                
• Advance report on trade in goods
• Chicago PMI
• Pending home sales
• Initial jobless claims (state program, SA)
• Initial jobless claims (total, NSA)
• Continuing jobless claims (state program, SA)
• Continuing jobless claims (total, NSA)

Market Summary

Stock Markets

Stocks edged higher last week, with all major U.S. indexes hitting fresh all-time highs. Fiscal-stimulus optimism, along with a brighter longer-term outlook driven by the rollout of vaccines, continues to support sentiment. Long-term Treasury yields rose modestly, and oil logged its seventh straight weekly gain. Economic data were mixed, revealing that the economic recovery is losing some momentum amidst rising virus cases and renewed restrictions in activity. The weakness in retail sales and the recent slowdown in job growth sharpened the market’s focus on fiscal aid. Congress appears to be closing in on an agreement on a relief bill worth $900 billion. Analysts think that the proposed fiscal deal will provide the relief needed to support the economy as it makes its way to the other side of the pandemic. They say fundamentals are supportive of the longer-term outlook, but investors should anticipate bumps along the way given some of the near-term headwinds to the economy.

US Economy

Stocks breached record highs again last week, trading within a fairly narrow range that reflected a mix of encouraging and disappointing factors, as well as the typical transition toward year-end holiday market conditions. After a dramatic swing this year from a deep recession and bear-market decline to a budding economic recovery and sharp stock-market rally, the present environment is significantly more balanced1. Last week brought a swath of new information that is consistent with analysts’ view of increasingly challenging current conditions countered by an increasingly positive outlook for next year and beyond. Here’s the updated view based on what happened last week:

The pace of the economic recovery is stalling out as surging virus cases have incited renewed restrictions and lockdowns.  Analysts don’t anticipate a return to deep recessionary conditions, but they think the economy will endure a soft patch in early 2021 before finding its footing as the vaccine is widely distributed, ushering in a more vibrant rebound in the second half of the year.

Metals and Mining

After starting the week at US$1,832 an ounce, the gold price rallied strongly, climbing as high as US$1,893.20 by Thursday. An uptick in value for the US dollar weighed the yellow metal down on Friday, pulling it further away from the US$1,900 threshold. The rest of the precious metals also climbed higher over the five-day period; however, palladium was unable to sustain the US$2,200 per ounce level, slipping below the mark twice before rising back. Following a month of declines, gold reached a 30 day high this session. But some of its momentum was lost late in the week as the US greenback pulled away from its year-to-date low. Gold trended lower throughout November as optimism around vaccines increased. Some of that thinking was reversed this week as positive cases of COVID-19 increased rapidly around the globe. Gold was priced at US$1,887.15 on Friday. The silver price also spent the majority of the week climbing higher, holding above US$23 per ounce. Year-to-date, the white metal has added 43 percent to its value. Silver’s ability to rise amid market chaos was recently highlighted by US Global Investors’ Ralph Aldis. Silver was trading for US$25.77 on Friday. Platinum rose to a year-to-date high this week, breaching the US$1,040 per ounce level. The price for the precious metal has been edging higher since mid-November. As mentioned, palladium experienced volatility throughout the session. Pushed as high as US$2,243 on Tuesday, it fell as low as US$2,166 on Wednesday. By week’s end, the autocatalyst metal had regained some lost ground to hold above US$2,200. Friday morning saw platinum selling for US$1,032, and palladium was sitting at US$2,224.

Economic recovery hopes continued to propel copper higher this week. The red metal surpassed its previous year-to-date high to rally to US$7,893 per tonne late in the period. Analysts remain optimistic that the base metal will benefit from the widespread vaccine rollout. Copper was holding in the US$7,900 range on Friday morning. Zinc also hit a year-to-date high this week. Since dipping to a low of US$1,773.50 per tonne in March, the zinc price has surged back 60 percent. As of Friday morning, zinc was valued at US$2,841.50. The rally continued for nickel as well, and it pushed to a year-to-date high on Monday of US$17,594 per tonne. The metal pulled back a day later but was able to end the week holding at US$17,520 on Friday. Unlike the other base metals, lead faced price pressure this week. Values hit a five day high on Wednesday of US$2,062 per tonne and have since pulled back. Lead was valued at US$2,046 on Friday.

Energy and Oil

Crude oil prices held their gains this week and pushed to new highs. In midday trading on Friday, Brent was over $52. Optimism on vaccinations is outpacing the bearish winds from record Covid-19 infections in the United States. Analysts differ on what happens next, but some say oil has more room on the upside. Having been savaged for much of 2020, stocks for North American oil and gas producers have surged in recent weeks. The Canadian Energy Sector Index is up 40% since November 9, and U.S. energy stocks are having their best quarter since 1989. LNG prices have in fact, skyrocket of late. JKM prices shot up over $12/MMBtu in recent days. Energy Intel says a combination of factors is leading to the 80% rally in just three weeks. Supply disruptions in Australia, Qatar and Norway, weather-related supply issues in the U.S., congestion at the Panama Canal, colder temperatures in the Northern Hemisphere. At the same time, Saudi Arabia cut its 2021 budget by 7%, as it seeks to minimize the damage from falling oil revenues. In a different light, after decades of stagnation and multiple false dawns, the hydrogen economy appears primed for a major takeoff. Industry experts are predicting that hydrogen could become a globally traded energy source, just like oil and gas, while the Bank of America says the industry is at a tipping point and set to explode into an $11 trillion marketplace. Natural gas spot prices rose at most locations this week. The Henry Hub spot price rose from $2.45 per million British thermal units (MMBtu) last week to $2.67/MMBtu this week.  At the New York Mercantile Exchange (Nymex), the price of the January 2021 contract increased 24¢, from $2.442/MMBtu last week to $2.677/MMBtu this week. The price of the 12-month strip averaging January 2021 through December 2021 futures contracts climbed 20¢/MMBtu to $2.780/MMBtu.

World Markets

Shares in Europe rose on optimism surrounding coronavirus vaccinations, better-than-expected readings from purchasing managers’ indexes in key eurozone economies, and signs of progress in U.S. congressional negotiations for another round of fiscal stimulus. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 1.48% higher, while Germany’s DAX Index rose 3.94%, France’s CAC 40 ticked up 0.37%, and Italy’s FTSE MIB added 1.26%. In London, the FTSE 100 Index ended the week down modestly, as the UK pound strengthened on earlier optimism over a trade accord with the European Union (EU). UK stocks tend to fall when the pound rises because many companies in the index are multinationals that generate significant overseas revenues.

These encouraging developments likewise appeared to reduce investor demand for assets perceived as havens, sending core eurozone bond yields higher and offsetting concerns about tougher coronavirus restrictions and Germany’s plan for hefty debt issuance next year. Peripheral eurozone bond yields ended the week flat. UK sovereign yields generally increased on growing optimism that the UK and EU could reach a trade agreement. However, dovish messaging from the Bank of England (BoE) amid an uncertain economic outlook, as well as growing worries over tighter coronavirus restrictions, somewhat curbed the rise in gilt yields.

Chinese stocks posted a weekly gain despite recording mild losses on Friday, when the U.S. announced that it was blacklisting China’s top chipmaker and more than 60 other companies for national security reasons. For the week, the large-cap CSI 300 Index rose 2.3%, while the country’s benchmark Shanghai Stock Exchange Composite Index added 1.4%.

On Friday, the U.S. Commerce Department said that it was adding Semiconductor Manufacturing International Corp. (SMIC) to its so-called Entity List, which deprives targeted companies from accessing U.S. technology ranging from software to circuitry. The addition of SMIC to the export blacklist came after the U.S. found “evidence of activities between SMIC and entities of concern in the Chinese military industrial complex,” according to the Commerce Department’s statement.

The Week Ahead

This week’s trading will be cut short by the Christmas holiday on Friday, and markets will close early on Thursday. Data being released include personal income and consumption, consumer sentiment, and new home sales.

Key Topics to Watch

• Chicago Fed national activity index
• Gross domestic product revision (SAAR)
• Consumer confidence index
• Existing home sales (SAAR)
• Personal income
• Consumer spending
• Core inflation
• New home sales (SAAR)
• Consumer sentiment index
• Initial jobless claims (regular state program, SA)
• Initial jobless claims (total, NSA)
• Continuing jobless claims (total, NSA)
• Durable goods orders Nov.
• Core capital goods orders

Market Summary

Stock Markets

Equities closed the week lower, led by the real estate and financial sectors, as the recovery in employment growth appears to be stalling and as talks between Republicans and Democrats over another round of fiscal stimulus continue to drag on. A postponed stimulus package poses a headwind for stocks, as further economic restrictions from rising cases constrict growth. U.S. workers claiming unemployment insurance for the first-time exceeded consensus estimates. Positively, consumer sentiment posted a surprising increase in December amid prospects for a vaccine rollout. Concurrently, working from home and record-low mortgage rates have driven housing demand and created an additional $1 trillion in wealth for homeowners. Even as the economic momentum slows in the near term, analysts think the outlook for the economy is positive over the next year, though the road may be bumpy.

US Economy

Major indexes reached fresh record highs last week before pulling back to finish modestly lower, as stalled Washington stimulus talks and the likelihood for a no-deal Brexit soured the mood. The market appears to be largely focused on the prospects of a brighter outlook driven by vaccine rollouts, even as recent coronavirus trends continue to worsen and restrictions in activity are reimposed. To this point, the S&P 500 has hit 30 new all-times highs in 2020, 17 of them recorded after the late-February pandemic-induced bear market, and four of them recorded the last two weeks. Is this remarkable strength justified considering the recent loss of momentum in economic data, or has complacency settled in?

Analysts contend that the answer is yes to both, with different implications based on time horizons. The pendulum of investor sentiment has clearly swung from fear of losses, to fear of missing out, and this could trigger near-term disappointments. However, what matters more for long-term investors, they say, is the prospect of the economy entering a new multiyear expansionary cycle that extends the bull market into the future.

Metals and Mining

The gold price ticked higher early in the week, climbing above US$1,850 per ounce for the first time since late November. But as the US dollar strengthened and vaccines began to be administered and shipped, the yellow metal faced volatility. Edging to a weekly high of US$1,872 on Tuesday, the metal shed 2.5 percent over the next 24 hours, but remained above the US$1,800 level to trade for US$1,825.

Gold climbed on Wednesday as a US coronavirus relief package continued to be delayed. The situation is becoming increasingly tense as many initial emergency aid programs are set to expire on December 26. On Friday gold was valued at US$1,837.01. After a steady uptick throughout November, December has added increased volatility to the silver price. The white metal started the first full week of the month trading at US$23.93 per ounce. A mid-week uptick sent the metal to a five day high of US$24.72. Holding above US$23, silver is on track for one of its best performances in seven years. Much of the white metal’s growth in 2020 is the result of the exchange-traded products (ETPs) space. As of mid-November, the silver ETP sector had recorded yearly inflows of 326 million ounces. The massive amount of buying pushed global ETP holdings to more than 1 billion ounces for the first time ever. Silver was priced at US$23.91 on Friday. Platinum and palladium also faced brief price dips this session. Platinum was trading for US$1,017 per ounce on Monday after surging to a year-to-date high of US$1,068 on December 4. Palladium fell to US$2,152 per ounce mid-week, its lowest point since early November. A day later, a 5 percent uptick sent the price to a four-week high. On Friday, platinum was selling for US$1,008 and palladium was at US$2,217.50.

Copper continues to trade near its seven year high, climbing as high as US$7,712 per tonne. As economic hopes add headwinds for safe haven assets, the positive outlook is propelling the base metals. Zinc was also on the up this week, adding 2.9 percent from Monday to end at US$2,810 per tonne. Nickel prices surpassed their previous year-to-date high to sell for US$16,807 per tonne. Since January, the metal has added 19 percent to its value. According to the International Nickel Study Group, global nickel demand is projected to come in at 2.52 million tonnes in 2021, up from 2.32 million tonnes this year. Nickel was moving for US$16,807 on Friday. Lead prices briefly rallied past US$2,100 per tonne this week before settling back just below that threshold. Lead ended the week valued at US$2,083.

Energy and Oil

Brent hit $50 per barrel on Thursday for the first time since March, edging higher on optimism surrounding vaccinations, the OPEC+ deal, plus strong demand in Asia. However, prices eased a bit on Friday as demand in Europe and the U.S. remains subdued and Covid-19 cases continue to spread. The EIA also reported a surge in crude inventories for last week, up 15.2 million barrels. There are signs of a demand rebound in Europe. Many European countries went back into lockdown in November but are loosening restrictions again. Bloomberg says that road usage is on the rise, hitting a two-month high. Pemex suspends work with Vitol. Pemex suspended business with Vitol after the oil trader paid $160 million to settle bribery charges. Vitol settled charges for paying bribes in Brazil, Mexico and Ecuador. The U.S SEC is set to vote on disclosures. The Securities and Exchange Commission will vote on December 16 on whether or not to approve new disclosure rules for oil, gas and mining companies related to payments to foreign governments. It is the third iteration of the rule and stems from the 2010 Dodd-Frank law.

Natural gas spot prices fell at most locations this week. The Henry Hub spot price fell from $2.70 per million British thermal units (MMBtu) last week to $2.45/MMBtu this week. At the New York Mercantile Exchange (Nymex), the price of the January 2021 contract decreased 34¢, from $2.780/MMBtu last week to $2.442/MMBtu this week. The price of the 12-month strip averaging January 2021 through December 2021 futures contracts declined 20¢/MMBtu to $2.576/MMBtu.

World Markets

European shares fell on concerns about the rising numbers of coronavirus cases in key economies and uncertainty surrounding a post-Brexit trade deal and U.S. stimulus measures. In local currency terms, the pan-European STOXX Europe 600 Index ended the week about 1.00% lower, while Germany’s DAX Index fell 1.39%, France’s CAC 40 declined 1.81%, and Italy’s FTSE MIB tumbled 2.15%. The UK’s FTSE 100 Index was flat.

Core eurozone bond yields fell amid growing concerns about the possibility of a no-deal Brexit and another injection of stimulus by the European Central Bank (ECB), although optimism related to coronavirus vaccines and expectations of further U.S. fiscal stimulus moderated the overall fall. Peripheral eurozone bond yields broadly followed core markets. UK gilt yields also declined on receding hopes of a post-Brexit deal and Bank of England Governor Andrew Bailey hinting that the central bank could implement negative interest rates.

China equities fell on renewed tensions with the U.S. after a second major index provider removed some Chinese companies from its benchmarks following a Trump administration executive order. The large-cap CSI 300 Index sank 3.5%, its biggest weekly drop since September, and the Shanghai Composite Index shed 2.8%. Sentiment weakened after S&P Dow Jones Indices (S&P DJI) said it would remove 21 Chinese companies from its global stock and bond benchmarks after the U.S. Defense Department earlier this year designated the companies as having ties to China’s military. The move by S&P DJI followed a similar decision by FTSE Russell the previous week and comes as other index providers, including JP Morgan, MSCI, and Nasdaq, are deliberating whether to do the same.

The Week Ahead

Next week promises to be busy as a flurry of economic data will be released, including Housing Starts, Retail Sales growth, the Fed Funds Target Upper Bound, and Markit PMI breakdowns.

Key Topics to Watch

• Import price index
• Empire state index
• Industrial production
• Capacity utilization
• Retail sales
• Retail sales
• Markit manufacturing PMI
• Markit services PMI
• Business inventories
• NAHB home builders’ index
• Federal Reserve announcement                                           
• Federal Reserve Chair Jerome Powell press conference                                          
• Initial jobless claims
• Initial jobless claims (federal & state, NSA)
• Continuing jobless claims (regular state program, SA)
• Continuing jobless claims (federal & state, NSA)
• Housing starts Nov.
• Building permits Nov.
• Philly Fed index
• Current account deficit
• Leading economic indicators

Market Summary

Stock Markets

Stocks edged higher last week as the market’s historic rally extended to the first week of December. Despite a notable slowdown in hiring that was revealed in the November jobs report, major indexes closed at record highs and Treasury yields rose, reflecting expectations for additional fiscal stimulus. The U.S. economy added 245,000 jobs in November, missing estimates amid a spike in COVID-19 infections and renewed restrictions in activity. The unemployment rate declined to 6.7% from 6.9%, but the participation rate also declined, indicating that more people exited the labor force. The silver lining is that the downshift in job gains could apply pressure to lawmakers to reach an agreement for a new stimulus package before the end of the year. Oil extended its gains to a nine-month high after OPEC and its allies agreed to increase production more gradually than previously planned, and the dollar hit a new two-and-a-half-year low against major currencies.

US Economy

Stocks take their direction from economic, earnings and policy fundamentals, not the calendar. That said, December has historically been a positive month for the market, with an average monthly gain of 1.6%. When the stock market enters December on a positive note, that momentum has often been carried through the remainder of the year. Over the past 75 years, when stocks have started the final month of the year with a year-to-date gain of 10% or more (as is the case this year), the market posted a positive gain for December 82% of the time. And the market rose by an average of 7.8% over the following year.

Stocks have now recouped the bear-market losses from earlier this year, reaching a new record last week. With equities up more than 60% since late-March, this has been the fastest recovery from a 30%-plus market drop on record. Markets don’t travel in a straight line indefinitely, and while analysts think 2021 will be a positive year for the markets, they expect the path ahead to be bumpier than the one we’ve traveled over the past eight months. The good news: Recovering the losses from a bear market didn’t mark an exhaustion point for stocks. Looking back at the bear markets since WWII, once the market returned to the previous high, the market gained an average of 14.3% over the following year.

Metals and Mining

After four weeks of declines, the gold price strengthened this week amid speculation that the US may pass a US$908 billion stimulus package before the new year. Gold steadily retreated in November after positive news in the pharmaceutical sector regarding COVID-19 vaccines. The yellow metal’s climb coincides with a dramatic decrease in the value of the greenback. The US Dollar Index slipped to its lowest point in two and half years this week, falling below 90.6. Gold entered the first week of December trading at US$1,773 per ounce and had moved 3.4 Although Q4 has brought added headwinds for gold, there are catalysts pointing to higher prices in 2021. Central banks have also begun purchasing gold again after becoming net sellers in August and September. “(Year-to-date) central bank net purchases continue to sit between 200-300 tonnes,” reads a report from the World Gold Council. Gold was trading for US$1,833.43 on Friday. The silver price started December with momentum, surging 8 percent between Monday and Tuesday. Adding another 1.9 percent to its value, the white metal topped out at US$24.26 per ounce after hours on Thursday. 2020 has been a breakout year for silver, which added as much as 57 percent to its price when it rocketed to US$28.32 in August. Pressure has pushed the white metal back, and it has held above US$22 since. On Friday, silver was moving for US$24.03. After falling to an 18 year low of US$608 per ounce in March, platinum has climbed to a four year high. The automotive metal broke the US$1,070 threshold as markets opened Friday. Since November, platinum has added 24.4 percent to its value, driven higher by production challenges out of South Africa. Most significant are the output constraints that sector leader Anglo American has experienced at its Anglo converter plant. Platinum was selling for US$1,046 on Friday While platinum has steadily trended higher during the first week in December, palladium has experienced volatility. Stable growth in November was upended this week. Hitting US$2,295 per ounce on Tuesday, prices had tumbled 5 percent to US$2,162 by Thursday. The metal has since moved back above US$2,200.

Copper continued its ascent into record territory this week, reaching a fresh seven year high on Friday. The red metal has added 14 percent to its value since early November and is still poised to climb higher. As of Friday morning, copper was priced at US$7,767. Zinc started the session strong, marking a year-to-date high of US$2,809 per tonne. Values fell back as the week progressed, but still maintained record levels. By week’s end, zinc was holding at US$2,747. Nickel prices rose to a one year high in late November, driven higher by positive electric vehicle fundamentals. After climbing to US$16,373 per tonne, prices have slipped back below US$1,600 since the beginning of December. On Friday morning, nickel prices were sitting in the US$15,937 range. In the lead space, prices also faced headwinds this week. A month of growth in November brought prices to US$2,117.50 per tonne, a level unseen since mid-January. However, the higher threshold was unsustainable, and the metal slipped back to US$2,046 at the end of the five-day period.

Energy and Oil

Oil prices rose after OPEC+ agreed to partial increases in production beginning in January, preventing a breakdown in the agreement. Brent inched close to $50 per barrel in a sign of confidence in the deal. It seems that OPEC+ has agreed to monthly increases. Discord characterized the OPEC+ meeting this week, and concerns grew that the group would fail to agree to postponing the planned production increases. But in the end, instead of allowing cuts to ease by 2 mb/d, the group agreed to monthly incremental production increases of just 0.5 mb/d. They also agreed to meet monthly going forward in early 2021 to assess the health of the market. The deal was not as bullish as market analysts had expected, but neither was it a failure. The reaction in oil prices suggests OPEC+ did enough to maintain market stability. Natural gas spot prices rose at most locations this week. The Henry Hub spot price rose from $2.28 per million British thermal units (MMBtu) last week to $2.70/MMBtu this week. At the New York Mercantile Exchange (Nymex), the December 2020 contract expired last week at $2.896/MMBtu. The January 2021 contract price decreased to $2.780/MMBtu, down 18¢/MMBtu from last week to this week. The price of the 12-month strip averaging January 2021 through December 2021 futures contracts declined 8¢/MMBtu to $2.773/MMBtu.

World Markets

Shares in Europe paused after last month’s strong rally. In local currency terms, the pan-European STOXX Europe 600 Index ended the week with a modest 0.21% gain. Major European indexes were mixed: France’s CAC 40 ticked up 0.20%, Germany’s DAX Index fell 0.28%, and Italy’s FTSE MIB slipped 0.78%. The UK’s FTSE 100 Index, however, gained 2.87%, reaching nine-month highs on news that the UK had approved the coronavirus vaccine developed by Pfizer and BioNTech.

Core eurozone bond yields increased overall, lifted early in the week by expectations for further economic stimulus in the U.S. and encouraging developments related to coronavirus vaccines. Core bond yields pulled back somewhat on news that the eurozone purchasing managers’ index (PMI) had declined from the previous month, driven by weakness in the services segment of the economy. Consumer prices in the eurozone declined 0.3% year over year in November, the fourth consecutive month of negative inflation.

Chinese stocks posted their third straight weekly gain, aided by solid economic data. The large-cap CSI 300 Index rose 1.7%, and the benchmark Shanghai Composite Index gained 1.1%, according to Reuters. The yield on China’s 10-year sovereign bond edged lower 3 basis points to end at 3.33%. In currency markets, the renminbi appreciated by 0.5% against the U.S. dollar to CNY 6.5342.

The Week Ahead

Important economic data being released include the small business optimism index on Tuesday, inflation on Thursday, and consumer sentiment on Friday.

Key Topics to Watch

• Consumer credit
• Productivity (revison)
• Unit labor costs (revision)
• Job openings
• Wholesale inventories
• Initial jobless claims (state program, SA)
• Initial jobless claims (total, NSA)
• Continuing jobless claims (state program, SA)
• Continuing jobless claims (total, NSA)
• Consumer price index
• 8Core CPI
• Federal budget
• Producer price index (final demand)
• Consumer sentiment index

Market Summary

Stock Markets

This week has seen positive coronavirus-vaccine news, which helped propel the Dow Jones up more than 12% for the month, crossing the 30,000 mark for the first time, and on-track to have the best monthly gain since January 1987. The S&P 500 and Russell 2000 both posted fresh record highs as well. Trading was cut short last week, with Thanksgiving Thursday off and the equity markets closing early on Friday. Economic data releases were light, putting the emphasis on the high-wire act investors are walking between positive vaccine news and rapidly climbing cases and hospitalizations. Analysts think the longer-term outlook remains positive for stocks, but investors should expect spurts of volatility as we turn the page on 2020.

US Economy

“Dow 30,000” has a nice ring to it, but the more important question is: What does this number mean for investors? The underlying factors that have gotten the market to this level are more significant than the number itself. Nevertheless, reaching the 30K mark offers us an opportunity to reflect on the Dow’s milestones: Dow 30,000 is no more significant than 29,928 or 30,169 in the bigger picture. The Dow first crossed the 10,000 level in 1999 to substantial fanfare but proceeded to cross above and below that threshold numerous times in the following years. It last touched 10,000 in 2010. The 25,000 level has been crossed dozens of times since it was first reached in 2018, including as recently as this June. Market index levels can serve as historical measuring sticks, but don’t, in analysts’ view, have particular bearing on the market’s path ahead.

Metals and Mining

The gold price continued to tumble lower this week, dragged down by more positive COVID-19 vaccine news. The optimism around the latest vaccination announcements translated into economic rebound hopes, which weighed on safe haven demand. The yellow metal fell as low as US$1,776.59 per ounce on Friday after dropping 1 percent since Thursday. It hasn’t slipped below US$1,800 since July. Silver also faced headwinds during the last full week of the month, shedding US$2 by week’s end. Speaking about gold’s descent, Peter Grandich of Peter Grandich & Company reminded investors to look at big picture drivers such as continued currency debasement. On Friday, gold was priced at US$1,783.25. Silver’s correlation to gold drove the white metal lower this week as well. Renewed economic optimism wasn’t enough to push silver’s industrial side higher. Starting the period at US$24.05 per ounce, silver trended lower for the rest of the week, bottoming out at US$22.41 when markets opened on Friday. The 6 percent decline was the sharpest decrease silver has experienced since September. On Friday, silver was valued at US$22.70. As gold and silver faced volatility, platinum and palladium were able to edge out small gains. Platinum slipped briefly mid-week but recovered, ending the period slightly higher than Monday. Palladium faced a similar trajectory, shedding value mid-week and then rallying back. By Friday morning, platinum was trading for US$960 per ounce, while palladium was selling for US$2,269 per ounce.

The base metals displayed a mixed performance for the final week of November. Lead pulled off a 2 percent uptick for the best performance of the week. It was followed by copper, which had edged 1.9 percent higher by week’s end. Lead has steadily moved higher since early November, adding 14 percent to its value since the beginning of the month. On Friday morning, lead was priced at US$2,031 per tonne. Copper followed a similar path, save for some volatility experienced mid-month. The red metal has climbed 9.5 percent since November 1, motivated by economic growth in key countries. Prices could be further helped by a 4 percent year-on-year decline in mine supply forecast by Refinitv. By Thursday, copper prices breached US$7,500 per tonne for the first time since 2013. Copper was selling for US$7,511 Friday. Despite issues with mine supply earlier in the month, zinc prices traded sideways this week. Starting the period at US$2,756 per tonne, the metal dipped to US$2,727 on Wednesday. By Thursday, prices had crept higher, holding at US$2,754.50 into Friday. Nickel also benefited from a rally in base metals prices, but that could be short-lived, according to another Fastmarkets report.

Energy and Oil

Oil prices have held on to recent gains despite Covid-19 headwinds. Investors are growing increasingly optimistic and looking beyond the immediate crisis. “It’s a total change of vibe,” Robert Yawger, director of the futures division at Mizuho Securities USA, told the WSJ. “Everything is much more positive now.” OPEC+ is now leaning towards a three-month extension, although not every member is on the same page. Oil prices are holding firm on expectations that the group avoids letting the production cuts ease as scheduled in January, and instead pushes that off until the end of the first quarter at least. The leaders of the OPEC+ pact, Saudi Arabia and Russia, have requested an informal meeting of the Joint Ministerial Monitoring Committee (JMMC) to be held on Saturday, before the alliance’s formal meetings on November 30 and December 1 to decide whether to extend the current level of oil production cuts. Natural gas spot prices fell at most locations this week. The Henry Hub spot price fell from $2.77 per million British thermal units (MMBtu) last week to $2.36/MMBtu this week. At the New York Mercantile Exchange (NYMEX), the price of the December 2020 contract decreased 32¢, from $3.031/MMBtu last week to $2.712/MMBtu this week. The price of the 12-month strip averaging December 2020 through November 2021 futures contracts declined 21¢/MMBtu to $2.779/MMBtu.

World Markets

European shares rose for a fourth consecutive week, fueled by positive vaccine developments, fading U.S. election uncertainties, and expectations that the U.S. Congress may compromise on a smaller economic stimulus. However, the advance lost steam after the UK and Germany extended coronavirus restrictions and vaccine euphoria waned. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 0.93% higher, while Germany’s DAX Index advanced 1.51%, France’s CAC 40 rose 1.86%, and Italy’s FTSE MIB added 2.92%. The UK’s FTSE 100 Index was little changed.

Core eurozone bond yields held firm overall despite a mixed week. Germany’s 10-year bund yield initially rose on more positive vaccine news. However, dovish messaging from the European Central Bank’s Philip Lane ahead of the European Central Bank’s (ECB) policy meeting next week reaffirmed market expectations for more stimulus, dragging yields back down to Monday’s levels. This dovishness pushed peripheral bond yields lower overall, with Portugal’s 10-year yield falling into negative territory. UK gilt yields also fell. Lingering Brexit worries and renewed concerns over economic growth prospects drove the decline, outweighing earlier increases in sentiment supported by vaccination progress.

Chinese stocks rose for the week as solid economic data outweighed concerns about rising defaults among domestic bond issuers. The blue chip CSI 300 Index added 0.8% while the Shanghai Composite Index gained 0.9% for the week, according to Reuters. In fixed income markets, the yield on the sovereign 10-year bond ended the week roughly unchanged. In currency trading, the yuan ended broadly flat against the U.S. dollar. A recent uptick in defaults in China’s high yield bond market has raised expectations that Beijing will focus on corporate sector deleveraging in the near term, as opposed to further stimulating the economy.

The Week Ahead

Economic series being released this week include pending home sales, Manufacturing PMI, and the unemployment rate.

Key Topics to Watch

• Chicago PMI
• Pending home sales index
• Markit manufacturing PMI
• ISM manufacturing index
• Construction spending
• Motor vehicle sales (SAAR)
• ADP employment report
• Beige Book                                         
• Initial jobless claims (regular state program, SA)
• Initial jobless claims (total, NSA)
• Continuing jobless claims (regular state program)
• Continuing jobless claims (total, NSA)
• Markit services PMI
• ISM services index
• Nonfarm payrolls
• Unemployment rate
• Average hourly earnings
• Trade deficit
• Factory orders

Market Summary

Stock Markets

Last week saw the equity markets performing a balancing act between incoming positive vaccine news and ever-growing economic restrictions aimed at curbing the recent spike in virus cases and hospitalizations. The rotation out of the technology sector and into more cyclicals stocks continued, as the vaccine developments improved investor sentiment and confidence about next year’s outlook. The jobs-data release showed worse-than-expected initial jobless claims, which, in our view, confirms that this economic recovery is likely to be choppy before ultimately returning to pre-pandemic levels. Reports that the Treasury department is not extending certain funding for the Fed’s lending facilities established earlier in the pandemic is catching attention, though analysts don’t interpret this as a signal that monetary-policy support will be significantly or permanently scaled back.

US Economy

A central theme in equity markets over the last two weeks has been the so-called rotation, or change in leadership across asset classes, sectors and investment styles. We received a series of positive vaccine announcements, first from Pfizer on 11/9, then from Moderna last Monday, and then from Pfizer again last Wednesday on the final results of its late-stage trial. This news propelled the S&P 500 to a new all-time high, before the rally fizzled later in the week on deteriorating coronavirus trends. The near-term outlook is also worsening because of the renewed restrictions on activity. As the market attempts to balance this weakened near-term outlook against an improving medium- to long-term outlook due to the vaccine developments, analysts see this tug-of-war likely continuing between the year-to-date leaders and the economically sensitive investments that have lagged. 

Metals and Mining

Gold continued to trade below US$1,900 per ounce this week, held down by positive news on the COVID-19 vaccine front. The yellow metal also faced pressure after the US Department of the Treasury made an announcement about ending emergency loan programs. Facing three months of price pressure, gold was on track for its second week of declines below the key US$1,900 threshold. The rest of the precious metals had better performances during the period, with platinum adding as much as 8 percent to its value this week. As stocks rallied over reports that Moderna is advancing its COVID-19 vaccine, the gold price slumped, dipping to a low of US$1,856.30. Some risk-on sentiment waned when key lending programs in the US were given an expiration date of December 31, 2020, by US Treasury Secretary Steven Mnuchin. Following the announcement, doubts rose around the future of stimulus and fiscal support. Despite the recent trends and vaccine pressure, Independent Speculator Lobo Tiggre sees gold’s fundamentals as more nuanced. At 10:05 a.m. EST on Friday, gold was priced at US$1,877.03. The silver price rose sharply on Friday morning, recovering some early week losses. Starting the session at US$24.53 per ounce, the value of the white metal had slipped 3 percent by Thursday. The metal’s ability to retain its value amid the headwinds gold is experiencing underline positive fundamentals moving forward. The white metal was valued at US$24.41 on Friday. The price of platinum has been edging higher since the morning bell rang on Monday. Adding as much as 8.2 percent, platinum has pulled back slightly but remains above US$950 per ounce. The recent price activity has been propelled by a decrease in platinum output, likely to be compounded by Anglo American Platinum’s closure of the Phase B unit at its convertor plant in South Africa. Platinum was selling for US$951 on Friday. After making steady gains since the beginning of the month, palladium faced volatility this session. The headwinds prevented any gains from locking in and aided in a dip below US$2,200 per ounce. By Friday, the metal was fluctuating just above US$2,200. Palladium is poised to perform well on the back of similar drivers in the platinum market. On Friday, it was moving for US$2,194.

The base metals sector also faced difficulties this week but managed to mitigate losses. Copper started the week trading at US$7,113 a tonne and fell lower over the period. Prices declined 1 percent by Thursday, and copper was selling for US$7,028 on Friday morning. Nickel also faced challenges, dropping 2 percent on Tuesday. Following a small rally on Wednesday, prices slipped to US$15,690 per tonne a day later. Nickel remained at that level on Friday. Two base metals were able to squeak out gains this week: zinc and lead. Starting the period at US$2,653 per tonne, zinc had climbed as high as US$2,732.50 by mid-week. By week’s end, the metal was holding at US$2,721. Lead also edged higher, adding 3.6 percent to its Monday value of US$1,882.50 per tonne. Lead has consistently moved higher since November 11, adding 7.3 percent to its worth. On Friday morning, lead was priced at US$1,951.

Energy and Oil

Oil prices pared recent gains as investors nervously watch the spread of Covid-19, which has tempered bullishness following positive vaccine news. “It’s not good news,” Bill O’Grady, executive vice president at Confluence Investment Management in St. Louis, told Bloomberg. “This is probably going to be a disappointing travel holiday coming up, and that’s going to weigh on demand.” Still, there are signs of life in global oil demand visible beyond the near-term coronavirus wave. Asia’s oil demand continues to look strong. While oil demand in Europe and the United States continues to disappoint, refiners in Asia are racing to procure crude from around the world, giving the oil market some hope that at least in one region, demand is strengthening in the fourth quarter. China’s oil binge to extend into 2021. China stockpiled oil this year when prices were cheap, offering an extra bit of demand to the market. Reuters reports that China’s private refiners will stockpile an additional 100 million barrels in 2021. Oil demand appears primed for recovery as crude oil demand is likely to rebound next year following the promising news about a vaccine against the novel coronavirus, according to Fitch Ratings.

Natural gas spot prices fell at most locations this report week (Wednesday, November 11 to Wednesday, November 18). The Henry Hub spot price fell from $2.77 per million British thermal units (MMBtu) last week to $2.36/MMBtu this week.  At the New York Mercantile Exchange (NYMEX), the price of the December 2020 contract decreased 32¢, from $3.031/MMBtu last week to $2.712/MMBtu this week. The price of the 12-month strip averaging December 2020 through November 2021 futures contracts declined 21¢/MMBtu to $2.779/MMBtu.

World Markets

Hungary and Poland blocked the European Union’s (EU) planned EUR 1.8 trillion fiscal package, which includes a large fund to help economies weather the damage caused by the coronavirus. They oppose a mechanism that would allow the EU to block disbursements to countries violating its rule of law principles. The Politico news website reported that EU leaders at their Thursday videoconference summit did not indicate how the standoff might be resolved. German Chancellor Angela Merkel said she would hold talks with the leaders of the two countries while defending the existing proposal.

Reports suggest that three main areas of contention—a level playing field for companies, fishing rights, and settling trade disputes—persist as the UK and EU negotiate a post-Brexit agreement on trade. Face-to-face talks have been suspended because a senior negotiator tested positive for COVID-19, although officials will keep working remotely, according to Reuters. France, the Netherlands, and Belgium urged the European Commission to start implementing contingency measures in case there is no deal before the Brexit transition ends on December 31.

Chinese stocks rose strongly after solid economic data lifted investors’ risk appetite. For the week, the large-cap CSI 300 Index gained 1.78% while the benchmark Shanghai Stock Exchange Composite Index added 2.04%, according to Reuters data. In fixed income markets, the yield on the sovereign 10-year bond increased six basis points to 3.34%. In currency trading, the renminbi strengthened by 0.6% against the U.S. dollar to close at 6.570. The People’s Bank of China (PBOC) injected RMB 800 billion (about USD 121 billion) in medium-term loans into the banking system and left interest rates on hold for the seventh straight month. The central bank also kept its one-year medium-term lending facility rate to financial institutions unchanged at 2.95%.

The Week Ahead

Important data being released this week include personal income and spending breakdowns, FOMC minutes, and building permits.

Key Topics to Watch

• Chicago Fed national activity index
• Markit manufacturing PMI (preliminary)
• Markit services PMI (preliminary)                                         
• Case-Shiller national home price index
• Consumer confidence index
• Initial jobless claims (regular state program, SA)
• Initial jobless claims (federal & state, NSA)
• Continuing jobless claims (regular state program, SA)
• Continuing jobless claim (federal & state, NSA)
• Gross domestic product revision (SAAR)
• Durable goods orders
• Core capital goods orders
• Advance report on trade in goods
• New home sales
• Consumer sentiment index (final)
• Personal income
• Consumer spending
• Core inflation
  

Market Summary

Stock Markets

The S&P 500 closed at a new record high and global equities posted a second week of gains following news of progress in developing a COVID-19 vaccine. Stocks surged on Monday after Pfizer and BioNTech announced that their vaccine had 90% effectiveness in their large study, triggering a wave of hope and optimism that a medical solution will address the health crisis and accelerate the economic recovery. Cyclical sectors that have been negatively impacted by the pandemic and are more sensitive to the reopening of the economy outperformed last week, while sectors that have benefited from the pandemic underperformed. A similar rotation occurred across asset classes, with small-cap and international stocks outpacing U.S. large-caps. The encouraging vaccine news is consistent with the view that the economic recovery will be sustainable heading into and through 2021, but near-term uncertainties could still trigger volatility. Mass production and widespread distribution of a vaccine will likely take months, and in the meantime the virus will continue to shape the direction of the economy, suggesting that balance and diversification across sectors and asset classes are warranted.

US Economy

In what surely qualifies as some of the more encouraging news of the year, the announcement that a Pfizer vaccine showed promising trial results powered markets higher last week. The coast isn’t clear, but the light at the end of the pandemic tunnel got a bit brighter. With U.S. equities up an impressive 10% in just the past two weeks, and with the spotlight likely to shine intensely not only on virus-case counts, but also on policy responses and the path of the recovery as we head into the holiday season things appear positive but guarded.

Gains were solid but not steady last week, with the S&P 500 rising 2.2% in see-saw fashion. Analysts think the improved prospects for a vaccine establish a bit of a safety net under the market, but they won’t prevent spells of weakness. The spike in new COVID-19 cases and hospitalizations will likely be the key instigator of market swings in the weeks ahead. The strong rally in U.S. stocks since midsummer has been driven by progress in reopening the economy. The surge in infections stunts that progress, with several areas, including Chicago and New York, imposing tighter restrictions to mitigate the spread. Analysts don’t think we’ll return to the lockdown measures of earlier this year, but the pace of the rebound in economic activity is likely to stall somewhat in the coming months. We suspect market sentiment will oscillate between vaccine optimism and near-term infection and reopening concerns.  

Metals and Mining

Gold prices were on track for their weakest performance since September, falling 5 percent Monday (November 9) as markets opened. News of a potential COVID-19 vaccine from Pfizer paired with US election results appearing to favor Biden pushed the currency metal lower. The positivity aided in a stock market rally as well as a rise in bond yields leading to a minor gold liquidation. The optimism waned mid-week as coronavirus cases in North America and Europe surged higher. The analyst also noted gold will face headwinds moving towards US$1,900 per ounce. Dipping as low as US$1,858 gold prices began to trend higher on Wednesday but remained well off the US$1,900 threshold. In the face of November’s price dip, the October gold ETF report logged an 11th consecutive month of net inflows. In its latest report, the World Gold Council notes gold ETF holdings rose by 20.3 tonnes in October. An ounce of gold was priced at US$1,889 on Friday. Silver prices mirrored gold’s performance, falling sharply to start the week. After edging to a 6-week high US$25.92 per ounce, values tumbled to US$23.77 midday Monday. Trading near US$24 for the remainder of the session prices climbed higher Friday, approaching the US$25 level. Silver was moving for US$24.66 on Friday. Prices for platinum also faced volatility dropping as low as US$846 per ounce. A brief rally late Monday held until late Tuesday when prices hit US$883. The uptick was quickly reversed when platinum fell back to US$854 Wednesday. By Friday morning prices had crept back to US$883. Unlike the other precious metals, palladium’s reaction to market positivity was delayed. Holding above US$2,300 per ounce off production challenges in South Africa early in the week, values slid to US$2,188 to end the day Wednesday. Palladium has not recovered those mid-session losses and was trading for US$2,196 on Friday.

The base metals space fared similarly, with a broad decline registering mid-week. Copper opened the period trading at a year-to-date high of US$7,034 per tonne. The value of the red metal has not breached the US$7,000 level since June 2018. By Wednesday the momentum was lost when prices slumped to US$6,68.50. Concern surging COVID-19 cases in various countries will lead to a new round of lockdowns has dampened economic recovery hopes. The uncertainty has also made forecasting difficult. Roskill estimates global GDP is likely to decline 3.9 percent this year. This will be followed by a 5.7 percent rebound in 2021. Copper was selling for US$6,904 a tonne Friday. Zinc prices hit an 18-month high of US$2,664.50 per tonne Monday driven by market optimism. Zinc’s upward trend has prompted Fastmarkets to forecast an upside target price of US$2,800 for the metal. By Friday zinc had pulled back to trade for US$2,593. Nickel opened the session at US$15,862 per tonne and was able to end the week slightly higher at US$15,874. Lead also made a strong showing mid-week reversing a small dip, to close the week at US$1,868.50 per tonne.

Energy and Oil

Oil prices surged early in the week on enormously optimistic vaccine news. But prices withered as the week wore on, as the short-term Covid-19 outlook continues to darken. The U.S. posted nearly 160,000 positive cases on Thursday, more than doubling the daily case-count in less than two weeks. Crude is still set to close out the week with price gains, but the short-run outlook is pessimistic. At the same time, new restrictions may hurt demand. The vaccine won’t be widely available for months at the earliest, and in the meantime, new partial stay-at-home orders have been announced in a growing number of places. Last week, Austria, France, Germany, the UK, and Portugal all began implementing a wide variety of restrictions that will no doubt compound the oil demand problem. The IEA downgraded its demand outlook by 1.2 mb/d for the fourth quarter in its latest Oil Market Report. “With a Covid-19 vaccine unlikely to ride to the rescue of the global oil market for some time, the combination of weaker demand and rising oil supply provide a difficult backdrop” to the OPEC+ meeting, the IEA said. “Unless the fundamentals change, the task of rebalancing the market will make slow progress.” On one positive note, the U.S. could add 23 GW of wind capacity this year, substantially more than the previous record set back in 2012 at 13.2 GW. One of the main drivers is the phasing down of the federal production tax credit.

Natural gas spot prices rose at most locations this week. The Henry Hub spot price rose from $2.60 per million British thermal units (MMBtu) last week to $2.77/MMBtu this week. At the New York Mercantile Exchange (Nymex), the price of the December 2020 contract decreased 1¢, from $3.046/MMBtu last week to $3.031/MMBtu this week. The price of the 12-month strip averaging December 2020 through November 2021 futures contracts declined 1¢/MMBtu to $2.991/MMBtu.

World Markets

Shares in Europe rallied with global markets on encouraging news regarding the development of a vaccine to combat the novel coronavirus, although surging coronavirus infections and lockdowns in key European economies capped the gains. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 5.13% higher. Major European indexes also posted strong gains: Germany’s DAX Index climbed 4.78%, France’s CAC 40 surged 7.45%, and Italy’s FTSE MIB added 6.21%. The UK’s FTSE 100 Index rose 6.88%.

Core eurozone bond yields climbed after Pfizer and BioNTech disclosed that their vaccine candidate had exhibited strong efficacy in Phase III trials. The movement in 10-year German bond prices was especially pronounced. Yields subsequently moderated on rising coronavirus cases, ongoing lockdown measures, and the European Central Bank’s (ECB’s) dovish comments. Peripheral eurozone bond yields largely tracked their peers in the core European economies.

Chinese stocks declined slightly for the week as unfavorable macro news outweighed generally positive corporate earnings. The Shanghai Composite Index shed 0.1%, while the large-cap CSI Index ended down 0.6%. In credit markets, the yield on China’s 10-year sovereign bond increased by six basis points to end at 3.28%, as solid monthly trade data underscored the strong post-pandemic recovery. Corporate bonds sold off following a default by state-owned Yongcheng Coal & Electricity, an event that proved disruptive to China’s money markets and led the country’s central bank to inject liquidity into the financial system. Foreign flows into China’s bond market slowed in October following an especially strong third quarter, which recorded inflows of USD 21 billion for each month. In currency trading, the renminbi stayed broadly unchanged and ended at 6.610 against the U.S. dollar.

The Week Ahead

Important economic data being released include retail sales and industrial production on Tuesday, building permits on Wednesday, and the leading index on Friday.

Key Topics to Watch

• Empire state index
• Retail sales
• Retail sales ex-autos
• Import price index
• Industrial production
• Capacity utilization
• Business inventories
• Home builders index
• Housing starts
• Building permits
• Initial jobless claims (state program, SA)
• Initial jobless claims (total, NSA)
• Continuing jobless claims (state program, SA)
• Continuing jobless claims (total, NSA)
• Philly Fed index
• Existing home sales
• Index of leading economic indicators

Market Summary

Stock Markets

U.S. stocks logged their best weekly gain since early April as investors reacted to the increased possibility of a divided government, including a potential Biden win and continued Republican control in the Senate. The final results of the U.S. election are still unknown as of Saturday. However, the market began to price in the scenario of a split government that potentially reduces the likelihood of immediate tax hikes and increased regulations, while not removing the potential for an agreement on some form of fiscal-aid package.

On the economic front, the jobs report showed that despite the lack of additional stimulus, election uncertainty, and rising virus cases, the labor market continued to heal, signaling that the economic recovery is still on track.

US Economy

Stocks rallied sharply, logging a 7.3% gain for the full week. Markets found some relief in the prospects of a divided government, with a Biden presidency and a Republican-controlled Senate reducing the likelihood of immediate tax hikes and increased regulations, while not removing the potential for an agreement on some form of fiscal-aid package. Analysts note that Washington’s composition is not yet set in stone given contested outcomes in certain states and Georgia’s two potential run-off elections for Senate seats. Analysts don’t think investors should let their guard down just yet when it comes to election-driven volatility, but we believe the week’s gains are consistent with our long-standing view that the economic recovery, along with monetary- and fiscal-policy tailwinds, will be behind the wheel as we advance, not simply the occupant of the Oval Office.

Metals and Mining

Gold edged toward US$1,960 per ounce on Friday as the US election tally dragged into its fourth day. In search of safe havens, investors kept the yellow metal well above US$1,900. A poor showing from the US dollar, which recorded its worst week since March, also aided gold’s ascent. The presidential uncertainty benefited the broader resource sector, with precious and base metals on track to end the week higher than they were on Monday. By Friday, gold had added an impressive 3.6 percent to its value since opening on Monday at US$1,889. The potential for a contested election added volatility to markets, with the Dow Jones Industrial Average slipping 158 points on Friday. It’s expected that monetary policy from the winning party will be a catalyst for gold’s further climb. Whether the yellow metal will enter record-setting territory again this year remains unknown, but Frank Holmes, CEO and chief investment officer at US Global Investors thinks US$2,000 is in sight in the short term. Longer term, he believes a price of US$4,000 is possible. On Friday, gold was valued at US$1,942.30. Silver also trended higher starting on Wednesday, but experienced some headwinds on Friday morning. Hitting US$25.93 per ounce before pulling back, the white metal added as much as 8 percent this week, its best performance since early August. Year-to-date, silver has increased 43 percent from its January start, and is positioned to continue to move higher off rising industrial and safe haven demand that favor the metal. Silver was holding in the US$25.34 range as Friday. Market volatility was also positive for platinum, pushing the catalyst metal above US$900 per ounce for the first time since September 18. Friday morning saw platinum reach US$908 before a reversal sent the metal back to the US$890 range. As platinum struggled to hold onto gains made since Monday’s US$849 start, palladium rocketed higher, adding the most to its value in the precious metals sector. Registering its best performance since March, palladium soared from US$2,077 per ounce on Monday to US$2,336, a 12 percent rise.

The base metals also trended higher throughout the week. Copper made a modest 1 percent climb in the first week of November. The red metal continues to trade near its year-to-date high of US$6,953 per tonne, which it reached on October 21. Copper’s gains this period have been attributed to a weakening US dollar index. As of Friday, copper was moving for US$6,798. Zinc prices soared to a year-to-date high this session, reaching US$2,593 per tonne. Since markets tumbled in March, zinc has added more than 46 percent to its value. On Friday morning, zinc was holding at US$2,593. After reaching its year-to-date high in late October, nickel has shed some of those gains, but remains in the US$15,000 per tonne range. A resurgence in industrial demand as supply chains strengthen has benefited the metal. Nickel was trading for US$15,450 to end the week. Despite rallying past US$1,800 per tonne this week, lead prices remain under pressure. The metal crept towards the US$2,000 per tonne range in mid-September.

Energy and Oil

It appears that Joe Biden will become the 46th resident of the United States barring the current legal challenges in play. Still, assuming Biden wins, he will take office with a divided government. He will have little wiggle room in Congress without Republican support, and he will also have his hands full with multiple crises – the pandemic, unemployment, climate change, and deep political division. Barring a sweep of two January Senate races in Georgia, presumed President-elect Joe Biden will struggle to push through major green stimulus as he had proposed unless he can somehow bring Sen. Mitch McConnell on board with concessions elsewhere. That leaves executive authority, something President Trump used heavily during his four years. A few possibilities jump out: rejoining the Paris Climate agreement, nixing Keystone XL and possibly the Dakota Access pipeline, slowing down drilling in Alaska and reinstating methane regulations on drilling. Plenty of other actions are possible, but may not be immediate, such as stricter fuel economy standards, reduced permitting for drillers on federal lands, greater environmental enforcement, etc. But big-spending items will require an act of Congress. Natural gas spot prices fell at most locations this week. The Henry Hub spot price fell from $3.06 per million British thermal units (MMBtu) last week to $2.60/MMBtu this week. At the New York Mercantile Exchange (Nymex), the November 2020 contract expired last week at $2.996/MMBtu. The December 2020 contract price decreased to $3.046/MMBtu, down 25¢/MMBtu from last week to this week. The price of the 12-month strip averaging December 2020 through November 2021 futures contracts declined 11¢/MMBtu to $3.001/MMBtu.

World Markets

Shares in Europe rallied in sympathy with U.S. equities while also receiving a lift from the generally strong quarterly earnings reported by European corporations and the additional stimulus measures announced in the UK. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 7.02% higher, while Germany’s DAX Index rallied 7.99%, France’s CAC 40 gained 7.98%, and Italy’s FTSE MIB climbed 9.69%. The UK’s FTSE 100 Index advanced 5.97%.

Core eurozone bond yields bounced around but ended the week roughly level. The German 10-year bund yield, for example, plummeted on Wednesday after early U.S. election results proved indecisive. This downward pressure eased as the odds of a Biden victory and a divided Congress appeared to increase. Yields on peripheral eurozone bonds fell overall. The growing likelihood of a Biden win drove demand for riskier assets, pushing the yield on Italy’s 10-year bonds to record lows on Friday. UK gilt yields largely tracked core eurozone yields.

Chinese stocks advanced as the prospect of a Biden presidency raised the outlook for improved U.S.-China relations. The benchmark Shanghai Composite Index ended up 2.2% and the large-cap CSI 300 Index rose 3.4%, according to Reuters data. The yield on China’s 10-year government bond increased to 3.22% as economic data showed the country’s recovery was on track. In currency trading, the renminbi rose 1.1% versus the dollar and closed at 6.621. Many policy analysts see scope for more cordial U.S.-China relations in trade, cross-border investment, and climate change. However, they caution that a major reengagement with China appears unlikely and that U.S. policy toward China regarding intellectual property rights, technology transfer, and national security may not change much under a Biden administration.

The Week Ahead

Important economic data being released this upcoming week include the Unemployment Rate, the Fed’s upper bound key interest rate, and various PMI series.

Key Topics to Watch

• NFIB small-business index
• Job openings
• Initial jobless claims
• Initial jobless claims (total, NSA)
• Continuing jobless claims (regular state program)
• Continuing jobless claims (total, NSA)
• Consumer price index
• Core CPI
• Federal budget
• Producer price index
• Consumer sentiment index               

Market Summary