CFD Markets News and Forecasts — 30-12-2020

• Says the new Covid variant is “now spreading across most of England”
• Says they can't give timelines on when any rollout will be completed; it does depend on delivery schedule, manufacturing schedule, of the vaccine
• Reiterates that UK's government has ordered enough doses of the vaccines for every single adult in the country if they want one
• We end 2020 still with great challenges but also with hope and confidence that in 2021 we have brighter future ahead

• There will be changes when UK leaves EU's orbit; "things will work differently"
• Trade deal with EU brings certainty for everybody
• Virus is really surging in some parts of the country and increasing virtually everywhere
• We have some tough weeks ahead
• The new variant is making keeping kids in school even more difficult
• We have tough weeks ahead

The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories dropped by 6.065 million barrels in the week ended December 25. Economists had forecast a decrease of 2.583 million barrels.

At the same time, gasoline stocks declined by 1.192 million barrels, while analysts had expected a build of 1.662 million barrels. Distillate stocks surged by 3.095 million barrels, while analysts had forecast an increase of 0.529 million barrels.

Meanwhile, oil production in the U.S. remained unchanged at 11.000 million barrels a day.

U.S. crude oil imports averaged 5.3 million barrels per day last week, down by 238,000 barrels per day from the previous week.

The National Association of Realtors (NAR) announced on Wednesday its seasonally adjusted pending home sales index (PHSI) fell 2.6 percent m-o-m to 125.7 in November, after a revised 0.9 percent m-o-m decline in October (originally a 1.1 percent m-o-m drop). This marked the third consecutive monthly drop in the value of the index.

Economists had expected pending home sales to be flat m-o-m in November.

On y-o-y basis, the index jumped 16.4 percent, following an unrevised 20.2 percent climb in October.

According to the report, all four regional indices recorded month-over-month increases in November, but remained higher on a year-over-year basis.

The index in the West plunged 4.7 percent m-o-m to in November to 111.3, which is up 10.4 percent from November 2019. The Northeast PHSI fell 3.3 percent m-o-m to 108.6 in November, a 15.3 percent increase from a year ago. In the Midwest, the index dropped 3.1 percent m-o-m to 115.9 last month, up 14.1 percent from November 2019. Pending home sales in the South declined 1.1 percent m-o-m to an index of 150.0 in November, up 21.3 percent from a year ago.

"The latest monthly decline is largely due to the shortage of inventory and fast-rising home prices," noted Lawrence Yun, NAR’s chief economist. "It is important to keep in mind that the current sales and prices are far stronger than a year ago."

MNI Indicators’ report revealed on Wednesday that business activity in Chicago grew in December at a slightly faster pace than in November, recording its sixth straight month of expansion.

The MNI Chicago Business Barometer, also known as Chicago purchasing manager's index (PMI) came in at 59.5 in December, slightly up from 58.2 in November.

Economists had forecast the index to fall to 57.0.

A reading above 50 indicates improving conditions, while a reading below this level shows worsening of the situation.

According to the report, Employment and Order Backlogs registered the largest monthly gains among the main five indicators, while New Orders recorded the biggest drop.

• Appeals for $4 bln to buy COVID-19 vaccines for distribution in lower- and middle-income countries through COVAX vaccine facility
• Says this is the challenge we must rise to in New Year
• Vaccines offer great hope to turn the tide of the pandemic
• But to protect the world, we must ensure that all people at risk everywhere are immunized
• World should walk the last miles of this crisis together, helping each other along the way, from sharing vaccines fairly, to offering accurate advice, compassion and care to all who need them

U.S. stock-index futures rose on Wednesday, as hopes for a vaccine-led economic recovery in 2021 outweighed uncertainty over an increase of the COVID relief payments by the U.S. Senate.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

The Commerce Department announced on Wednesday its preliminary estimate showed that the U.S. wholesale inventories edged down 0.1 percent m-o-m in November, following a revised 1.2 percent m-o-m increase in October (originally a 1.1 percent m-o-m growth). This was the first monthly decline in wholesale inventories since July.

According to the report, stocks of nondurable goods decreased 1.4 percent m-o-m in November, while durable goods inventories rose 0.9 percent m-o-m.

In y-o-y terms, wholesale inventories dropped 2.2 percent in November.

USD fell against its major counterparts in the European session on Wednesday as uncertainty over a possible increase of the COVID relief payments by the U.S. Senate was outweighed by the UK's approval of a new coronavirus vaccine. 

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, dropped 0.32% to 89.71.

Senate majority leader Mitch McConnell blocked an attempt by Democrats to set up a vote on a House-passed bill, increasing stimulus payments for most Americans from $600 to $2,000. He said that senators would address the measure this week, but the outcome remains uncertain. The latest setback likely kills the possibility of approval of boosted payments under the current Congress, which expires this weekend.

The market sentiment, however, got a lift from the approval of the coronavirus vaccine developed by AstraZeneca (AZN) and Oxford University by the UK, which battles a more contagious variant of the coronavirus. The vaccine will become the second COVID-19 vaccine in use in Britain. Earlier this month, the UK's health regulators gave emergency authorization to the Pfizer/BioNTech's vaccine.

According to Reuters, officials in Switzerland's canton of Lucerne said on Wednesday that a Swiss person who was among the first in the country to be vaccinated with a COVID-19 shot later died. However, they did not indicate whether the death was related to the inoculation. “We are aware of the case,” a spokesperson said. The matter had been referred to the Swiss drugs regulator Swissmedic.

Lucerne became the site of the first vaccinations in Switzerland beginning last week, with a shot from Pfizer/BioNTech given primarily to elderly people. Switzerland has gotten 107,000 vaccine doses, so far, and expects to receive 250,000 per month starting 2021.

Norges Bank made a statement on its planning foreign exchange transactions for January 2021. In its press release, the Bank said: "The daily foreign exchange transactions in January are lower than implied by the budget figures for 2021. This is to ensure that Norges Bank has sufficient foreign exchange for sale through the month. Norges Bank maintains a separate portfolio, called the petroleum buffer portfolio (PBP), to manage the flows related to foreign exchange transactions. The government’s cash flow from petroleum activities in foreign currency (revenue from the State’s Direct Financial Interest, SDFI) is transferred to the PBP; the same applies to transfers of foreign exchange from the Government Pension Fund Global (GPFG). Norges Bank sells this foreign exchange from the PBP.

In planning transactions, Norges Bank will seek to avoid situations where the level of the portfolio falls below zero. The daily foreign exchange sales entail a decline in the PBP through the month, even if some of the foreign exchange sold is covered by current foreign exchange revenue from the SDFI. The lowest level of the PBP through the month sets a limit for the size of daily foreign exchange sales. The size of the PBP rises markedly again at the end of each month when foreign exchange is transferred from the GPFG."

• Recent surge of COVID-19 cases is largely due to new variant, which may be up to 70% more infectious than the original one
• The 'suppress the virus' bit has got a whole lot harder since the new variant really got going over December
• Now, majority of new cases in the UK are the new variant; it is much, much easier to transmit from one person to another
• It is absolutely critical that people follow rules and do everything they can to stop spread

• Says there will be no compulsory vaccination for healthcare workers
• Expects thorough and rapid processing of EU application for approval of Oxford/AstraZeneca's coronavirus vaccine by European authorities

Reuters reports that global index publisher FTSE Russell said it may delete more Chinese companies from its global benchmarks, after the Trump administration on Monday strengthened an executive order barring U.S. investment in firms with alleged Chinese military backing.

The U.S. Treasury Department on Monday published guidance clarifying that the executive order, released in November, would apply to investors in exchange-traded funds and index funds as well as subsidiaries of Chinese companies designated as owned or controlled by the Chinese military.

FTSE Russell, which has announced the exclusion of nine Chinese companies from its global indexes in response to the executive order, said in a statement late on Monday that it is reviewing the U.S. clarification and will make evaluation for “potential additional exclusions”.

FTSE Russell reiterated it will publish an announcement on Jan. 4, 2021, with any additional deletions being effective from Jan. 7.

FXStreet reports that China’s Xinhua News Agency came out with the news quoting statements from the People’s Bank of China (PBOC) as it unveiled details of quarterly monetary policy committee held Friday.

“China will implement a prudent monetary policy that is flexible, precise, reasonable and moderate, and keep it consistent, stable and sustainable,” said the PBOC, per the news.

The PBOC also vowed further monetary support for the real economy, stressing more financial aid for small and micro firms as well as those involved in technological innovation and green development

Reuters reports that Britain on Wednesday became the first country in the world to approve a coronavirus vaccine developed by Oxford University and AstraZeneca as it battles a major winter surge driven by a new, highly contagious variant of the virus.

Britain has already ordered 100 million doses of the vaccine, and the government said it had accepted the recommendation from the Medicines and Healthcare products Regulatory Agency (MHRA) to grant emergency authorisation.

The approval is a vindication for a shot seen as essential for mass immunisations in the developing world as well as in Britain, but one that has been dogged by questions about its trial data that make it unlikely to be approved very soon in the European Union or the United States.

Reuters reports that with a call for both sides to look forward to a new chapter in their relationship, EU chiefs signed the Brexit trade deal agreed with Britain and sent the text off to London on Wednesday for Prime Minister Boris Johnson to add his signature.

"It is of the utmost importance for the European Union and the United Kingdom to look forward, in view of opening a new chapter in their relations," the bloc said in a statement, calling for joint action on climate change and international affairs.

Britain formally left the EU nearly a year ago and the new partnership agreement will regulate ties from Jan. 1 on everything from trade to transport, energy links and fishing.

After both sides have signed, the deal will be in place until the end of February, pending final approval by the European Parliament that would make it permanent.

RTTNews reports that flash data published by the statistical office INE showed that Spain's consumer prices continued to decline at the end of 2020.

Consumer prices decreased 0.5 percent year-on-year in December after easing 0.8 percent in November. Prices have been falling since April.

Likewise, the annual fall in the harmonized consumer prices slowed to 0.6 percent from 0.8 percent. Economists had forecast an annual fall of 0.7 percent.

Month-on-month, consumer prices were up 0.2 percent, the same rate of growth as logged in November.

FXStreet reports that the long-term interest rate in the eurozone is now zero and the core eurozone countries' long-term interest rate is now negative. However, holdings of public sector bonds or debt have not declined. One possible explanation is financial repression, rules that force investors to hold public debt, according to economists at Natixis.

“Financial repression is the set of rules that force investors to hold public debt. This can involve for foreign central banks, rules that limit investment to risk-free bonds, with a virtual obligation to hold bonds from core euro-zone countries. For eurozone banks, the liquidity ratio (LCR) requires them to hold liquid risk-free assets, including in particular government bonds, which is one of the explanations for the high level of government debt held by banks. For insurers, the Solvency II rules (Solvency Capital Requirement, SCR) are based on an analysis of the risk of loss over a 12-month horizon, and therefore heavily penalise risky assets, driving insurers to buy risk-free bonds. Moreover, as euro funds have a capital guarantee at all times, they are also inevitably heavily invested in risk-free bonds.”

According to the report from KOF Economic Research Agency, the economic barometer remains virtually unchanged at the end of the year. The sharp declines that the barometer underwent in early 2020 have been offset by a rapid recovery during the summer. The barometer already reached a value above its long-​term average again in August and was able to maintain this level during the second half of the year. However, the prospects for the Swiss economy remain subdued at the beginning of 2021 due to the ongoing pandemic.

The KOF Economic Barometer stands at 104.3 points in December, 0.6 points higher than in November (revised from 103.5 to 103.7 points). The slight increase is driven by bundles of indicators from the manufacturing sector and private consumption. An additional positive signal is sent by indicators for the financial and insurance service sector. By contrast, negative impulses are coming from indicators for foreign demand.

The positive developments within the manufacturing sector stem primarily from indicators for the machine and vehicle construction industry, followed by indicators for the textile and clothing industry, the electrical industry as well as the paper and printing sector. 

In the goods producing sector (manufacturing and construction) indicators for the assessment of new orders and the purchase of intermediate goods point in a positive direction.

During today's Asian trading, the US dollar fell against most of the world's major currencies, as traders adjust positions at the end of the year in view of the likely continuation of risk appetite in the markets next year.

"The economy is recovering, the policy of central banks will remain stimulating in the coming years, and this suggests that the background for risky assets will be favorable. The reality is that markets will focus on the recovery, " said Brian Levitt, global markets strategist at Invesco.

The ICE index, which tracks the dollar's performance against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), fell 0.15%.

Meanwhile, the situation with the coronavirus in the world remains difficult. The first case of infection with a new type of coronavirus, which previously imposed strict restrictive measures in the UK, was detected in the US state of Colorado.

At the same time, hopes for large direct payments to americans as part of a new package of measures to support the economy are not yet justified. On the eve of the Republican majority leader, Senator Mitch McConnell, blocked a vote in the Senate on a bill passed by the House of Representatives that provides for an increase in direct payments to americans to $2 thousand from the previously planned $600.

CNBC reports that according to the chief investment officer of a Chinese financial services firm, China’s IPO market is set to keep booming next year even after a blockbuster 2020.

It has been a “very exciting” year for China’s domestic stock market, William Ma of Noah Holdings (Hong Kong) told CNBC, adding about $75 billion has been raised from roughly 400 listings.

“In terms of the IPO size and volume in the domestic China market, it has hit historical ... peak in the past 10 years,” said Ma, chief investment officer at the firm.

That trend looks likely to continue, he said, with “huge demand” coming from both domestic and institutional investors while companies in the new economy sector look to go public.

Stock listings of Chinese firms have dominated the rankings in 2020, according to research from EY.

According to the report from Nationwide Building Society, annual house price growth rose to a six-year high of 7.3% at the end of 2020. Economists had expected a 6.7% increase.

Prices up 0.8% month-on-month, after taking account of seasonal factors. Economists had expected a 0.4% increase.

All regions saw a pickup in house price growth rates in Q4, with East Midlands the strongest region.

Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said: “Annual house price growth accelerated further in December, reaching a six year high of 7.3%, up from 6.5% in the previous month. Prices rose by 0.8% month-on-month, after taking account of seasonal effects, following a 0.9% rise in November. House prices ended the year 5.3% above the level prevailing in March, when the pandemic struck the UK. The resilience seen in recent quarters seemed unlikely at the start of the pandemic. Indeed, housing market activity almost ground to a complete halt during the first lockdown as the wider economy shrank by an unprecedented 26%. But, since then, housing demand has been buoyed by a raft of policy measures and changing preferences in the wake of the pandemic".

EUR/USD

Resistance levels (open interest**, contracts)

$1.2351 (3161)

$1.2325 (1246)

$1.2307 (1290)

Price at time of writing this review: $1.2284

Support levels (open interest**, contracts):

$1.2202 (3532)

$1.2170 (1625)

$1.2132 (2297)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date January, 8 is 78474 contracts (according to data from December, 29) with the maximum number of contracts with strike price $1,2100 (4891);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3719 (2150)

$1.3646 (1005)

$1.3591 (1210)

Price at time of writing this review: $1.3544

Support levels (open interest**, contracts):

$1.3417 (820)

$1.3355 (746)

$1.3277 (1880)

Comments:

- Overall open interest on the CALL options with the expiration date January, 8 is 58569 contracts, with the maximum number of contracts with strike price $1,4000 (33133);

- Overall open interest on the PUT options with the expiration date January, 8 is 29578 contracts, with the maximum number of contracts with strike price $1,2800 (2935);

- The ratio of PUT/CALL was 0.51 versus 0.50 from the previous trading day according to data from December, 29

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

RTTNews reports that China downgraded its economic growth for 2019, which is set to provide a low base for the 2020 growth calculation.

The National Bureau of Statistics revised down the GDP growth for 2019 to 6.0 percent from 6.1 percent. For 2019, the government had targeted 6.0-6.5 percent annual expansion.

This year China avoided setting an economic growth target for the first time due to the uncertainty posed by the outbreak of Covid-19.

The NBS is set to publish the fourth quarter GDP data on January 18.