Global Equity Markets Higher
STOCK INDECIES FUTURES
Global equity markets overnight were higher with markets in Shanghai and Hong Kong tracking lower with declines of 0.5% to 1%. While the stock market bulls have depended on the passage of a stimulus package for a long time, an official deal should result in more buying. In the end, two long held uncertainties of BREXIT and stimulus should no longer limit the markets. Therefore, it is possible that equities will shift their focus back to the rate of US infections and the progress in distributing the vaccines.
DOLLAR: While the Dollar continues to track sideways and is building consolidation support, we assume that the trend remains down and fresh new lows for the move are likely ahead. Going forward it would appear that two major global economic headwinds (BREXIT & Stimulus battling) will be put in the rearview mirror this week and those threats have been the mainstay of the bull camp in the Dollar. The focus in the Dollar trade is now likely shift to the race to implement vaccines in the face of surging infections. However, we would note that the CDC new daily infection count figures have seen two readings below 175,000 after seeing daily readings above 200,000 for several weeks. Dollar positioning in the Commitments of Traders for the week ending December 21st showed Non-Commercial & Non-Reportable traders added 1,230 contracts to their already short position and are now net short 15,335.
EURO: The Euro appears to have regained footing on its charts and without evidence of mechanical/physical trade turmoil the currency should make new highs for the year in the coming sessions. In fact, official passage of a US stimulus package should spark at least a return to contract highs up at 1.23 in the March Euro. Euro positioning in the Commitments of Traders for the week ending December 21st showed Non-Commercial & Non-Reportable traders were net long 203,342 contracts after increasing their already long position by 2,013 contracts.
YEN: The downward bias remains in the Yen with the declines likely the result of year end profit taking by longs and perhaps by those seeing further declines in global uncertainty following this week’s major fundamental developments. In fact, without the unending explosion in infections the Yen would likely be trading below 96.00.
SWISS: After two weeks of corrective action, slack US scheduled data and weakness in global equities last week, the Swiss now appears to have found solid support at the 1.125 level. The bias is up with near term resistance and targeting seen up at 1.1341.
POUND: The Pound remains off balance despite signs of recovery in the Euro and Swiss. Apparently, getting beyond the unending uncertainty of a blueprint to unwind the relationship with Europe, is not the end of uncertainty regarding trading procedures and possible conflict with mainland Europe.
CANADIAN DOLLAR: With the Dollar showing signs of resuming its down trend and Canadian building permits recently providing some fresh economic hope, we see the March Canadian Dollar forging a 6-day high in the coming sessions.
INTEREST RATE MARKET FUTURES
With the BREXIT situation finally ending, a stimulus package likely to move closer to law today and higher global equity market action early on the fundamental bias is pointing down in Bonds and Notes. However, a very thin global economic report-slate overnight, and only a 3rd tier House Price report due out from the US today we see narrow trading ranges. While we expect to see some minor gyrations off headline stories flowing from the Senate vote on the larger stimulus package the trade is largely anticipating a deal and the market’s reaction is likely to be subdued. However, it is possible that the markets will see a reaction to a seven Year Note auction at mid-session but given that yields are nearing the highest of the pandemic period, demand for the instruments today might be solid. On the other hand, the markets have shown a preference for longer maturities and if demand is soft that could signal a general deterioration of interest in US Treasuries and in turn renewed confidence of better returns in equities.
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