Prepare for Reduced Volumes
Today will be the last full trading session before traders in the US take off for the Thanksgiving holidays
Today will be the last full trading session before traders in the US take off for the Thanksgiving holidays. With reduced participation, volumes are likely to be lower than usual.
With Trump announcing the first of his pardons for his friends and family, it seems like he’s taken another step to accepting that he’s into the last legs of his presidency.
- Gold & Silver — Gold support is at 1780–90. Short term support for Silver is at 22.50–60 while major support is at 21.80–90. Market traded in a relatively narrow range. The position wash-out seems to be fizzling out.
Key risks — Higher US interest rates and a stronger USD remain the main risks for now.
WHAT HAPPENED YESTERDAY
- Among the data that was released to investors before Thanksgiving Day, two reports stood out: weekly initial claims were higher than expected at 778,000 (expected 735,000), and the pace of October new home sales was better than expected at 999,000 units (expected 977,000). Separately, the FOMC Minutes for the November meeting indicated that participants were debating ways to enhance guidance for asset purchases while believing that the current pace of purchases remained appropriate.
- U.S. Personal income declined -0.7% m/m in October (expected 0.0%) following a downwardly revised 0.7% increase (from +0.9%) in September. Personal spending rose +0.5% (expected +0.3%) following a downwardly revised +1.2% increase (from +1.4%) in September. The PCE Price Index was unchanged, as was the core PCE Price Index, which excludes food and energy. Economists surveyed expected a 0.1% m/m increase in the core PCE price Index.
- The Dollar edged lower against a basket of currencies on Wednesday, trading near a three-month low. The avalanche of mixed U.S. data had little impact on the USD, and it appeared traders were more focused on pre-Thanksgiving holiday position adjustments than anything else. Sterling edged higher on Wednesday after British finance minister Rishi Sunak announced a one-year spending plan to parliament, along with new forecasts for the country’s coronavirus-hit economy.
- In corporate news, The Wall Street Journal reported that Salesforce (CRM 246.82, -14.02, -5.4%) has been in talks to acquire Slack (WORK 40.70, +11.12, +37.6%), which sent CRM shares down 5% and WORK shares up 38%. Gap (GPS 21.60, -5.27, -19.6%) shares plunged 20% following its earnings report.
U.S. HITS HIGHEST DEATH TOLL SINCE MAY WITH HOSPITALS ALREADY FULL
Daily U.S. deaths from COVID-19 surpassed 2,000 for the first time since May and with hospitals across the country already full, portending a surge in mortalities to come as the coronavirus pandemic casts a shadow over the holiday season.
The death toll reached 2,157 on Tuesday — one person every 40 seconds — with another 170,000 people infected, numbers that experts say could grow with millions of Americans defying official warnings and traveling for Thursday’s Thanksgiving holiday.
U.S. President-elect Joe Biden has promised to make fighting the pandemic his top priority upon taking office on Jan. 20 and will give a speech on the topic on Wednesday.
Biden will have the help of Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, who said on C-SPAN on Wednesday he had been in contact with Biden’s staff and was willing to serve on any task force.
UK BORROWING TO HIT PEACETIME HIGH AS ECONOMY FACES COVID EMERGENCY
Britain will borrow almost 400 billion pounds this year to pay for the massive coronavirus hit to its economy, finance minister Rishi Sunak said, as the budget deficit climbs to its highest level outside wartime.
“Our health emergency is not yet over. And our economic emergency has only just begun,” he told parliament, promising more money for health and to fight unemployment.
The Office for Budget Responsibility (OBR) estimated borrowing would be 394 billion pounds ($526 billion) in the 2020/21 financial year that began in April, slightly more than its last prediction in August.
At 19% of gross domestic product, that will be almost double its level after the global financial crisis which took nearly a decade of unpopular spending cuts to work down.
Rather than explain how to bring the debt down, Sunak sought to stress how spending would rise in the short term as Britain grapples with the fallout from the pandemic.
JOBLESS AID FOR NEARLY 14 MILLION AMERICANS TO EXPIRE THE DAY AFTER CHRISTMAS
The number of Americans receiving unemployment benefits under pandemic programs set to expire the day after Christmas continued to rise in early November, according to a Labor Department report released Wednesday.
The majority of people receiving emergency benefits, or 9.1 million, are enrolled in pandemic unemployment assistance (PUA), which expanded unemployment benefits to freelancers and self-employed people who wouldn’t usually qualify for this aid.
Some 4.5 million people collect pandemic emergency unemployment compensation (PEUC), which provides 13 extra weeks of benefits for people who have exhausted state benefits. Enrollment is growing steadily as more people use up their regular benefits, which last for up to 26 weeks in most states.
Both those programs expire on Dec. 26. Congress has not been able to agree on another round of fiscal stimulus to replace them. Democrats want more than $2 trillion in new benefits and Republicans favor a narrower bill that shields companies whose employees catch COVID-19 on the job from liability.
Thematic Context: “Yellen has called for increased government spending to boost the U.S. economy out of a deep recession brought on by the coronavirus and has frequently cited growing economic inequality in the United States as a threat to America’s values and its future. At Treasury, she would have a major role in influencing U.S. fiscal and tax policy, tools she did not have at the Fed, which she chaired from 2014 to 2018. She was the Fed’s vice chair from 2010 to 2014.
U.S. stocks picked up ground following the report, with investors seeing Yellen as a force for more fiscal action to combat the economic crisis unleashed by the COVID-19 pandemic, and as someone in a strong position to ensure the Treasury will continue to work closely with the Fed. This is a bullish development for risk assets.” — 24th Nov 2020
ECB Monetary Policy Meeting Accounts: The ECB will release the minutes of its October policy meeting. Investors will be looking for clues whether the ECB is planning additional easing before the end of the year.
Big Tech Is Going Vertical (Hardware & Semiconductor Renaissance)
The phrase “Owe the bank 500 dollars, that is your problem. Owe the bank 500 million — that is the bank’s problem.” is something that comes to mind for some of the tech monopolies right now. There is a shifting relationship between the largest software companies in the world and their suppliers. As the leading software companies have become ever-larger portions of the compute pie, it’s kind of become the problem of the tech companies and not the semiconductor companies that service them to push forward the natural limits of hardware. Software ate the world so completely that now the large tech companies have to deal with the actual hardware that underlies their stack. Especially as some companies like Intel have fallen behind.
Now the largest software companies are slowly becoming hardware companies and pursuing an integrated strategy that only can be achieved at the largest scale possible and with barriers of entry that are quickly expanding in addition to their well-known network effects. The walls are slowly rising, the moats slowly widening, and as we are on the cusp of a new hardware renaissance, the decisions the hyperscalers make now are going to have a long-lasting competitive shadow. More on this in time to come.
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Phan Vee Leung
CIO & Founder, TrackRecord