Santa Claus is clearly worried about potential disruptors to his annual gift distribution business from the likes of Amazon and their online ilk. Faced with an onslaught of data that suggests that the Christmas-tech disruptors were on course for a record year with the US consumer, Santa Claus appears to have returned to Wall Street overnight. Dropping off another round of goodies for investors whilst belly laughing “ho-ho-higher.”
Investors could take their choice as Santa Claus fought for market share against Mr Bezos, with investors eagerly opened the Christmas 2.0 vouchers falling from the sky. What does your Xmas 2.0 voucher say, young investor? Equities? No problem, let me set them all at record highs for you. Bonds? A little tougher, but I’ve dropped the 2’s -10’s curve yields a couple of bps for you. Oil? Certainly, let me add a per cent gain there for you. Gold? A little more tricky, but not impossible. Let me pop another $10 onto the previous closing price.
In fact, in an overnight session where investors could have bought any asset class they wanted and made money, the only thing Santa and his deep-pocketed private equity backers didn’t mess with, was the US dollar. The greenback eased, but only ever so slightly as to be almost unchanged. Santa was perhaps fearful of repercussions from the White House on potential currency manipulation. Rumours abounded on Capitol Hill that the President’s advisors were already scrutinising allegations that some of Santa’s presents were labelled “made in China”.
Wall Street’s “buy everything and win” afterglow will inevitably spill over to Asia today with most of the region back at work. Asia however, has been slightly more cautious of late and is unlikely to fully embrace Wall Street’s Christmas 2.0. One dark cloud potentially looming is China’s Industrial Profits data at 0930 SGT. Profits are expected to drop by 3.2% y/y. Although we now have a trade-deal ready to be signed in January allegedly, a worse than expected print may be enough to knock the wind out of Asia’s sails on the day.
A lot of excellent news is now priced into financial markets across the globe, but top picking remains a dangerous game; only for the brave and deep-pocketed. Strong moves at this time of the year always come with an ample risk warning. Resisting the temptation to come off the sidelines is always tough; as to paraphrase Yoda, “the FOMO is strong with this one.” Stay strong.
Equities
Wall Street set record highs overnight, led by the NASDAQ, where Amazon and Apple both reported that they were stealing Santa’s lunch with strong sales. the NASDAQ rose 0.73%, the S&P 500 rose 0.38%, and the Dow Jones rose 0.24%
Asia hasn’t bought into the overnight gains with the Nikkei 225, Kospi, Straits Time and ASX 200 all drifting back to flat after some initial gains. In all likelihood, regional markets are probably awaiting the China Industrial Profits data to pass without incident to greenlight some cautious gains for the day.
Currencies
The US dollar gave some ground overnight, but only ever so slightly, as every other asset class finished the day in the green in New York. EUR/USD regained 1.1100 and the GBP/USD consolidating at 1.2990. The trade-sensitive AUD/USD and NZD/USD both continued gaining, and both antipodeans are up nearly one per cent for the week.
The offshore Yuan, the USD/CNH, continues to trade sideways in its one week 6.9850 to 7.0100 range, trading at 6.9920 this morning. With an interim trade-deal seemingly tagged and bagged, and USD/CNH at the bottom of the recent range, the charts suggest it is building for a move lower. The initial target of a downside breakout in USD/CNH being the 6.9200 regions, the lows after the initial trade-deal announcement.
Oil
Another day, another rally for oil, albeit on below-average volumes. Brent crude rose 1.05% to $67.90 a barrel and WTI jumped 1.0% to $61.80 a barrel.
Brent crude is now eyeing the $70.00 regions, and WTI has resistance between $63.50 and $64.00 a barrel. Given the momentum in both contracts we have seen over the holiday period, both targets may well be possible. With the moves happening on low volumes though, across the holiday period, I remain sceptical about the ability of either to set new ranges above those targets. US shale lies in wait gleefully at those levels I am sure. We can expect both a ramp-up in production and shale producer hedging via the selling of futures across the curve in the New Year.
The short-term momentum remains positive though although I expect Asia to content itself with remaining on the sidelines today.
Gold
Gold continues to defy the sceptics, myself included, posting another strong rally overnight on low volumes. Gold climbed 0.80% to close at $1511.00 an ounce. As gold moved up through $1500.00 an ounce, I suspect that more stop-loss and computer-driven model buying into low liquidity is the culprit. That said, the market is always right even if you know you are, and resistance is futile now for gold bears. Far better for the irrational exuberance to run its course.
Gold faces strong technical resistance at $1520.00 an ounce followed by $1535.00 an ounce, with support now around the $1500.00 region. Asia should be supported on dips today, as investors not on holiday, hedge weekend event risk.
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