Tuesday, December 1, 2020

Asia Times: Oil’s rally stalls as OPEC+ reportedly delays meeting to end of the week; Russell 2000 records highest monthly gain

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  • Gold
  • Yen
  • Euro
  • Pound
  • Stocks
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Market Recap: Oil’s rally stalls as OPEC+ reportedly delays meeting to end of the week; Russell 2000 records highest monthly gain

Stocks in the US retraced back lower on the final day of November as investors appear to be rounding out of top performing positions after a record November thanks to vaccine news and political certainty. Increasing risk in relation to lockdowns around the world is likely also playing a part in the downward pressure that was seen yesterday, particularly after New Jersey was reported to be moving forward on tighter restrictions. New York City's positivity rate soaring above 4% likely also impacted markets sentiment. The health care system in the US is looking increasingly under strain, with New York announcing that elective surgery in Erie County will be halted, while also saying that hospitals will start identifying retired nurses and doctors to return to the front lines in the event of shortages. California was also considering stricter measures to help alleviate the pressure off the state's health care system after the US stock markets closed. As for vaccine news, Moderna's shares surged after it announced plans to submit its phase three results to the US regulatory body for emergency authorisation use on Monday in the US. Drug maker Novavax also said that its trials in the UK has reached full enrolment and expects an interim analysis in the first quarter of 2021. Its phase three trials in the US and Mexico however, originally planned for mid-October, were delayed for the second time, and is expected to only start in the coming weeks.

Indexes Daily Change (%) Net Change Closing Price
Dow -0.91% -271.73 29,638.64
S&P500 -0.46% -16.72 3,621.63
Nasdaq -0.06% -7.11 12,198.74
*Source: Bloomberg

Sectors in the S&P500 drifted mostly lower, supported only by sectors considered to be safer positions amid the pandemic. Tech led gains, similar to last Friday as optimism on cyclicals pare back gains from earlier in the month on shorter-term risk. Oil plunged for the second trading day in a row as oil prices suffered on the back of a reduction in likelihood for a delay to production hikes planned for January by OPEC+. In company news, shares of Nikola tumbled 26.92% after General Motors (GM) announced the terms of its anticipated deal with the electric truck maker. Details of the deal now reveal that GM will not take the initially proposed 11% equity stake in Nikola and will instead take on a much narrower partnership with the company. The announcement comes after the ousting of Nikola's founder Trevor Milton and a short seller report doubting the company's outlook earlier in September. The new partnership will now not feature the GM-Nikola battery-powered pickup Badger and will instead will only see GM becoming one of two suppliers of hydrogen fuel cells for Nikola's semi-trucks.


Despite Monday's pullback, equities still had one of best monthly performances. Most major indices gained upwards of 10% during November. The Dow had its best monthly gain since 1987, while the S&P500 gained the most since April. More impressive was smaller-cap indices, with the Russell 2000 recording its best month ever. Indices outside of the US performed even better, driven both by the weaker dollar and increased flows towards more value positions out of the US. Only the ASX200, HSI and the CSI300 underperformed US indices. Still, Asian indices are trading with quarterly gains upwards of 10% apart from the CSI300. We expect this trend to mostly continue, but at a slower pace as parts of Asia are now showing signs of spikes in daily Covid-19 cases. European stocks may have some upside potential here, since several countries in the EU are seeing the daily pace of new Covid-19 cases slowing (includes Germany, Italy, Spain, UK).

Indexes Monthly Change (%) Monthly Net Change Closing Price
Dow +11.84% +3,137.04 29,638.64
S&P500 +10.75% +351.67 3,621.63
Nasdaq +11.80% +1,287.15 12,198.74
Russell 2000 +18.29% +281.34 1,819.82
S&P600 +18.02% +157.92 1,034.51
FTSE100 +12.35% +688.92 6,266.19
Dax +15.01% +1,734.68 13,291.16
Stoxx +18.06% +534.33 3,492.54
Nikkei +15.04% +3,456.49 26,433.62
CSI300 +5.64% +264.92 4,960.25
KOSPI +14.30% +324.19 2,591.34
ASX200 +9.96% +590.23 6,517.81
HSI +9.27% +2,234.07 26,341.49
STI +15.76% +382.11 2,805.95
*Source: Bloomberg

Currencies normalised Friday's performance on Monday, with the dollar rebounding slightly against most other major G10 currencies. Commodity-linked currencies returned gains from Friday, likely weighed down by the risk of renewed lockdowns in the US and parts of Asia. Sterling was the only currency to strengthen against the dollar, likely as Cable found some support from slightly more upbeat remarks from French European Affairs Minister Clement Beaune saying that he hopes to see an agreement over the next few days. His added comments that both the EU and UK remain “very far “likely downplayed any optimism on a deal, however.


Safe havens traded muted on Monday, as investors weigh on the longer-term impact of vaccines and short-term lockdown risk. Gold edged lower. The Japanese yen fell against the dollar but gained against the euro. US Treasures were mostly flat, with benchmark 10-year yields inching 0.2bps higher to 0.84%. Bitcoin hit a new high after retracing back downwards at the end of last week as more traders use the cryptocurrency as a hedge against the dollar. Volatility in Bitcoin remains high however, and big swings are continually expected moving forward as the outlook for the dollar weakens on expectations for an inflationary environment post-pandemic.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold -0.61% -10.84 1,776.95
Silver +0.31% +0.07 22.64
USD/JPY +0.21% +0.22 104.31
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year -0.4bps 0.15%
10-Year +0.2bps 0.84%
30-Year -0.3bps 1.57%
*Source: Bloomberg

Oil futures inched lower as the rally in oil markets stalled after Bloomberg reported that OPEC+'s decision on January's production hikes is being postponed to the end of the week, according to a letter seen by the company. The bloc's ministers are now expected to meet on December 3rd instead. A survey by Bloomberg revealed that 34 out of 36 respondents (analysts) expect a decision to delay production hikes set for January at the OPEC+ meeting this week, with most respondents expecting a delay by three months. In our view, this suggests that there may be some downside due in crude oil futures after a strong month of gains as OPEC+’s decision has a higher likelihood of disappointing markets even if they decide to delay production hikes by only a month. Increasing short positions from traders categorised as “other reportables” by regulators may also indicate that current level of oil prices is relatively fragile, and may support thoughts that a large swing in prices is due (short positions amounted to close to a record of 469 million Brent crude oil futures contracts as of November 24th) as oil markets look increasingly divided on the outlook for crude oil (in contrast net bullish positions by traditional speculators reached a nine month high last week).

Oil Futures Daily Change (%) Net Change Closing Price
Brent -0.77% -0.37 47.88
WTI -0.42% -0.19 45.34
*Source: Bloomberg

In Asia, stocks were trading higher despite losses in the US as investors in the region shrug off risk aversion. The Nikkei, KOSPI and ASX200 were all trading upwards of 1% in the earlier hours of Tuesday's trading session. Futures tracking major indices were trading higher as well as of 9.10am (GMT +8). There was a slight skew towards the tech heavy Nasdaq 100 e-mini futures however, which could be a signal that investors may only be cautiously bullish.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei +1.29% +344.41 26,778.03 9:00:45 AM
KOSPI +1.12% +29.35 2,620.69 9:20:40 AM
ASX200 +1.16% +76.59 6,594.40 9:20:44 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures +0.52% +155.00 29,784.00 9:10:47 AM
US Futures +0.62% +22.50 3,645.75 9:10:47 AM
Nasdaq 100 Futures +0.80% +98.50 12,375.50 9:10:47 AM
*Source: Bloomberg

Economic releases for the day ahead include (All timings in GMT +8):

  • China Nov Manufacturing PMI (Caixin) (9.45am)
  • RBA Monetary Policy Statement/Decision (11.30am)
  • Germany Nov Unemployment Rate/Change (4.55pm)
  • Eurozone Nov Inflation Rate (Core CPI/CPI) (P) (6pm)
  • Canada Q3 GDP (9.30pm)
  • US Nov Manufacturing PMI (ISM) (11pm)
  • Fed Chair Powell Testifies Before Senate Banking Committee (11pm)