Tuesday, January 12, 2021

Asia Times: Big Tech move fuels selloff on Monday; political uncertainty adds to the dollar’s gains

  • Dollar
  • Gold
  • Yen
  • Stocks
  • Oil


Market Recap: Big Tech move fuels selloff on Monday; political uncertainty adds to the dollar’s gains

Downward pressure on Big Tech led to losses across major indices in the US on Monday after a decision by multiple tech giants faced backlash from markets. Over the weekend, Twitter (-6.41%) and Facebook (-4.01%) moved to ban US President Donald Trump off their platforms while Amazon (-2.15%), Apple (-2.32%) and Google (-2.24%) took down social networking company, Parler, by removing hosting services for the app off its AWS server (Amazon) and removed the app from app stores (Apple, Google) with the reason cited as being the allowance of posts that stoked riots in the US capital last week. All five tech giants dragged on the market as investors feared that scrutiny against Big Tech will ramp up thanks to the move. Profit taking may have also contributed to the rest of the broader selloff in the market, putting additional pressure across all major indices to fall for the first time after four straight days of gains.

Indexes Daily Change (%) Net Change Closing Price
Dow -0.29% -89.28 31,008.69
S&P500 -0.66% -25.07 3,799.61
Nasdaq -1.25% -165.55 13,036.43
*Source: Bloomberg

S&P500 sectors were more skewed towards cyclicals as energy, health care and financials advanced through Monday, signalling that investors likely remain bullish on the global economic outlook despite the selloff. Similarly, small cap indices also outperformed major indices, with the Russell 2000 falling marginally by 0.03% while the S&P600 advanced 0.42%. VIX saw a large spike up but still ended lower than last week's high.

Eli Lilly and Co's shares surged more than 11%, the largest single stock gain on Monday in the S&P500, after its experimental Alzheimer's treatment showed promise in a mid-stage clinical trial. Shares of Cruise operator Carnival (-1.61%) fell after posting an adjusted fourth quarter net loss of US$1.9 billion, lower than analysts’ expectations for a US$1.57 billion loss. More interesting of Carnival's earnings report was that cumulative advanced bookings for the first half of 2022 is now above 2019 levels, signalling consumers' pent up demand because of the pandemic. With cumulative advanced booking for the second half of 2021 "within the historical range", consumers are likely expecting the travel ban to be lifted starting in the second half of the year with vaccines already in deployment stage. It also suggests that consumer confidence remains strong in the longer-term as consumers ignore short-term headwinds in favour of a more optimistic economic outlook once vaccines are deployed.


The dollar continued to claw back from losses as political uncertainty and rising yields put upside pressure on the currency. House Democrats introduced a resolution to impeach Trump again, this time for inciting the mob that attacked the Capitol. The chamber will vote Tuesday on a motion to urge Vice President Mike Pence to use his constitutional authority to remove the President. If Pence declines, then a delayed Senate trial will come into play after President-elect Joe Biden takes office. The move likely fuelled political uncertainty as it may be taking away attention from more pressing issues of the economy and the pandemic, consequently putting upside pressure on the dollar. It also introduces greater risk of retaliation from Trump supporters come Biden's inauguration day. US Treasury yields continuing to rise also provided added upside pressure to the dollar.

Commodity-linked currencies underperformed the basket of G10, while the safer yen and Swiss franc were among the better performers.  Performance in currency markets also highlighted that profit taking along with safe haven demand amid political uncertainty was present in the market. This came despite Pfizer and BioNTech's plan to boost expected output to 2 billion doses of its vaccine this year, up from its earlier target of 1.3 billion. Other more longer-term optimistic news relating to vaccines and the pandemic include Johnson & Johnson looking to file preliminary data from its phase three trials in South Africa to US regulators on January 21st and New York City reiterating its goal of vaccinating one million people by the end of the month.


Safe haven assets were largely mixed on the day as investors navigate through political concerns and optimism on the global economic outlook. Gold and silver continued to decline, but at a marginal rate relative to Friday's plunge. The Japanese yen fell against the dollar but advanced against all other G10 currencies. US Treasuries fell across the board, pushing 10-year yields 3.1bps higher to 1.15%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold -0.28% -5.12 1,843.89
Silver -2.01% -0.51 24.91
USD/JPY +0.31% +0.32 104.26
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year +1.2bps 0.14%
10-Year +3.1bps 1.15%
30-Year +1.0bps 1.88%
*Source: Bloomberg

Oil futures were muted with a marginally mixed performance as the uptick in the dollar contrasted the narrative for bullish crude oil prices. Additionally, some of the profit taking in equity markets likely also negatively impacted crude oil markets as well, especially with both crude oil benchmarks trading in overbought territory in the 14-day RSI. Still, oil's dip was minimal, probably thanks to comments from Goldman Sachs as it expects Brent crude oil prices to reach US$65 per barrel sooner than previously thought. As before, while we do expect short-term headwinds to impact prices, downside is likely to be limited thanks to Saudi's voluntary output limit reaching one million barrels per day through February and March, as well as a vaccine driven recovery.

Oil Futures Daily Change (%) Net Change Closing Price
Brent -0.59% -0.33 55.66
WTI +0.02% +0.01 52.25
*Source: Bloomberg

Stocks in Asia appeared to be skewed towards the upside after opening lower on Tuesday morning. The Nikkei and ASX200 were both trading in the green, while the KOSPI appeared to be showing some slight signs of recovery after opening lower in the earlier hours of Tuesday's trading session. Futures tracking major indices in the US were all higher as of 9.19am (GMT +8).

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei +0.52% +145.91 28,284.94 9:09:50 AM
KOSPI -0.59% -18.35 3,130.10 9:29:50 AM
ASX200 +0.15% +9.94 6,707.10 9:29:44 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures +0.18% +55.00 30,957.00 9:19:50 AM
S&P500 Futures +0.21% +8.00 3,800.00 9:19:50 AM
Nasdaq 100 Futures +0.26% +34.00 12,931.00 9:19:49 AM
*Source: Bloomberg

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

  • US Dec Small Business Index (NFIB) (7pm)