Good morning,

Well, that wasn’t exactly the start to the New Year we were looking for….

Sterling moved sharply lower yesterday when it was announced that Boris would be speaking at 8pm. What the PM delivered wasn’t exactly encouraging, but the market has since stopped selling the Pound and it’s slowly started to creep back up.  We were reading some commentary this morning talking about Sterling’s lack of rebound since the Brexit news and apparently it’s all down to the lack of speculative money that’s previously been so interested in betting on the future fortunes of the UK.  The absence of speculators in the market place isn’t likely to continue for too long, though the lockdown measures that have just been imposed are currently the strongest in Europe and as such, will that shine a different light on the Pound?  The lockdown in March was more stringent than this one, but in a very short space of time it wiped double digits off UK GDP.  This second lockdown is going to be at least seven weeks long and is certainly going to have a material downward impact on output, though by how much?

Stock markets had a bit of a divergence yesterday, with the whole world doing reasonably well, but the US moving lower by more than 1.5%.  By and large individual exchanges have moved fairly synchronously with each other and when they don’t it’s not to such an extent as we saw yesterday.  The rationale for the move seems to be some domestic positioning in the US ahead of the Georgia election, where people think that a Democratic win of both seats is slightly less of an outside chance than the polls would have us believe.
Joe Biden might have encouraged any undecided voters yesterday by saying that “if you send Jon and the reverend (the Democratic candidates) to Washington, those $2,000 cheques will go out the door, restoring hope and decency and honour for so many people who are struggling right now”.  This, coupled with news out over the last couple of days that Donald Trump might have committed state and federal crimes by trying to get Georgia’s secretary of state to “find” enough votes for him to overturn the Democratic electoral college win – it’s unlikely this will go anywhere, but it’s still not great press – is tightening the race.
Trump has come out swinging in the 12th round though and at a rally in the state last night was defiant in saying “everyone loved my phone call” and that he will “put forth indisputable evidence documenting the rampant fraud… on Wednesday” (the day after the polls close?!)

On the US-China front:  The New York Stock Exchange has reversed its plans to de-list Chinese telco’s from the exchange, which now puts them in defiance of an executive order.  There hasn’t been much in the way of explanation from the NYSE as to why they’ve U-turned, but their actions will have definitely left people with some significant trading gains or losses, as the stocks of the three companies in question have understandably whipped around an awful lot as investors sold ahead of the de-list and then clambered back aboard on the latest news.

Another news sensitive asset at the moment is oil and Russia and Saudi Arabia are at odds over whether or not to increase production.  Russia are keen, but Saudi are concerned that the fragile market can’t take an increase and they might “put at risk all that we have achieved for an instant, but illusory, benefit”.  Trying to forecast future oil consumption is a tricky business at the moment, with the second wave in Europe reducing demand but with vaccine news potentially brightening the outlook for the future, meaning there could be a case for opening the spigot slightly more.  Last time these countries disagreed and we were going into lockdowns there was a price war followed by an unprecedented price crash, into negative territory. Let’s hope they’ve learned that lesson!

This year, we hope, will see more of a return to markets moving on fundamentals and data releases – like the good old days – but the numbers out today are all backward looking (i.e. German retail sales from November) and as such we wonder whether the market will pay any attention to what has been when they give no indication of what might be. Though it’s not all old news: Rishi Sunak is speaking this morning, presumably with additional support packages, or an extension of the existing themese.  In the US, interesting stuff will start to happen around 2-3am tomorrow morning when we start to see Georgia Senate election results come in, though we could be waiting until Friday, or beyond, for the result to be called. Still, we’re not going anywhere…

Be well.


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