US fiscal stimulus optimism managed to save the day for risk assets, as House Speaker Nancy Pelosi commented that she was hopeful that a deal agreement can be done by this week, which would be bigger, better and retroactive.
Negotiations between stakeholders are still ongoing; Senate Majority Leader Mitch McConnell has continued to warn the White House against the US$2.2 trillion package proposed by the Democrats-controlled House.
The S&P 500 and Nasdaq 100 notched up gains of +0.5% and +0.4% respectively even the US Department of Justice’s antitrust lawsuit against Google failed to make a dent on the risk-on mood with Google’s parent Alphabet share price rallied by +1.4%. Interestingly, the US Treasury 10-year yield inched up higher for four straight consecutive session and ended yesterday’s US session at 0.802%, its highest level since June. Hence, the rising yield had contributed to the outperformance of financial stocks seen yesterday as the S&P financial sector was the second best performer (+0.8%) with Energy ahead at +1.1%.
Netflix’s share price tumbled by 5.7% (495.40) in the after-hours trading session post Q3 earnings release. Market participants were disappointed by its new subscriber’s growth for Q3, with 2.2 million added versus the 3.32 million consensus estimate. In addition, earnings per share were also below expectations; $1.74 versus $2.13 consensus while revenue surpassed at US$6.44 billion versus $6.38 billion expected.
The US dollar had continued to be soft against the major currencies as the US Dollar Index had declined for second consecutive session (-0.4%) to retest the 12 October low of 93.01. The main contributor of US dollar weakness came from the EUR, where the EUR/USD rallied by 0.5% by the end of yesterday’s US session and it is now approaching to retest a major resistance at 1.1890, the long-term secular descending trendline in place since April 2008 high.
EUR pairs cross plays such as EUR/GBP can be another contributing factor for USD weakness due to the uncertainty over post-Brexit trade deal negotiation talks as standoff between UK and EU officials lingered on. The EUR/GBP gained +0.5% and staged a bullish breakout above the 0.9100 descending resistance in place since 11 September 2020 high.
Over to Asia, most benchmark stock indices had started on a strong footing with gains seen across the board so far, Japan’s Nikkei 225 +0.4% (23676), Hong Kong’s Hang Seng Index +1.0% (24819), China’s CSI 300 almost unchanged -0.1% (4786) and Singapore’s Straits Times Index +0.5% (2540). A weaker USD/CNH (offshore yuan) also triggered a positive feedback loop into Asian stocks; the USD/CNH had decisively broken below the 6.68 major support in place since late February 2019 and it is trading at 6.6525 at this time of the writing with the next significant support coming in at 6.46 (see chart of day).