Most major benchmark stock indices ended the day with a modest gain; the S&P 500, Dow Jones Industrial Average and Russell 2000 advanced by 0.2% to 0.1%, while the Nasdaq 100 was almost unchanged at 12,456, with gains from Google/Alphabet (+1.7%) and Facebook (+0.3%) offset by losses recorded in Microsoft (-0.4%), Amazon (-0.5%) and Tesla (-2.7%).
Earlier losses in the US stock market were likely to be inflicted by a weaker-than-expected ADP employment report for November; 307,000 jobs were added to private-sector payrolls versus the consensus estimate of 360,000. Fiscal stimulus optimism saved the day for an afternoon boost for stocks in the US session, after it was reported by media that Democrats' congressional leadership supported a reduced US$908 billion bipartisan fiscal stimulus bill as a starting point for negotiations with the Republicans. The bill is less than the US$2 trillion package preferred by the Democrats, but higher than the US$500 billion plan proposed by Republican senators.
S&P sector performances painted a positive picture for Energy (+3.15%), Financials (+1.05%) and Communication Services (+1.01%). The strong performance seen in the energy sector is likely to be supported by +1.6% gain seen in WTI crude oil futures, where it staged a rebound from its previous swing high of 43.78 printed on 26 August, and now turns into a pull-back support area. Despite another dismal performance seen in the broad Information technology sector (-0.22%), the semiconductor industry within the Information technology continued to be the shining star.
The PHLX Semiconductor ETF (SOXX) advanced by 0.3% (368.86), another fresh all-time high and its fourth consecutive session of higher daily closes since 27 November. From a technical analysis perspective, therer are no clear signs of a bearish reversal signal for SOXX, which implies the broader stock market is not facing the threat of an impending major downside reversal at this juncture, given that the price action of semiconductor stocks are considered to be a proxy for global economic growth.
The US-China relationship remains on a rocky footing, after US president-elect Joe Biden said that there will be a quick rollback of Trump’s existing tariffs on China’s exports to US, as he maintains the Phase 1 trade deal agreement that Trump struck with China. In addition, the US House of Representatives had approved legislation in line with the Senate that could lead to Chinese firms listed on the US stock exchanges to be kicked out if regulators are not allowed to review their financial results; these penalties will be triggered after three consecutive years of failure to comply. Targeted firms are likely to be China's big tech industry, such as Alibaba. The KraneShares CSI China Internet ETF listed on the NYSE shed -0.6% (74.18) which has significant holdings in Alibaba ADR, Pinduoduo ADR, Meituan and JD.com ADR.
Over to the foreign exchange market, the USD continued to remain weak in general as the US Dollar Index shed -0.2% (91.11) to hit almost a 2-year low since 30 Apr 2018. Given the on-going weak sentiment in USD, the GBP/USD had managed to recover partially from its earlier losses seen in yesterday’s London session at the 1.3285 minor range support in place since 24 November 2020 low after a plunge of 115 pips from 1.3441 intraday high. Negative Brexit news flow was the culprit; it was reported that Chief EU Brexit negotiator Michel Barnier told EU envoys that talks were still stuck and there may still be a no-deal outcome.
Asian stock markets continued to consolidate after stellar performances seen in November. Mix intraday performances at this time of the writing; Japan’s Nikkei 225 +0.01% (26806), South Korea’s KOSPI 200 +0.5% (360.20), Hong Kong’s Hang Seng Index +0.3% (26600) & Hang Seng TECH Index +0.6% (7891), Australia’s ASX 200 +0.4% (6615) and Singapore’s Straits Times Index -0.06% (2809).
Chart of the day – GBP/USD
Brexit woes, GBP/USD bulls need to have a clear break above 1.3380.
Source: CMC Markets