Looking at the broad-based upturn of equity markets on Friday, it appears that markets had celebrated Biden's victory on Friday, so the official confirmation over the weekend provided moderate boost to risk assets on Monday. Investors are trying to price in the degree of liquidation of inconvenient Trump's agenda by the new US administration.
The 2.4% decline in USDCNY since the start of November indicate strengthening faith that policies and statements regarding China will become a little less belligerent. Speaking of risky assets in general, Trump's defeat means a slightly less unpredictable trajectory of US foreign policy and trade, which, together with the Fed's loosened credit conditions boosts R/R in equities. In this situation, the dollar looks like the main outsider among the major currencies in the medium term.
Two hot elections-related threads which remain important for markets:
- The race for seats in the Senate, which boils down to the battle for Georgia, and which has every chance to drag on until January.
- Resistance of Trump to the results of elections and related legal battles. Markets are discounting this risk for now.
The eco calendar is not particularly eventful this week, so all attention will be focused on Biden’s first steps on the stimulus package, taxes and regulation, foreign policy, and the fight against Covid-19. By the way, the number of cases in the United States continues to grow and has been exceeding 100K for a several days:
With increasing incidence rate, the number of hospitalizations inevitably increases, which increases the burden on health services. As in Europe, this could lead to stricter restrictions in the US, but this currently remains a dormant risk for equity markets.
From the positive data updates supporting the risk appetite:
- US unemployment report. Jobs count beat estimates, unemployment fell and the figures for the previous month were revised upwards. The data makes a bit harder to pick holes in the US recovery, but it reduces the chances of a generous fiscal deal. Therefore, the data cannot be called strictly for the market.
- Data on China's exports were stronger than expected in October, but imports slowed down. The figures show that foreign demand remains robust, despite the lockdowns.
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