Markets Rally as Political Risk Recedes

Market Drivers November 13, 2020

  • Equities rebound
  • Dollar slightly offered
  • Nikkei -0.53% Dax 0.31%
  • UST 10Y 0.88
  • Oil $40.57
  • Gold $1879/oz.
  • BTCUSD $16351/oz

Asia and the EU

  • EUR HICP -0.9% vs -1.0%
  • EUR GDP -3.3% vs. -4.3%

North America Open

  • USD PPI 8:30
  • USD U of M 10:00

The markets resumed their risk-on tone in Asian and early European trade as stock index futures rose by 80 basis points and the dollar was slightly weaker across the board.

The move occurred despite the rising number of coronavirus cases and deaths in both Europe and the US that may prompt many OECD countries to impose partial lockdowns once again. The US reported a record-shattering 150,000 number of cases and experts project that given the trajectory of infections the US may be on pace of 200,000 daily cases and 2000 deaths per day by Thanksgiving.

Although the COVID numbers may be bleak the markets are looking past the current data with the hope that a new batch of vaccines coming onto the market will be able to immunize the population from infection by next year.

Meanwhile, the political risks posed by Donald Trump’s refusal to recognize the election win of Joseph Biden are starting to dissipate as more and more Republican legislators begin to distance themselves from the current President. That latest polling indicates that only 3% of Americans believe that Joe Biden did not win the Presidency and fully 79% do. That suggests that Mr. Trump’s attempts to contest the election have backfired badly.

Mr. Trump never had any legal cause for his grievance, but his lying and disinformation campaign could have created serious political risks if a large part of the population was willing to believe his claims. That threat appears to be gone and markets may be seeing a small relief rally as a result.

The calendar today is very quiet with only PPI and U of M data on the docket and absent any further exogenous shocks the price action may settle into a more subdued range as well. After several days of massive turbulence, volatility is clearly compressing as traders wait for fresh catalysts to move the markets.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Boris Schlossberg

Mr. Schlossberg is a regular contributor to CNBC's Squawk Box and a commentator for CNBC Asia and CNBC Europe. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Mr. Schlossberg has written for SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is the author of Technical Analysis of the Currency Market and Millionaire Traders: How Everyday People Beat Wall Street at its Own Game, both of which are published by Wiley

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