Stock Markets and Bitcoin Rise in First Post-Xmas Trading; Dollar Weak but Steady

December 28, 2020

After threatening not to sign the $900 billion U.S. pandemic relief package that extends extra jobless benefits and continues the half on shelter evictions, President Trump did sign the bill over the weekend. A possible federal government shutdown has been averted.

Markets remain closed today (Boxing Day) in the U.K., Australia, New Zealand and Canada.

The trade-weighted DXY dollar index touched 89.98 but is currently hovering just above the 90.0 level at 90.27, which is essentially unchanged from its pre-Xmas close. On a bilateral basis, the U.S. currency has climbed 0.5% against sterling, 0.2% versus the kiwi, and 0.1% relative to the Swissy,Aussie dollar and Mexican peso, held steady against the yen and yuan, and fallen 0.2% vis-a-vis the euro and loonie.

Markets have reacted to the Swiss National Bank‘s promise to intervened “more strongly.” Swiss forex policy is oriented toward the franc’s cross rate against the euro rather than its dollar value. The franc touched a 7-month low today of 1.0892 per euro.

Likewise, the greater-than-forecast two percentage point interest rate hike last Thursday by Turkish monetary officials to 17.0% strengthened the lira to a high today of  7.5897 per dollar, its firmest level in three months.

Share prices advanced today by 1.4% in Indonesia, 1.1% in Taiwan, 0.8% in India and 0.7% in Japan. Equities so far are up 1.7% in Switzerland, 1.5% in Germany, 1.1% in France, 0.9% in Italy and 0.5-0.7% in U.S. futures.

The price of a bitcoin, which exceeded $20k for the first time on December 16, has now risen past $28,000 for a month-t0-date appreciation of about 35%. WTI oil is 0.9% firmer, and gold is little changed. The 10-year U.S. Treasury yield climbed 3 basis points after Trump signed the pandemic relief bill.

Japanese industrial production, which had dived 16.9% in the second quarter and then recovered 8.7% in 3Q and 4.0% further in October, stagnated last month. This left the 12-month comparison at minus 3.4%, and officials are predicting a drop of about 1% in December. Nonetheless, the trend designation for industrial production was “picking up,” same as the characterization in September and October.

A summary of the Bank of Japan Board meeting on December 17-18 reveals mounting concern over yen appreciation and a resolve to employ FX intervention should such move past 100 per dollar.

Chinese corporate profits, which back in March were 34.9% weaker than the year-earlier level, posted a year-on-year increase in November for the seventh straight time. The gain was 15.5%, just half as much as in October, and that put the January-November average level 2.4% above accrued profits in the first eleven months of 2019.

More evidence emerged that the start of Covid vaccine usage this month is promoting hope even as trends in new cases, hospitalizations and deaths remain severe:

  • Consumer confidence in December improved to a 5-month high in Finland and a 3-month high in the Czech Republic.
  • Business confidence in December improved to a 9-month high in The Netherlands and a 5-month high in the Czech Republic.

Norwegian retail sales in November rose 2.9%, a 5-month high, and posted the largest 12-month rate of increase in 4 months, which was 13.8%. That same month, however, Spanish retail sales fell 0.8% on month and by 4.3% on year, its largest 12-month drop in 5 months.

The Dallas Fed monthly regional manufacturing index will be reported later today.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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