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Weekly Market Report

22 Dec 2020

21 December 2020


The Market Last Week

Global equities ended mostly firmer last week, amid Brexit optimism and US stimulus hopes.

UK Markets ended the week in negative territory, amid worries over new Tier 3 lockdown restrictions in parts of London.

The DCLG house price index climbed on an annual basis in October.

The Markit manufacturing PMI climbed more-than-expected in December.

The GfK consumer confidence improved in December.

In the UK, average earnings including bonus advanced more than market consensus in October.

Retail sales fell less than market consensus in November.

UK’s non-seasonally adjusted output producer price index (PPI) fell less than market anticipations in November.

UK’s consumer price inflation weakened to a three-month low in November.

The retail price index dropped in November.

The Markit services PMI rose less-than-expected in December.

UK’s ILO unemployment rate rose to its highest level since 2016 in October.

European Markets ended the week on a positive footing, amid continued optimism over post-Brexit trade deal.

Eurozone’s industrial production grew at its fastest pace in three months in October.

Eurozone’s trade surplus widened in October.

Eurozone’s Markit manufacturing PMI rose in December.

Eurozone’s Markit services PMI jumped in December.

Eurozone’s current account surplus widened in October.

Eurozone’s seasonally adjusted construction output rose on a monthly basis in October.

Eurozone’s consumer prices declined for a fourth straight month in November.

Germany’s PPI dropped less-than-expected in November.

Germany’s Ifo business climate index unexpectedly advanced in December.

Germany’s Ifo current assessment index improved in December.

Germany’s Markit manufacturing PMI rose to 3-year high in December.

Germany’s Markit services PMI unexpectedly advanced in December.

US Markets ended the week in green, as the US Federal Reserve pledged to keep interest rates near zero and on stimulus expectations.

US industrial production advanced more-than-anticipated on a monthly basis in November.

The Markit manufacturing PMI dropped less than market forecast in December.

Housing starts rose for a third consecutive month in November.

Building permits advanced to a 14-year high in November.

Business inventories climbed more-than-anticipated in October.

The MBA mortgage application rose on a weekly basis in the week ended in 11 December 2020.

The leading indicator climbed more than market forecast in November.

Current account deficit widened less than market anticipations in 3Q20.

The Markit services PMI fell in December.

Retail sales fell for the first time in seven months in November.

The NY Empire state manufacturing index declined more than market anticipations in December.

Initial jobless claims unexpectedly climbed to a 3-month high in the week ended 11 December 2020.

The Philadelphia Fed manufacturing index eased in December.

The NAHB housing market index fell more than market expectations in December.

The Federal Reserve (Fed) kept its key interest rate unchanged at 0.25%, as widely expected. Further, the central bank reiterated that it will keep buying government bonds until substantial further progress has been made toward the Committee’s maximum employment and price stability goals. Moreover, the Fed raised its outlook for 2021 and stated that it expects GDP at 4.2% compared to 4% previously and 3.2% in 2022 against 3.0%.

Asian Markets ended mostly firmer last week, tracking gains in their US counterparts.

Australia’s unemployment rate declined in November.

Australia’s Commonwealth Bank services PMI advanced in December.

Australia’s Commonwealth Bank manufacturing PMI rose in December.

Australia’s Westpac leading index climbed on a monthly basis in November.

Australia’s HIA new home sales increased in October.

China’s industrial production climbed in line with expectations in November.

China’s retail sales rose less than market consensus in November.

Japan’s industrial production rose more than estimated in October.

Japan’s adjusted merchandise trade surplus widened in November.


Japan’s national consumer price index (CPI) dropped in November.

The Bank of Japan kept its benchmark interest rate unchanged at -0.10%.

The People´s Bank of China (PBoC) kept its key interest rate unchanged at 3.85%.

Reserve Bank of Australia (RBA) in its December meeting minutes indicated that Australia’s labour market is recovering faster than expected, however, it will still take years for unemployment to fall to desired levels. Further, the central bank reiterated its commitment to keep rates at 0.1% for at least three years and to not tighten until inflation was sustainably back in a 2%-3% target range.


Currency Update

The EUR ended firmer against the USD last week, after the Euro-zone services activity advanced more than expected in December.
The British Pound ended stronger against the greenback last week, amid hopes that UK and the European Union might reach a trade deal.
The US Dollar ended mostly weaker against its major counterparts last week, as progress in the development of Covid-19 vaccine boosted investors’ risk appetite.


BoE warns lockdown restrictions to weigh on economic activity

The Bank of England (BoE), in its monetary policy decision, kept its benchmark interest rate unchanged at 0.1% and maintained its bond buying programme unchanged at £895.0 billion. The central bank warned that rapidly growing coronavirus cases will affect economic activity in early 2021. The policymakers indicated that the long term outlook for British economy had improved slightly since its last meeting in November, following positive news around the Covid-19 vaccines and their rollout, but current economic performance had been worse.


The Week Ahead

Going ahead this week, investors will keep a tab on the US Chicago Fed National Activity Index, gross domestic product (GDP), existing homes sales, the Richmond Fed manufacturing index, durable goods orders, personal income, personal spending, initial jobless claims, the Michigan consumer sentiment index, new home sales and the Dallas Fed manufacturing business index for further direction. Additionally, Eurozone’s consumer confidence index along with Germany’s GfK consumer confidence index will keep investors on their toes. Also, UK’s public sector net borrowing, current account balance and GDP would garner significant amount of investor attention.


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