The quote of the day for me comes from Managing Director Paul Single of City National Rochdale in an internal note this morning: “We Now Return to Our Regularly Scheduled Pandemic … The nail-biter of a presidential election has finally been decided. It cost an estimated $5-6 billion. It is over. Now we can focus our attention on the elephant in the room: COVID-19.” U.S. daily cases topped 100,000 for the fourth day in a row, with deaths reaching 869, the highest since Sept. 1. The ugly numbers were countered this morning by Pfizer’s announcement that its CovidCOVID-19 vaccine candidate is 90% effective, which added to the risk-on sentiment noted in the rest of today’s commentary.
Equity markets are still pricing in a divided government, even as the Senate is to be decided in early January. If you just look at stocks globally this morning, Europe is happier than we are about that. Many major European indices are up 5%–7% overnight, while Asian indexes are up 1%–2%. At the open in the U.S., the Dow Jones is up around 4%, the S&P 500 is up just under 4%, and the NASDAQ is up just under 1%.
The risk-on theme extended to the U.S. dollar. The trade-weighted dollar index fell to two-month lows as equities and commodity prices rose. The euro posted an eight-week high of 1.1899. Currency moves have been very orderly, but markets are certainly aware that ECB policymakers are keenly aware of anything that might mess up their plans to keep their foot on the monetary-easing accelerator.
The U.S. dollar rose against the Japanese yen, which is the opposite of what would normally be expected in a risk-on environment, as the yen has become a currency to buy in stressful times, much to the chagrin of Japanese officials. The action may have been due to Japan’s finance minister noting that officials are watching the currency levels with urgency, one of the early steps that could lead to intervention down the road.
Finally, the worst-performing emerging-market currency this year — the Turkish lira — rose just under 4% on the news that Turkish President Recep Tayyip Erdogan fired the country’s central bank governor. The strength of the currency is due to expectations that interest rates would rise in an effort to combat inflation and attract capital. Turkish stocks also rose on the news. Usually, stocks don’t rise when higher rates are expected, but an exception is when the move is the right one to restore economic health. | |
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