Primus Weekly - 9th November

Hi Everyone,

Joe Biden has won the U.S. Presidential election and is set to become POTUS 46 in January 2021. His elect-Vice President Kamala Harris has made history by becoming the first woman of color and South-Asian woman to hold the number 2 position. Equity markets had changed their sentiment to risk on late last week when S&P500 was gained 6.5% and Nasdaq100 8.4%.

After long and gruesome 5 weeks we have reached the finish line of U.S. Presidential elections. The counting process took longer than expected as a record number of mail-in ballots were submitted this year. The results were announced only on Saturday, 4 days after the Election Day. Whilst there are still a number of states that have not completed the counting process, Joe Biden has 290 electoral votes. A candidate needs 270 electoral votes in order to win the elections. As expected, President Trump has not conceded and refuses to accept the loss by filing a number of lawsuits to dispute the outcome. The Republican party seems divided as a number of senior party members have shown support to Trump, whilst others have chosen to remain silent over the weekend. This week is expected to bring more clarity on the actions that President Trump and the G.O.P. decides to take but knowing the style of the current leadership team we can expect Twitter and Fox News to be the best source of information.

The results of U.S. Congressional elections have not been finalized yet but at the time of writing this report the Democratic Party seems to have maintained control of the House, albeit losing a few seats. The Republican Party is set to control the Senate which means elect-President Joe Biden will face a pushback when it comes to implementing his policies. We can expect continuous use of executive orders and a congressional stagnation, along with concessions on both sides.

Non-farm payroll report offered a positive surprise when 638,000 jobs were added, versus the expectation of 600,000. Unemployment rate fell from 7.9% to 6.9%, showing a strong improvement compared to April’s peak unemployment rate of 14.7%. Whilst the recovery has been strong, the data still suggests a loss in momentum as the pace of jobs added has decreased in the last 4 months. Given that there were 22.2 million jobs lost in Q1 and Q2, and that 12 million jobs have been recovered, there is still a hole of 10 million jobs. Assuming October pace of jobs added, it would still take at least 17 months to get back to the previous employment peak. October showed a strong recovery in retail and leisure/hospitality sector with 375,000 jobs added. Heavily cyclical transportation sector showed a decline of 8,000 jobs which indicates that non-consumer driven part of the economy is still struggling to pick up the pace.

Markets have shifted to risk on mode last week when equity turned positive – S&P500 was up 6.5%, Nasdaq100 8.4% and DJIA 5.4%. Gold futures broke the resistance of 1,920 and closed 1,951.5 having gained 4.3%. US dollar, measured by DXY index, was down 1.7%. Oil futures were up 6.4% but the bullish case for oil remains weak.

Have a great trading week ahead!

In The Spotlight

• China Consumer Price Index

Inflation measures the rise in consumer prices in an economy over a certain period of time. Higher inflation means that consumer

prices have grown compared to the previous period. Higher than expected rate may be both positive or negative for CNY as the

market does not like inflation expectations too far off from consensus. Generally, both high and negative inflation are bearish for currency, while positive and low inflation, in line with expectations, is bullish.

• UK GDP growth

GDP data shows the monetary value of all the goods and services produced in the UK. A negative number indicates a contraction of

economic activity while a positive number shows an expansion. A better than expected growth is generally positive for GBP, whilst a print below expectations tends to be negative.

Market Sentiment

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