Friday, 4 December, 2020 [email protected] Global Economics & Markets Research Email: [email protected] URL: www.uob.com.sg/research Markets Overview HIGHLIGHTS AHEAD . Key data release will be the US nonfarm report for November, which is expected to see 500,000 job gains from the 638,000 increase in October, while unemployment rate is seen easing to 6.8% (from 6.9% in October). US wage growth is expected at 0.1% m/m, 4.2% y/y (from 0.1% m/m, +4.5% y/y in October). US factory orders for October is expected to slow to +0.8% m/m compared to 1.1% in Sep. Philippines and Thailand will be releasing their November CPI today. In Thailand, headline CPI has likely remained in deflation of around -0.5%y/y while core CPI is forecast to be stable at +0.2% y/y in November. The contraction in Singapore’s retail sales is expected to have narrowed to -8.3% y/y in October from -10.8% y/y in September. Thailand commemorates the King’s Father birthday on Saturday (5 Dec) with the holiday observed on Monday (7 Dec). CENTRAL BANK OUTLOOK . The US Senate confirmed on Thursday Christopher Waller to serve on the Federal Reserve Board, but the status of President Donald Trump’s second nominee, Judy Shelton, remained in limbo amid opposition from Democrats and some Republicans. Senators voted 48-47 to put Waller on the US Fed, concluding a confirmation process that had been dragged out for months because of controversy surrounding Shelton, who was nominated by Trump at the same time. Waller, 61, becomes the fourth Trump pick to join the seven-member Fed board. He is viewed as a policy dove who will probably give full backing to the central bank’s projection to hold interest rates near zero to support the US economy during the coronavirus pandemic. Reserve Bank of India (SGT 2.15pm) is widely expected to be on hold at 4.00% today. Despite the economic headwinds, high domestic inflation may limit RBI’s ability to cut interest rate in the near-term even though the central bank has signaled prospect of more policy accommodation. Headline CPI rose to 7.61% y/y in October, having registered above the 2-6% target range in nine out of ten months. FX . The US dollar plunged to its weakest level in more than 2-1/2 years on Thursday, amid signs of progress towards a US fiscal stimulus package and optimism about COVID-19 vaccines. The US dollar index (DXY) retreated for the third day in a row, easing 0.44% to 90.714 on Thursday and looks set for its third weekly decline. The DXY is hovering at the lowest level since April 2018. The pound led gains among G10 currency peers, but pared its advance from a one-year high after conflicting signs on whether a historic Brexit trade deal will emerge, while the euro moved to a new 31-month high. Sterling rose as much as 1% to 1.3500 against the USD, the highest level since December 2019, before retreating to 1.3453 late Thursday. EUR/USD advanced 0.2% to 1.2142 for the third straight day of gains, lifting the single currency to its highest level since April 2018. USD/JPY came off 0.5% to 103.95 late Thursday, for the first decline in 4 sessions. AUD/USD climbed 0.3% to 0.7440, reaching its highest since August 2018 while NZD/USD was little changed at 0.7072 on Thursday. In Asia, SGD, TWD and KRW were up around 0.3% to close at 1.3345, 28.53 and 1,096.90 against the dollar respectively on Thursday. CNH initially fell but recovered and traded to a high of 6.5254 late-Thursday and ended at 6.5356 (+0.12%). USD/SGD touched a new low for the year at 1.3323 before closing at 1.3345 on Thursday. The SGD NEER is trading at 0.26% below the mid-point this morning. On the SGD NEER, mid-point to -0.5% from the mid-point implies USD/SGD range of 1.3305-1.3372 based on the current FX levels. Markets Overview Friday, 4 December, 2020 1 | P a g e EQUITIES . US equity markets turned a bit cautious on Thursday after a report said Pfizer is dialing back its coronavirus vaccine rollout plan for this year due to supply chain issues, even after US weekly jobless claims dropped for the first time in 3 weeks to 712,000 in late November, from 787,000 in the prior week, while continuing claims fell to 5.52 million from 6.09 million. The S&P 500 eased marginally in a late-day sell-off, dipping just 2.29 points, or less than 0.1%, to 3,666.72 on Thursday, after hitting an all-time high earlier in the session and stepping back from a record close for a second day in a row on Wednesday. The Dow Jones Industrial Average gained 85.73 points, or 0.3%, to 29,969.52. Earlier in the day, the Dow rose more than 200 points. The Nasdaq Composite edged up 0.2%, or 27.82 points, to 12,377.18 for a new record high. Asian equity indexes mostly ended higher on Thursday with KL Composite Index (+1.85%), Philippines Stock Exchange Index (+1.60%) and Thailand SET (+1.44%) leading the advance. The MSCI Asia ex-Japan index recovered for the third straight day on Thursday with gains of 0.78%, and is now marginally higher for the week. Sentiment may turn more cautious today on news of supply bottleneck for COVID-19 vaccines while higher infection rates are forcing economies into tightening their social-distancing measures. US TREASURIES/BONDS . US Treasury yields were broadly lower on Thursday, as investors focused on the prospects for another stimulus bill from Congress to combat the impact of the coronavirus pandemic and ahead of the Federal government funding deadline on 11 December. The 10-year Treasury note yield fell 2.9bp to 0.919%, while the 2-year note yield edged 1.1 basis point own to 0.153%. The 30-year bond yield slipped 3.9 basis points to 1.666%. The S&P Pan Asian Government Bond Index ended marginally lower by 0.04% on Thursday. In Asia, yields fell the most in Thailand with the 2-year and 10-year yields down 1.8 bps and 2.3 bps to 0.49% and 1.30% respectively. Meanwhile, 2-year yields rose the most in India by 2.7 bps to 3.95% and 10-year yields rose the most in Taiwan by 5.0 bps to 0.29% on Thursday. On Asia’s government bond auction calendar today, India will be offering 3, 15 and 30 -year bonds. COMMODITIES . Crude oil prices reacted positively to the news from oil producers group agreeing to a compromise deal to gradually taper output curbs after a week of negotiations. Brent crude futures traded 1.4% higher at $48.92 per barrel, while US West Texas Intermediate (WTI) futures settled 36 cents, or 0.8%, higher at $45.64 per barrel. The Organization of the Petroleum Exporting Countries (OPEC) and Russia, a group known as OPEC+, announced late Thursday that to increase production by 500,000 barrels per day beginning in January, i.e. cutting production by 7.2 million barrels per day (bpd), or 7% of global demand from January, compared with current cuts of 7.7 million bpd. Gold firmed on Thursday as the US dollar fell and investors focused on the possibility of an eventual breakthrough in negotiations over a fresh US coronavirus aid package. Spot gold gained 0.4% to $1,838.83/oz. It earlier hit its highest since 23 Nov at $1,843.80. Reuters reported that a bipartisan, $908 billion coronavirus aid plan is gaining momentum in the US Congress on Thursday as conservative lawmakers expressed their support and Senate and House of Representatives leaders huddled, though it is unclear how far beyond $500 billion in spending Senate Majority Leader Mitch McConnell would agree to after months of insisting that anything approaching $1 trillion was unnecessary. ECONOMIC NEWS & DATA . President-elect Joe Biden said he would ask all Americans to wear a mask to prevent the spread of the coronavirus for the first 100 days of his administration as well as issue a “standing order” requiring face coverings in federal buildings and on all interstate transportation. Biden also told CNN in an interview on Thursday that he had spoken to Dr Anthony Fauci and asked him to stay on as the government’s top infectious disease expert in the Biden administration. The US House of Representatives passed a law to kick Chinese companies off US stock exchanges if they do not fully comply with the country’s auditing rules, giving President Donald Trump one more tool to threaten Beijing with before leaving office. The measure passed the House by unanimous voice vote, after passing the Senate unanimously in May, sending it to Trump, who the White House said is expected to sign it into law. “The Holding Foreign Companies Accountable Act” bars securities of foreign companies from being listed on any US exchange if they have failed to comply with the US Public Accounting Oversight Board’s audits for three years in a row. Markets Overview Friday, 4 December, 2020 2 | P a g e . The head of the US Centers for Disease Control and Prevention (CDC) warned on Wednesday the COVID-19 pandemic, still raging with unprecedented fury nationwide, will pose the country’s grimmest health crisis yet over the next few months, before vaccines become widely available.