Global COVID-19 cases is fast approaching the 30 million mark after a record number of daily cases reported over the weekend. Hopes of a potential vaccine was hampered as AstraZeneca halted trials amid complications. Markets worldwide continued its downward momentum as tech stocks led the decline across major indices. ByteDance chose Oracle as its US key partner ahead of the 15 September deadline. Crude oil prices fell below USD38/barrel while gold prices closed higher at USD1,944/oz.

 

In the News

  • The World Health Organisation reported a record daily increase in case numbers on Sunday (13/9), as virus cases continue to rise rapidly in India, US and Brazil. Total number of cases worldwide has now passed the 29 million mark.
  • Trials for the AstraZeneca coronavirus vaccine that was expected to be fast tracked by the US came to a halt as a participant developed a serious neurological disorder.
  • It was a highly volatile week for US markets, as it continued its downwards momentum with indices declining for the second week from record highs set earlier this month.
  • The prospects of passing a coronavirus stimulus aid before elections in November remains dim, as the US senate on Thursday (10/9) rejected an estimated USD300 million bill, as Democrats seek a bigger package of USD3 trillion.
  • Despite high unemployment rates, US inflation rates continue to rise, but remains below the Federal Reserve’s target of 2%.
  • US consumer prices rose of the third straight month in August, as prices continues to rebound from the effects of the pandemic.
  • The S&P500 closed 2.31% in the red last week, with tech stocks leading the decline. Tech focused Nasdaq fared the worst in the market last week, dipping 3.87%, 10% lower from the index’s all time high just 6 trading days earlier.
  • As tech stocks experienced its worst pullback since March last week, the NYSE FANG+ Index, which focuses on 10 tech and innovation leaders dropped a further 5.40% last week in MYR terms. The major selloff contributed to a further gain of 5.36% in the 0831EA,  which provides an inverse exposure to the index. 
  • However, YTD performance of the NYSE FANG+ index remains strong at +64.85%, and the 0830EA has gained 79.56% in MYR terms since the beginning of the year.
  • Chinese indices also closed in the red last week, following the negative sentiment in the US market. The CSI300 dipped 2.68% over the week while the Shanghai Composite Index closed 2.51% in the red.
  • ByteDance, which owns the social media app TikTok announced that it would not sell or transfer the algorithm of its app in any sale or divestment deal, following the Chinese government latest announcement regarding the controls in technology exports.
  • With the 15 September deadline coming up, TikTok’s Chinese owner has chosen Oracle as its technology partner for its US operations, rejecting the acquisition offer from Microsoft. However, it is unclear if Oracle will be getting a major ownership stake of the app in the US. 
  • Consumer prices recorded a three month low of 2.4%, as cost of food increased steeply amid surging pork prices and slowdown in imports due to the pandemic. As China’s relationship with key import sources like US and Australia continues to decline, China’s long-term food security is now a concern, with the government introducing its “Clean Plate” campaign to curb food waste.
  • With tensions between US and China showing no signs of easing, the Chinese government has put its focus to increase domestic consumption and achieve technological independence, driving the growth in its New China economy. The consumption-focused S&P New China Sectors Ex A Share Index was less impacted that is peers, dipping 1.91%. Performance of the 0829EA, which tracks the index also dipped 1.91%, but is still locking in YTD gains of 23.58%. 
  • The Malaysian market trailed the further sell down in US markets, as the FBM KLCI index dipped 0.73% last week, offsetting BNM’s decision to keep the Overnight Policy Rate (OPR) unchanged at 1.75%. The Dorsey Wright Technical Leaders Malaysia Index dipped 4.46% over the week.
  • Oil prices recorded a second straight week of decline, dipping 5.94% in MYR terms to close below USD38/barrel, as crude inventory gain recorded at 2 million barrels last week, as compared to analyst’s expectations of 1.3 million barrels. 
  • Gold prices edged higher last week as economic uncertainties loomed across markets. The precious yellow metal closed the week at USD1,944/oz, advancing by 0.56% over the week. Gold remains one of the best performing asset classes this year, with the 0828EA locking in YTD gains of 28.35% in MYR terms.

 

On the Economic Data Front

  • US economic data sends conflicting signals:
    • Initial jobless claims for the week ending 5 September exceeded expectations, staying consistent at 884,000
    • However, continuing claims rose beyond expectations, as number of claims increased for the first time since mid-July
    • CPI rose 0.4% for the third consecutive month in August, but inflation remains below 2%. 
    • Congress failed to pass its coronavirus relief aid, as prospects of reaching an agreement before the upcoming elections remains dim.

  • Continuous economic recovery seen in Europe despite resurgence in virus cases:
    • A resurgence of the COVID-19 virus continues rapidly in Europe.
    • Tensions intensify between the EU and UK as fresh rounds of post-Brexit talks begin for a trade agreement. 
    • The ECB has left its policy measures unchanged, expressing optimism for the region’s economic recovery
    • UK government expects economic outlook to face downward pressure as job support program expires.

  • Further recovery in the Chinese economy is expected:
    • Consumer inflation failed to meet expectations, sliding to a three-month low of 2.4% last month.
    • Export readings exceeded expectations at 9.5% last week, as the nation’s key trading partners ease lockdown measures.
    • With the upcoming economic data announcement, further growth is expected to be seen in the economy as it recovers from the effects of the pandemic.
    • Analysts are expecting industrial output to grow 5.2% in August, while retail sales are expected to have a flat reading after declines in the past 6 months.

 

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A look at the performance of the TradePlus ETFs, and major global indices

 

 

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