US indices reversed its positive streak to end mixed, as a post Thanksgiving surge in pandemic cases saw a resurgence in weekly jobless claims; while stalled stimulus talks outweighed positive vaccine news. Geopolitical tensions between the US and China continued, as several major US indices announced the removal of Chinese stocks for its products, bringing Chinese equities into correction territory. On the local front, relaxation in lockdown measures couples with positive vaccine news led to a rally in the banking sector; boosted by optimism towards further economic recovery. Gold prices ended the session flat but see positive optimism with the upcoming Federal Reserve policy meeting this week.


In the News

  • The US Food and Drug Administration (FDA) has released data confirming the 95% efficacy rates in the Pfizer/BioNtech vaccine and subsequently recommended emergency use authorisation for the vaccine. The UK government began mass vaccinations on its populations last week, starting with medical frontliners and the elderly.
  • However, the US continues to hit grim pandemic related milestones, recording over 3,000 deaths for the first time last week. The world has now recorded over 72 million cases and over 1.6 million deaths, with the US recording a total of over 16 million cases and over 300,000 deaths. 
  • Optimism for a new stimulus aid in the near term turned dim as leaders of both parties remain reserved about the USD 908 million bipartisan proposal that saw Republicans demanding a liability shield for businesses against coronavirus claims while the Democratic demands assistance to both state and local governments. 
  • Positive vaccine news seemed insufficient to offset the negative sentiment on stimulus negotiations as major indices ended the week mixed after touching record highs during the week. Throughout the week, the S&P 500 index ended 1.24% in the red while the tech-focused Nasdaq slid 0.97%.
  • The NYSE FANG+ Index managed to outperform its peers, ending the week with 0.92% in the green in MYR terms, with Baidu leading the gains after announcing its USD1.5 billion share buyback initiative. Consequently, the 2x Leveraged 0830EA advanced by 2.11% over the week, with a YTD return of 113.70%. 
  • In China, negative sentiment outweighed positive economic data as tensions between the US and China was renewed with more sanctions being imposed on Chinese companies. As a result of President Trump’s executive order, S&P Dow Jones Indices, one of the US’ biggest index provider has removed multiple Chinese companies from its benchmarks, following the footsteps of FTSE, which announced the removal of 8 Chinese firms from its products. 
  • Following which, the CSI 300 fell the most since September, shedding 3.97% in MYR terms last week while the Shanghai Composite index ended 3.32% in the red.  While the S&P New China Sectors Ex A Share Index was not spared, the China new economy focused index performed better than its peers, only dipping 0.65% throughout the week in MYR terms. The 0829EA dipped 0.79% throughout the week, with YTD gains of 30.83%.
  • In Malaysia, sentiment was positive as hopes of an economic recovery and the expectation that the Overnight Policy Rate (OPR) will be kept unchanged brought on a rally in banking names like CIMB and Public Bank, which also announced a 4 to 1 bonus issue last week. Sentiment was further boosted by the relaxation of the Conditional Movement Control Order (CMCO) and the assurance of COVID-19 vaccine supply next year, with the FBM KLCI index seeing weekly gains of 3.87%. 
  • However, due to market rotation activities from pandemic-related sectors into recovery names, the Dorsey Wright Technical Leaders Malaysia MYR Index’s performance was lacklustre compared to its peers, sliding 1.84% throughout the week, while the 0836EA slid 1.68%.
  • Gold prices ended the week flat as gains from the decline in US dollar was hampered by stalled stimulus talks and positive news on vaccine rollout. However, the upcoming Federal Reserve policy meeting could see gold prices ticking higher with the expectation of an expanded QE programme. Over the week, LBMA gold prices dipped 0.59% in MYR terms, while the 0828EA slid 0.64%, with a YTD gain of 17.77%.


On the Economic Data Front

  • US economic recovery under pressure:
    • Weekly unemployment claims jumped by over 100,000, recording at 853,000, a record high in nearly three months.
    • Continuing claims reversed its downwards trend since early September, recording at 5.76 million.
    • Consumer Price Index (CPI) rose by 0.2% in November from October, higher than analyst’s expectations.
  • China economic recovery still going strong:
    • Exports rose unexpectedly in November at 21.1% from a year earlier, marking its strongest growth since February 2018.
    • Official CPI fell into negative territory from a year earlier, mainly driven by a decline in pork prices and not faltering demand.

  • EU ramps up on stimulus as economies expects slower recovery:

    • The EU passed an historical EUR 1.8 trillion budget, which includes a EUR750 billion pandemic recovery fund.
    • The European Central Bank (ECB) has increased its Pandemic Emergency Buying Programme to EUR 1.8 trillion with a 9-month extension till 2022.
    • Post Brexit talks between the UK and EU remains at a gridlock but is expected to continue after agreeing to extend its supposed deadline last Sunday (13/12).


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