APAC Morning Update - 18 Nov 2020

The market is not the only thing looking for inspiration this morning. On a shorter time frame, things are in the range chopping around, but if you look longer term, both the AUD and NZD are on the charge. The AUD is coming into resistance around 0.7413 while the NZD is edging around 0.6950 odd. It is definitely worth taking a step back every now and again to try and gauge the bigger picture of where these moves may lead.

Speaking longer term, it does make you ponder the likely reaction of the market to a vaccine. If we do get more concrete news that a vaccine passes all its trials in the next month or so, and is released into the public, to get rolled out over the next 6 months. How would this affect things? Well in the short term, it is great for the world, and great for risk. As we have seen risk has responded well on vaccine developments, and this could well get the AUD breaking through 0.7413 and the NZD through 0.7000. Medium term, both Australia and New Zealand will be better off sure, but how would life on the ground actually change? Eventually more travel, and other countries will do better so we'll see growth slowly back on track, but these are tweaks at the margins. The US and Europe on the other hand would be able to get out of lockdown, which would have a dramatic impact on GDP, and therefore stop the rout in USD. They would improve relatively more.

Once the crisis is over, then the world can look at rebuilding. However this is no natural disaster where the rebuild of infrastructure actually helps contribute to growth, this rebuild is going to be a lot more abstract, and dare we say a lot longer. Long story short, a vaccine is not a panacea that solves every problem out there, and the market is not going to recover in a straight line.

Global equity are generally off, Dow -0.5%, S&P 500 -0.3%, FTSE -0.9%, DAX -0.0%, CAC +1.7%, Nikkei +0.4%, Shanghai -0.2%.

Gold prices are off -0.1% currently trading at $1,885 an ounce. WTI Crude Oil prices are off 0.4% trading at $41.1 a barrel.