This past week ended with the VIX ‘fear gauge’ rising the most since the end of October as global equities experienced a cautious pullback. The S&P 500[1], DAX 30[2] and Nikkei 225[3] aimed lower. Could this be setting a sour tone for financial markets heading into 2021? Treasury yields on the longer-dated spectrum declined, signaling fading optimism on longer-term growth prospects.
Looking at currencies, the growth-linked Australian Dollar[4] still managed to outperform, likely boosted by Chinese demand for iron ore from Down Under. This is as the British Pound[5] declined, experiencing the worst week on average since early September. Sterling’s woes can be traced to dimming prospects of a Brexit deal, as made apparent by UK Prime Minister Boris Johnson.
The US Dollar[6] continues to weaken, and that has been a boon to commodities such as copper[7] and crude oil[8]. Covid vaccine prospects are likely benefiting the latter with anticipation of a steady increase in general travel. Yet, anti-fiat gold prices[9] are struggling to capitalize on greenback declines, signaling underlying weakness despite a parallel drop in US real yields.
After the UK became the first western nation to begin rolling out a coronavirus vaccine, the US was poised to follow after the FDA recommended the approval of Pfizer’s and BioNTech’s product. The anticipation of immunization may have kept US consumer sentiment upbeat this past week, despite ongoing roadblocks to a $900 billion bipartisan fiscal package.
Republicans push for employer liability protections continued to clash with Democrat wishes for state and local government aid. Outside of fiscal affairs, keep a close eye on central banks such as the Fed, BoE
