Stocks Slump on Virus Spike Before Georgia Runoff

Volatility gripped financial markets, spurring a stock selloff amid concern that a surge in global coronavirus cases could crimp the nascent economic recovery. The S&P 500 fell by 1.48% to 3,700.65 while Dow Jones was down 382.59 points (1.25%) to 30,223.89.

Fed’s Evans Favors Aiming for 2.5% Inflation in Bid for 2% Goal

Federal Reserve Bank of Chicago President Charles Evans said the US central bank shouldn’t be shy about letting inflation run, as it has promised, above its 2% target in order to make up for years of undershooting that goal. “If we try to fine-tune a very modest inflation overshoot of only a 10th or two, we run a very large risk of failing to achieve our 2% averaging goal within any reasonable amount of time,” Evans said.

Germany Leads European Manufacturing to Best Month Since 2018

Euro-area manufacturing grew at the fastest pace in more than 2 1/2 years in December, bringing some positive news at the end of an horrific 2020 for the region’s economy. Final readings of IHS Markit’s monthly surveys showed growth led by Germany, where activity expanded the most in almost three years, with all other countries covered also reporting an improvement on November. The euro-area index came in at 55.2, up from 53.8 though slightly lower than an earlier preliminary reading.

UK Mortgage Approvals Surge to 13-year High During Lockdown

UK mortgage approvals reached the highest since 2007 in November as housing continued to boom in spite of a broader economic downturn. The housing market is surging largely because of a tax cut on house purchases that is worth as much as 15,000 pounds (US$20,000) to buyers. The total for the first 11 months of 2020 now stands at just over 715,000, just shy of the levels reached in 2018 and 2019.

Asia Manufacturing Picks Up Pace as China Starts to Moderate

Factory activity across Asia continues to gain momentum, spurred by strong demand for the region’s exports, while China’s recovery is starting to moderate. Japan’s purchasing managers index rose to 50 in December, its highest reading since April 2019, according to Jibun Bank and IHS Markit. Taiwan’s PMI jumped to 59.4, its highest mark in a decade, while South Korea’s remained at 52.9, its third consecutive month above the 50 level that separates contraction from expansion.

Singapore Continues Slow Recovery From Worst Economic Slump

Singapore’s economy continued its slow recovery from the worst slump in the country’s history, with mainstays such as trade and tourism hammered by the coronavirus pandemic. Gross domestic product last quarter grew 2.1% on a seasonally adjusted basis compared to the previous three months, according to advance estimates from the Ministry of Trade and Industry released.

Hong Kong’s Retail Slump Began Easing Before New Virus Wave

Hong Kong’s retail environment showed further signs of improvement in November, although the recovery may have been short-lived as the city was hit with a fresh wave of virus infections and imposed new restrictions late in the month. The provisional value of total retail sales in November 2020 was HK$28.7bn (US$3.7bn), down by 4% compared with the same month in 2019.

Oil Falls as OPEC+ Extends Talks to Second Day Without Decision

Oil dropped the most in two weeks with OPEC+ yet to resolve an impasse on whether to keep raising production at a time when the pandemic threatens demand. Brent crude for March settlement fell US$0.71 to US$51.09 per barrel.

Source: Affin Hwang Research - 5 Jan 2021