US markets were closed for Thanksgiving on Thursday. The MSCI world equity index, which tracks shares in 49 countries and had risen to a record high on Wednesday, held close to it on Thursday.Gold prices picked up as investors bet that the grim US economic data would lead to further stimulus. Europe’s Stoxx 600, which is also having its best month on record, up 14.5% in November, was flat at 0.1% on the day. Cyclical companies including banks and energy firms that had led the post-vaccine surge retreated while more defensive tech shares gained. That was mirrored by equity futures in the US, where contracts on the main gauge fell while those on the tech-heavy Nasdaq 100 were little changed.

The US Dollar slipped overnight, then recovered during the European session. Versus a basket of currencies, it was up 0.2% on the day, having touched its lowest in nearly three months in early London trading. It lost out versus the safe-haven Japanese yen, down 0.2% on the day at 104.3.

Even with three successful vaccines on the table, sentiment turned cautious on Thursday as the virus toll continued to rise in Europe and the US, leading German Chancellor Angela Merkel to call on Europe’s ski resorts to close this winter. In France and Germany, consumer confidence plunged in November under new lockdown restrictions, challenging the idea of a quick return to normal in the euro zone’s two biggest economies. Merkel told parliament that lockdown measures will be in place until at least end-December and possibly longer. The euro dropped 0.1% against the Dollar, at $1.18995, while euro-sterling rose 0.3% at 89.23 pence per euro.

Asian equities are poised for a cautious end to the week as the global stock rally loses steam. Today brings China industrial profits and GDP data from Taiwan and India.

Markets are looking forward to 2021 and the time when vaccines will be rolled out and economic activity can get back to normal. But question marks still surround the speed of a global roll-out and the proportion of populations willing to be vaccinated. These factors, combined with a second consecutive week of rising jobless claims in the US, appear to have brought the rotation into value and back-to-work stocks grinding to a halt for now. More defensive tech shares gained, as the task of vaccinating the world’s population is rife with logistical problems.

Investors took solace from the minutes out of the Federal Reserve’s latest meeting, which showed the central bank discussed providing more guidance on its bond-buying strategy “fairly soon” but didn’t see a need for immediate adjustments ·        UK investors will be watching trade talks between Britain and the European Union, with little more than a month until the status-quo transition period ends on Dec 31, as face-to-face trade talks resume this weekend after key officials were forced into quarantine.

Britain’s finance minister said that “it’s clear what the shape of the deal looks like” but that the United Kingdom would not sign a deal at any cost.

Source: OCBC Research - 27 Nov 2020