YouGov Poll Tells Boris, “It’s You Guv'” | Daily Market Commentary with Jeffrey Halley
The British Pound has risen 0.50% to 1.2930 this morning as the latest YouGov MRP Poll, published his morning, suggests that the UK Conservative’s would win the general election handsomely if held tomorrow, by 68 seats. The main loser would be Labour, whose leader, Jeremy Corbyn-grad, is paying the price for his Brexit fence-sitting strategy, with much of the swing coming from Labour-held seats that voted strongly for Brexit in 2016.
The reason this poll, amongst all the others, carries so much weight, is that it correctly predicted the hung parliament of the last election. Markets do like certainty, and the YouGov poll, if accurate, gives precisely that on Brexit. With two weeks to go until election f]day in the UK, PM Boris Johnson is on track to become the new “Guv’nor.” The lead appears so commanding, that PM Johnson could say nothing over the next two weeks and still win well. If only it were that simple.
Speaking of highs, I note that Canada now has a marijuana mountain, after legalising it a year ago. Prices have collapsed as legal producers underestimated demand and cranked up the hydroponic systems. Legal and illegal sellers are now fighting for market share with prices collapsing. It is interesting how the application of market forces in Canada, has taken one year to remove the incentives of decades 0f illegal trade and its associated ills. Profit. The imaginative and courageous might cast eyes further South and ponder the effectiveness of a similar strategy.
While Canada is not high enough, it seems, other parts of the world are certainly carving out new highs. Palladium hit record highs overnight as supply squeeze continued to bite, hitting $1834.00 an ounce. Australian and New Zealand stock markets joined the record highs club this morning with the major indices in New York all still there, or thereabouts.
The US continues to weed out the economic doomsayers, with another set of tier one data released overnight showing the economy, while not achieving the horsepower of earlier in the year, is still finely tuned. US GDP rose 2.10%, and Durable Goods rose 0.60%, both above expectation. Consumer personal spending rose 0.30% as well, as expected. The positive data propelled Wall Street to new record highs as the US now breaks for Thanksgiving and the Black Friday sales at the week’s end.
Green shoots seem to be appearing around the Asia Pacific as well. Singapore Industrial Production on Tuesday, outperformed, rising 4.0%, with New Zealand retail Sales also posting an impressive 1.60% quarterly gain. South Korean Consumer confidence rose to 100.9 yesterday, and Business Confidence rose to 74 this morning. The only blot has been Japan retail Sales, which plunged 7.10% YoY for October. It may be a passing drop though, as the Japan sales tax increase last month made its presence felt.
President Trump signed the Congress Hong Kong legislation into law overnight, but I believe it will not derail the trade negotiations. Had the President vetoed the bill, it would certainly have gone back to both houses where they would have overridden the veto. China is a notable laggard in the region and, despite the bluster, needs a trade agreement as much as the US does. Counting in President Trump’s favour is that he didn’t create the bill, contenting himself with taking credit for having saved Hong Kong already. Expect some belligerent noises from China about domestic affairs interference today, but no concrete reprisals.
Except for Malaysian PPI at 1200 SGT, Asia’s data calendar is blank. With the US now on its Thanksgiving break, with Americans travelling near and far on their world-class transport infrastructure to reach loved ones, the Asian session is likely to become more muted as the day goes on.
Robust US data propelled Wall Street’s major indices to new record closes overnight, ahead of the holiday in the US today. The S&P 500 rose 0.42% to 3154, the Nasdaq rose 0.66% to 8705, and the Dow Jones climbed 0.16% to 28,166. With no negative trade headlines to upset the applecart, the FOMO global recovery trades remain in full swing.
Asia has climbed aboard in early trading with the Nikkei 225 and Kospi both higher by 0.30%. Positive data see the NZX higher by over 1.10% with the ASX climbing 0.30% with Hong Kong up by 0.20%.
Mainland exchanges may have a more circumspect open as they wait to see the government’s reaction to the Hong Kong Law being signed off by President Trump. With the US on holiday today, we would expect Asia to consolidate its opening rally but range quietly after that.
The US dollar rose overnight, buoyed by rising Treasury yields, themselves bolstered by robust US data. The dollar index rose 0.16% to 98.41.
Notable losers were the JPY with USD/JPY rising 0.50% to test resistance at 109.50. The Euro gave ground with EUR/USD falling 0.20% to 1.1005 ahead of daily support at 1.0980. The rotation out of haven currencies continued, with USD/CHF climbing to 0.20% to 0.9991 ahead of resistance at 1.0000 and 1.0030. Although the dollar does look poised to break higher across the board, there is a lack of momentum, with the dollar gaining inches and not yards and a serious move, one way or the other, awaits concrete detail from the trade negotiations.
The British Pound rose 0.50% to 1.2930 as polling showed the UK Conservative on track for a sizeable outright majority after the election in two weeks. GBP though, is still trading within its clearly defined 1.2800/1.3000 range. The 1.3000 resistance could come under threat, however, as we get closer to the election and the if the Conservative’s strong lead continues.
Latam currencies were under the pump overnight, Brazil intervening on the Real and the Chilean Peso hitting record lows, as unrest sweeps the continent. The fall-out on Asia’s regional markets should be contained though, as US-Sino trade remains the only game of importance for the region. With the US on holiday, trading in local currencies will be quiet today.
Official US Crude Inventories rose unexpectedly, yet again, by 1.572 million barrels, offsetting positive US data elsewhere. The net effect was to push both Brent and WTI gently lower, marking a quiet end to trading ahead of the US holiday. Brent crude fell 0.20% to $64.15, and WTI dipped 0.30% to $58.10 a barrel.
WTI has traced out a multi-day top at $58.50. That along with concerns over record US production, now at 12.90 million barrels a day, and stubbornly high US crude inventories have seen oil prices ease in Asia today. Brent has fallen 30 cents to $63.85, and WTI is lower by 25 cents to $57.85 a barrel.
Asian oil traders are perhaps wary of China’s reaction to the passing of the US Hong Kong law as well and its potential adverse effects on trade negotiations. With both curves in backwardation, dips on spot market s are likely to be limited for now, as the US holiday mutes activity.
The positive US data saw gold fall 0.50% to $1454.50 overnight as the dollar, US Treasury yields and equities all climbed higher. In this climate, gold is unlikely to find many friends, with crucial technical support at $1445.00 an ounce nearby. A break of this region implies a move to $1400.00 is possible, although I believe we will need to see a trade break-through for this to happen.
Above, gold now has technical resistance at $1463.00, followed by long-term technical resistance at $1480.00. The later remaining a formidable barrier to a meaningful recovery above $1500.00.
Gold has risen by to $1465.00 an ounce this morning in quiet trading, possibly spurred by concerns over the passing of the US Hong Kong law and China’s possible reaction.