Trump signs on the dotted line

An otherwise quiet day in Asia has sparked to life as the President announced from Florida, that he had signed the omnibus Pandemic Relief/Government Funding bill into law. The headline should provide a welcome boost to sentiment in Asia, which was likely to waiver today as Chinese authorities over the weekend told Ant Financial to go back to its core payments business.

Coming after China officials initiated an investigation into Jack Ma's Alibaba over possible monopolistic behaviour last week. Over the weekend the veiled Ant Financial breakup threat threatened to overwhelm the 15.50% YoY increase in China Industrial Profits released over the weekend.

A certain amount of bluff and horse-trading appears to have gone on to get the President's signature on the omnibus bill. The President let unemployment benefits lapse on Saturday night, but by signing today (Sunday US time), will restart them in return with a week’s gap and avoid a US Government shutdown on Tuesday. Both the Financial Times and Bloomberg are saying that the President has claimed that the GOP Senators and the Democrat-controlled House will vote on increasing the $600 payment. Additionally, Section 230 (the social media content liability shield) would be repealed, and an investigation in voter fraud commenced.  

Whether any of that passes muster with the Senate and House, is, of course, an entirely different matter. But the possibility of an increase in direct payments above $600 should be a market positive on top of the boost received from the President's signature. With one eye on the Georgia Senate run-off on January 5th, politicians from both sides may also feel slightly more generous than a week ago.

The bashing big tech is a theme to keep an eye on. China is busily clipping Alibaba and Tencent's wings at the moment; the Russian Duma has just passed a bill doing much the same for foreign social media if it wishes. If the US President is to be believed, repeal of Section 230 is on the way in the US. I have stated before that reining in big tech is perhaps the one thing that both Republicans and Democrats agree. Big techs Standard Oil moment in 2021 could be getting closer to reality and is a theme that readers should be watching closely next year.

With the week shortened by holidays worldwide, Australia, New Zealand and the United Kingdom are closed today, for example, the data calendar is thin in Asia. The week's highlight in Asia is likely to be China's official PMI release on Thursday, along with US Initial Jobless Claims. Otherwise, politics and Covid-19 will dominate the financial market landscape. Next Tuesday's double Senate run-off in Georgia, and potentially, stimulus votes this week, will dominate the airwaves. Blissfully, polling predictions have been absent from the media regarding the Georgia vote next week; I suspect our lock will run out as this week progresses, however. 

US Stimulus Bill lifts Asian Equities.

With liquidity lower than usual and a dearth of meaningful news over the weekend, the Presidential signing of the omnibus bill today has lifted sentiment in Asia. Most of the region is green, although the gains' scale is modest, perhaps reflecting the holiday-thinned participation.

The Nikkei 225 has risen 0.40%, with the Kospi rushing 0.70% higher out of the gates this morning. Singapore is 0.20% higher, Taipei has rallied 0.75% higher, with Kuala Lumpur jumping 0.80% and Jakarta up 0.15%. Only Manila is lagging regionally, down 1.30% in early trading. 

China has shrugged off news that Ant Financial has been told to go back to basics by the PBOC this weekend. The threatened breakup coming after its parent Alibaba's shared tanked in the US on Thursday after Chinese authorities announced investigations into its business practises. Not being listed on the Mainland may have been a blessing in disguise for the Shanghai Composite and CSI 300, which are higher by 0.30% and 0.50% respectively. Hong Kong has weathered the storm as well, despite Alibaba being listed there. The Hang Seng rising 0.35% today.

Australia and the United Kingdom are closed today, but European equities should also catch the US stimulus tailwind and move higher. Sentiment should also receive a modest boost with the start of Covid-19 vaccinations across the Eurozone at the weekend. 

US Dollar reverses early gains

The US Dollar has reversed its early session gains after President Trump signed into law, the US omnibus bill releasing fiscal stimulus and funding the US Government through 2021. That led to a wave of risk-seeking sentiment with the Australian and New Zealand Dollars both rising over 0.40%. It should be noted though, that although both have a high beta to the world economic cycle, both markets are closed today, and the gains could be as much about liquidity as US stimulus.

Elsewhere amongst the majors, both Euro and Sterling have risen 0.30% to 1.2215 and 1.3560 respectively. The signing of the Brexit trade agreement was a massive sigh of relief to financial markets, which had spent the last few months buying Sterling in anticipation of the outcome. The fact that the world is long Sterling probably explains why Sterling did not leap to greater heights after the announcement last week. Nevertheless, Sterling should target 1.3800 in the coming weeks. Markets are likely to wait until next week though before buying again, fearful of massive bottlenecks at the English Channel as the new rules take effect.

Asian currencies have rallied in sympathy this morning, boosted by the Presidential signature. Across the region, the CNY, SGD, MYR, and JPY are all between 0.10% to 0.20% higher versus the greenback. The Thai Baht remains an outlier, with USD/THB rising 0.25% to 30.110 today. The outbreak of Covid-19 just outside Bangkok has raised fears that the reopening of Thailand’s vital tourism sector will be delayed, weighing on sentiment. In the greater scheme of things though, the Baht remains in a structural rally, and the weakness is unlikely to persist unless Covid-19 numbers explode.

Oil markets are modestly lower

Oil markets headed South early this morning, on fears that the US stimulus and government funding measures would fall at the last Presidential hurdle. With President Trump signing the bill, oil has quickly recouped most of its losses today, although both Brent and WTI remain modestly in the red.

Brent crude is just 0.35% lower at $51.15 a barrel, and WTI is 0.40% lower at $48.10 a barrel. With trading volumes thinned by the holiday week, oil is likely to remain below the radar in the coming days. That said, the signing of the US stimulus bill, with the possibility of an increased sized, should put a floor under oil prices in a shortened week. 

Brent crude has resistance at $52.50 a barrel, and only a failure of $49.00 a barrel suggests that a deeper correction could occur. WTI has resistance at $49.20 barrel, and only a loss of $46.00 a barrel imperils the longer-term rally.

Gold rises on the Trump signature

Both gold and silver have enjoyed a strong start to the week as US funding and fiscal stimulus packages were signed into law. That has seen an immediate fall in the US Dollar, which has seen gold rise 0.85% to $1895.00 an ounce, and silver leaping 3.0% to 26.5980 an ounce. It should be noted that trading volumes are thinner than usual this week, and that moves are prone to exaggeration in that environment.

The gold/silver, or "mint" ratio has also fallen this morning by 2.20% to 71.20. Admittedly, the fall has been exacerbated by the move higher in the less liquid silver side of the ratio. However, the mint ratio is now once again within shouting distance of last week’s low at 69.50. A daily close below that level would be a bullish technical development for gold and silver, implying that further meaningful gains lie ahead. 

Gold has risen to $1895.00 an ounce today, just below initial resistance at $1898.00 an ounce, its 100-day moving average. (DMA) That is followed by $1917.00 an ounce, last week’s highs. A rally through $1917.00 an ounce opens the road to more gains to the $1960.00 an ounce region. Support lies at $1870.00 an ounce, and only a failure of support at $1855.00 an ounce suggests that gold has fallen back into its previous $1820.00 to $1880.00 an ounce range.

Bitcoin

Bitcoin continued its quest to be regarded as a "mainstream financial asset" by rising over 16.0%, including 3.45% today, during the Christmas break, when the rest of the world was opening presents and overeating. 

The latest bout of great rich quick, it’s all "institutional money," Dutch tulip FOMO-mania appears to have been a rise through the previous resistance around $24,000.00. That seems to have triggered stop-loss buying, which in turn, dragged in even more "momentum' buyers, creating a self-perpetuating bullish storm.

The signing of the stimulus bill today by President Trump appears to have prompted the latest rally, as Bitcoin-ista's price in another round of Dollar weakness, which surprisingly, I agree with.

While I am sure the bonfire of Bitcoin will be brutal when it comes, as people who should know better refuse to differentiate volatility from reality, I cannot argue with the momentum. Bitcoin has resistance at $28,000.00, but I suspect that will present no great barrier, such is the desperation of the FOMO Bitcoin-istas to make their $30,000.00 dream come true. You could also say to yourself that Jeffrey Halley is turning bullish on Bitcoin and race for the sell button. Nothing would make me happierbsidiaries, officers or directors.