ETF Securities Multi Asset Weekly: US dollar strength weighs on asset performance

Oversupplied markets and weak industrial production in China continue to weigh on commodity prices….

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– While stocks fell across the developed market, strong ‘Singles Day’ sales lent support to China A
– The US dollar continued to find support from previous week’s payroll numbers, while the Euro came under pressure as ECB hinted at expansion of QE next month


Oil market to rebalance in 2020 at US$80/bbl. according to IEA. In the World Energy Outlook 2015 published on Tuesday, the International Energy Agency (IEA) expects oil market to remain subdued for the next five years. While IEA forecasts annual demand growth at 900,000 barrels per day until 2020, further production and spending cut are needed to reduce the surplus on the oil market. US oil inventories reported last week are now close to its all-time high while Saudi Arabia is offering oil at a substantial discount to Brent to the European market, sending oil prices near their respective historical lows. A considerable sell-off in the global ETF space continues to weigh on platinum and palladium prices. Meanwhile, sugar and cocoa both rose 1.4% on the upward revision of the 2015/2016 deficit by the International Sugar Organization and on the acquisition of Nyonkopa, the Ghanaian cocoa purchaser, by the Swiss based Callebaut chocolate maker announced last Monday.


Chinese stocks benefit from strong ‘Singles Day’ sales. Developed market stocks fell over the past week. Buoyant jobs data in the US released the previous Friday failed to support the S&P 500, which dropped 2.5%, as US retail sales disappointed. China import, industrial production and loan growth data came below expectations and previous months’ numbers. However, MSCI China A index gained 3.1% last week responding to the better-than-expected October Chinese retail sales data and the strong ‘Singles Day’ sales last Wednesday, highlighting the transition in China’s engine of growth toward services. While industrial production in Europe has been growing by 1.7% yoy in September, German industrial production fell for the third consecutive month and UK’s economic recovery remained unbalanced pushing the DAX 30 and FTSE 100 down 1% and 2.8% respectively. The soft data is placing pressure on the European Central Bank for imminent policy easing.


USD and GBP strengthen as employment market improves. Following strong US job indicators the previous Friday, the US dollar (USD) continues to strengthen although the  dds for a rate hike in December reduced from 68% to 64% over the past week. In contrast to the US, strong employment data in Australia failed to support the Australian dollar which barely moved over the same period. While the British pound plunged on the day following the Bank of England decision to keep rate unchanged, the currency bounced back on a better-than-expected unemployment rate, ending last week up 1.2%. In the meantime, the European Central Bank (ECB) hinted that the asset
purchase programme could ramp up to €1.1bn as soon as next month weighing further on the Euro while the Japanese Yen fell 0.7% despite expectations that the bank of
Japan may put an end to its easing program in the near term.


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