Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Uphill Battle As Traders Are In Pre-Weekend De-Risk Mode

By Stephen InnesMarket OverviewNov 06, 2020 05:37AM ET
www.investing.com/analysis/new-york-open-uphill-battle-as-traders-are-in-preweekend-derisk-mode--fretting-about-nfp-no-stimulus-will-definitely-put-the-brakes-on-hiring-200543742
Uphill Battle As Traders Are In Pre-Weekend De-Risk Mode
By Stephen Innes   |  Nov 06, 2020 05:37AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

It's been an uphill battle today with the bulk of the market in pre-weekend derisking mode, as investors view rallies as a good opportunity to sell risk. While low liquidity conditions are not helping matters potentially exaggerating price moves, especially to the downside where bids are notably lacking.

These types of trading conditions typically make a fool out of anyone trying to formulate a constructive narrative. (my hand is up)

Prudence says it tough to see markets moving higher with contested election results hanging over the market. Giving traders a touch of pre-weekend heartburn as Covid concerns melding with election risk is likely bringing more attention to the one quick fix that is so desperately needed, which is the elusive stimulus deal as QE can't fix the economy.

A pound or a dollar or a euro of QE isn't worth what it once was. The ability of central bank money to propel an economy forward needs to be questioned. Instead, QE needs to be thought of as increasingly close to monetary financing. Put bluntly, what's the point of QE increases? Answer: to assist government funding and keep credit costs down.

There was nothing of note from the Fed last night with Chair Powell reiterating he was happy with the amount of policy accommodation. He gave little insight into any potential changes to the make-up of asset purchases and instead continued to call for more fiscal support. For now, the Fed remains undeterred by the slowing in the economy, given it followed the sharp rebound in Q2 and expects the recovery to continue. In his view, the worst of the downside risks have been removed.

Not that the Fed really matters at the moment, given the US election gridlock continues. The same can be said for today's US employment report. It is hard to see the market getting overly excited especially if the result remains unclear. It is possible to construct a scenario that a long tail of reopening and related hiring numbers could mean upside risks.

However, the miss in ADP may mean the higher COVID cases and more labor market sensitivity, election uncertainty, and less stimulus may have put a brake on hiring. At the margin, given the ongoing uncertainty, I don't think the market will be able to shrug off a weaker print easily.

Painfully slow process

Painfully slowly, Joe Biden looks like he is inching towards becoming US President-elect. Meanwhile, the US President continued to undermine the validity of the voting process, promising legal challenges. The market is beginning to look forward to 2021 with the tailwinds of a vaccine, more fiscal support, abundant liquidity, with Central banks "doved-up" to the eyeballs.

Masterful inactivity

Fed Chair Powell tried hard (and largely succeeded) to not say much yesterday. The one thing of note was that the FOMC "had a full discussion of the options around the asset purchase program. And we understand how we can adjust the parameters of it to deliver more accommodation". Shifting towards longer maturities would presumably be an easy move in this respect. However, it might conflict with a desire to let optimism express itself in a steeper curve in positive covid vaccine news. 

Oil down but not out

Oil is down due to lingering election uncertainty, and continued worries about spiking coronavirus infections in the US and Europe weigh on sentiment. Balancing this, and keeping Brent above $40/b so far, is a positive messaging from OPEC on the potential for current supply cuts to be extended into next year. There have even been comments suggesting a deepening of cuts might be a possibility. While I would rate this as a meager- chance probability outcome, but the fact it is even being mentioned in oil circles, it is still evidence of a “whatever it takes” approach from OPEC+ that may downside risk for oil. 

In a sign of the times, Royal Dutch Shell has announced plans to start shutting down its Convent refinery in South Louisiana as part of its plans to shrink its portfolio. The refinery current produces around 211k barrels per day and has around 675 employees. This is the latest in US refinery closures, with Marathon and Philips 66 closing sites or converting them into renewable diesel plants.

Uphill Battle As Traders Are In Pre-Weekend De-Risk Mode
 

Related Articles

Michael Ashton
Watch Out For Rise In Money Velocity By Michael Ashton - Jun 29, 2022

As M2 money growth soared throughout the COVID and post-COVID period of direct stimulus check-writing funded by massive quantitative easing (QE), monetarism novices thought that...

Uphill Battle As Traders Are In Pre-Weekend De-Risk Mode

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email