Hi-Ho Silver! Away!

Silver Climbs Higher

The Lone Ranger galloped into town upon Silver overnight and precious metals markets are seeing fireworks this morning after plenty was also seen yesterday. Silver prices exploding higher, threatening to drag gold out of its multi-week malaise—more on this below.

Meanwhile, the buy-everything trade was back with a vengeance overnight and perhaps rightly so. Markets were booster shot-ed by positive news from Astra-Zeneca regarding the progress of their Covid-19 vaccine. The European Union also lent a helping hand, edging towards a workable pandemic recovery package. The net effect immune boosted equities and commodities, and spurred a new wave of US dollar rotation, as the street priced in more light at the end of the pandemic economic tunnel.

The vaccine news was particularly welcome, capping a slew of positive news from that sector over the past week. My reverse Black Swan continues to be that a vaccine arrives in Q3 with distribution beginning shortly after that. The world won’t have dodged an economic bullet but may get away with a flesh wound that can be staunched without surgery.

The news, however, isn’t all positive. Far too many people around the world are still testing positive for Covid-19, and the situation in the United States, a particular concern. Fears of extended or new lockdowns saw Amazon and Zoom outperform overnight, lifting the Nasdaq to an outsized outperformance day. The bearish outside reversal formation on the Nasdaq which I highlighted last week is well and truly consigned to the dustbin. Momentum rules and big tech has plenty of it.

China stock markets outperformed yesterday, rising by over 3.0% on the day. The regulator lifted the cap on the amount of domestic equities; Chinese insurers can hold. That increased from 30 to 45% of total assets, as at the end of the previous quarter. It caps a busy month for central government involvement in the onshore equity markets. They were firstly urging retail investors to get long to partake in China’s recovery, then getting cold feet a week later after a 13% rally. That led to an almost equally precipitous drop. And now, allowing insurers to buy more equities. The latter makes complete sense, even if the previous two don’t. Retail flows dominate equity volumes on the Mainland and allowing more institutional money to participate may help smooth out the headless charges back and forth by the retail crowd.

Today’s data calendar is incredibly light. The RBA minutes were released, and unsurprisingly, the RBA is happy with monetary policy where it is, isn’t concerned about the exchange rate and is watching developments in the world. Japan’s inflation data this morning showed that inflation is still missing in action after 25 years. Operations normal. Singapore’s inflation data will tell a similar story this afternoon, with MoM rising slightly by 0.50%, but the YoY number firmly anchored in negative territory at -0.80%.

A slew of business and consumer confidence will hit the wires across Europe and today and tomorrow. It should show a generally improving trend as the Eurozone rebounds from its Covid-19 lockdowns. Markets, though, will continue to focus on the pandemic recovery package details, which should maintain the bullish mode for both the euro and European equities.

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