The Hunger Games

Food was at the top of the agenda overnight. DoorDash’s stock market debut saw its stock finish 83.53% higher on the day at USD187.20. Yes, you read those numbers right. Airbnb debuts today. Having already ramped its offer price higher, it would not surprise me in the least to see the same IPO-mania occurring there, justified as a “recovery” trade.

It was not enough to save the broader stock market, though, which got a mild food poisoning case. Senate Republicans continued to hold their position in US fiscal stimulus negotiations. A lack of progress sent a chill wind through the broader indexes, spurring a risk reduction move across various asset classes.

With founders, venture capitalists and investment bankers feasting in the IPO trough, the sell-off got nudged along by the announcement of US anti-trust lawsuits by the US FTC against Facebook. That follows similar actions towards Google, and with bi-partisan support in Congress, other “big-tech” are almost sure to get that Standard Oil feeling in 2021. Still, it is nice to see the Republicans and Democrats agree on something at least.

Over in Europe, food was at the top of the agenda again. UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen enjoyed a three-hour dinner in Brussels to try and bridge the two sides’ Brexit trade agreement differences. Even pavlova for dessert could not bridge the gap, though. Both sides were left hungry for more progress, with the situation looking less like bridging differences, and more like a bridge too far. Clearly, they hadn’t used New Zealand chefs to create the pavlova.

With noises from heavyweight politicians on both sides saying the talks remain perilously poised, both sides said they would walk away if necessary. The next self-imposed deadline, which this time really is the final deadline, except if we extend that deadline, is this Sunday. That could make for an emotional Monday morning session for sterling, renowned in forex circles as the widow-maker of liquidity in the start-of-week Australia/New Zealand twilight zone. They really should have got a Kiwi to make that pavlova, instead of GBP/USD markets on a Monday morning in Asia.

Switching from my reminiscences as a sterling trader in Wellington during the ’90s, for a British Bank, the data calendar today is modest in Asia. For November, Japan’s MoM PPI printed at 0.0%, as expected, and in line with the last 30 years trend. Next week is likely to be more interesting for Asia, with central banks in China, Japan, Taiwan, Indonesia and the Philippines meeting. We also have Japan’s Tankan, China Industrial Production and export data from around the region, interspersed with the US FOMC meeting, which will be a “live” one.

Eye on ECB Meeting

Later today, the European Central Bank is likely to announce further monetary stimulus. With rates already negative, the ECB is expected to extend the duration and increase the totals of its Pandemic Emergency Purchasing Programme (PEPP). Additionally, it may extend the sweetheart -1.0% rate on its Targeted Longer-Term Refinancing Operations (TLTRO) and signal the launch of new TLTRO’s in 2021. All of that is mostly expected, with the ECB President Lagarde’s press conference likely to be a source of greater volatility. I expect them to note positive data from Germany and highlight the downside risks associated with the pandemic. Ms Lagarde may also express some disquiet with the euro’s appreciation, but any dips will probably be short-lived.

The US Initial Jobless Claims’ improvement has bottomed out in the past weeks as the pandemic rampages across America, leading to renewed movement restrictions. Even with vaccines in sight, the end is certainly not, and we could see a surprise jump in Initial Claims tonight. The consensus is 725,000 new claims, but a surprise jump above 800,000 could prompt more unwinding of risk, weighing on stocks but supporting the US dollar. Total employment remains 10 million jobs lower versus the pre-Covid era, hardly a ringing endorsement. The only silver lining possibly being nudging the US fiscal stimulus negotiations along, with one eye on the double-header Georgia Senate run-off in early January.

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