The return of the Sheriff of Nottingham

Robinhood restrictions send GameStop plunging

It wasn’t supposed to be this way, but the Reddit army discovered their favourite broker for taking from the rich, Robinhood, was secretly the Sheriff of Nottingham. That dominated business news overnight as the Sheriff and his band of merry online brokers put a stop to the peasants’ rebellion by restricting trading in GameStop, AMC and some other pimp up my price favourites. The resulting price plunge had the media wailing that USD11 billion of value was wiped out in a single day; however, I would argue that there was never USD11 billion of value in the first place.

All the noise from the market’s discount circle seats drowned out the US data releases overnight. US GDP rose 4.0% QoQ, slightly lower than expected, but not enough to set off a double-dip panic. Weekly Jobless Claims outperformed at 847,000 jobs lost. It’s a strange old world where 847,000 new jobless claims from Americans in just one week, is perceived as good news. If nothing else, it reinforces the Federal Reserve’s dovish mantra from the day before.

That was enough to stop the mini taper tantrum of the previous day in its tracks. US equities clawed back some of the earlier days’ losses, the US dollar edged lower, and US Treasury yields rose slightly. With the Sheriffs of Nottingham burning the peasants’ crops, markets can now get back to the bigger issues at hand. US Personal Income is expected to rise 0.10% in December with the closely watched PCE Price Index rising 1.10% YoY. Only a substantial deviation is likely to be market-moving though with December data rapidly becoming old news.

Johnson and Johnson were expected to release preliminary data on their one-shot Covid-19 vaccine by the end of today, according to Dr Fauci. That is likely to be more market-moving, should it appear, than the US data releases. Positive news could spark a mini-rotation rally aka November into the end of the week.

Asia has a packed data calendar today, but trading in the region has a sedate “its Friday” look about it. South Korean Industrial Production rose by 3.40%, more than expected. Japan Unemployment remained steady at 2.90% with Industrial Production edging lower to -1.50%, possibly distorted by the US and European holiday seasons and Covid restrictions. Tokyo CPI revealed that inflation in Japan is still missing in action after 30 years. Australian PPI rose 0.50% QoQ, but was flat YoY, giving the RBA no inflationary concerns in the near term, especially as Private Sector Credit was also flat.

The story will be much the same when Singapore PPI is released this afternoon, Vietnam Inflation fell to -0.97% with the Trade Balance outperforming at $1.3 billion. Malaysia releases its trade balance later today. The overall picture is one of a continuing recovery in exports by Asia, but with little to no sign of inflationary pressures emerging, as domestic demand remains muted. With interest rates at record lows across the Asia Pacific, central banks will be feeling no need to adjust ultra-easy policy and the region will continue to march in lock-step with the Federal Reserve in the first half of the year at least.

China releases official January Manufacturing and Non-Manufacturing PMI’s on Sunday. Both headline numbers are expected to ease slightly to 51.5 and 55.4 respectively from December. A larger pullback could see some risk reduction in Asia on early Monday. Conversely, a surprise to the upside will probably boost Asian markets as they start the week.

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