On a day almost totally devoid of significant developments, the only demonstrably positive outcome was the resolution, after six weeks, of the argument about the result of America’s general election. The Electoral College confirmed that Democrat Joe Biden won the same 306 votes that the current President secured in his “landslide” victory four years ago.
Otherwise, there was not much to occupy investors’ attention beyond the swirling waters of Covid infections, vaccines and lockdowns. Broadly they leaned towards caution on the risk-appetite scale: equity indices in Europe were generally higher on the day while elsewhere they lost ground. The caution did not translate into currency valuations though. The NOK, SEK and CHF took the three podium slots ahead of the GBP and EUR in fourth. The JPY shared sixth place with the CAD, down by an average of 0.1%.
There was nothing obviously new on the Brexit front. The media have come to the conclusion that the Prime Minister will buckle down and come to a trade agreement with Brussels, perhaps as soon as this week. However, French fish catchers are threatening to blockade Calais in the event of a no-deal redistribution of quotas, despite the threatened deployment of a flotilla of British gunboats.
The Aussie dollar was Monday’s loser, at least partly because of continued political tension between Beijing and Canberra. It lost four-fifths of a cent to sterling and fell by an average of 0.4% against the majors. Coal was the catalyst.
Global Times, a Chinese state medium, reported that China will prioritise imports of coal from Mongolia, Indonesia and Russia. At the same time, imports from Australia will need specific approval. Some 60 bulk carriers, with hundreds of millions of tons of Australian coal, are already stranded off the coast with nowhere to go. China is miffed at Prime Minister Scott Morrison’s opposition to its territorial expansion and his siding with Washington to investigate the origin of the tragic Covid-19 pandemic.
Less detrimental to the AUD, the minutes of the Reserve Bank of Australia monetary policy meeting said the bank would “keep the size of the bond purchase program under review”. Westpac’s Bill Evans expects the current $100 billion programme to be doubled up to $200 billion before being wound back in 2022.
Ahead of London’s opening this morning, the UK employment data had no discernible effect on the pound. The uptick in unemployment from 4.8% to 4.9% was smaller than expected. There are no further UK ecostats until tomorrow morning’s inflation numbers.
Prior to the UK employment figures, Westpac’s consumer survey found confidence rebounding sharply in December, as “households regained their festive spirit”. The index rose 10.9 points to 106, a four-month high. Chinese retail sales increased by 5% in the year to November and industrial production was up by 7%. China is likely to be the only major economy to enjoy GDP growth this year.
Another thin agenda today brings French and Italian inflation together with South African producer prices this morning. After lunch comes Canadian housing starts and manufacturing sales as well as US import/export prices and industrial production. Bank of Canada Governor Tiff Macklem will be speaking this evening.