Market Drivers Nov. 10, 2020
- Growth falls value rises
- Cable hits 1.3200
- Nikkei 0.26% Dax 0.24%
- UST 10Y 0.93
- Oil $40.75
- Gold $1886/oz.
- BTCUSD $15435/oz.
Asia and the EU
- GBP UK Claimant Count
- EUR ZEW -64.3 vs. -65
The brutal unwind in momentum continued today with NASDAQ Futures down by nearly 1% today while the Russell 2000 which represents small-cap value plays was up by 2%.
This was the second day in a row that the spread between momentum and value has widened significantly as investors continued to rotate out of the darling Work-From-Home plays into the beaten up “real economy” stocks that have gotten a bid after yesterday’s announcement from Pfizer (NYSE:PFE) on the progress made in the COVID vaccine.
The markets are clearly giddy about the prospect of a return back to normal, but experts warned that vaccine production and dissemination may take time and broad protection from the virus may not be ready until the middle of next year. Still, tonight’s move is as much about the liquidation of growth as it is about the appeal of value as many late investors including very likely many retail punters who have been so active in the most prominent high beta growth names via options have found themselves on the wrong side of the trade.
The high flying Nasdaq names will no doubt see further profit-taking, but on a longer basis, COVID has proven that much of global workflow can now be performed virtually and these large-term secular trends will continue to grow well into the future.
In FX the action was a bit more muted but the dollar was weaker across the board with cable especially strong as the pair barreled through the 1.3200 barrier to hit multi-week highs. Sterling rose on vaccine optimism as the country is now in a virtual lockdown given the massive outbreak of the virus in its second wave.
On the eco front, the UK labor data also showed considerable improvement with jobless claims falling for a second straight month in October while average weekly earnings also improved from 1.1% to 1.3%.
In North American trade, the calendar is barren, and price action will likely be driven by headlines from Washington DC as traders wait to see just far the Trump administration is willing to go to challenge the election results. Although Joe Biden has essentially ignored Mr. Trump’s utterly unsubstantiated claims there are now logistical conflicts brewing as a Trump-appointed nominee out of the GSA office has refused to release key transition funds and security clearances needed for the Biden team. These moves could not only impede a smooth transition of power but endanger national security as well and as the standoff turns to legal maneuverings the markets could quickly take on a risk-off posture as the United States fails to have a peaceful transition of power for the first time in history.