1/ CHRISTMAS CONUNDRUM
Christmas is coming and many countries are torn between giving citizens a respite from stringent restrictions and tightening them as coronavirus cases soar.
A raft of countries from Germany to Italy and the Netherlands have called off or curtailed planned easing over the holidays. A new coronavirus strain has seen Britain shut off from the rest of Europe.
All this has stymied the year-end Santa rally after world stocks, oil prices and bitcoin have recently been in a festive mood on hopes of U.S. stimulus bets and COVID-19 vaccine hopes. News that the New Year could bring more lockdowns could serve as a cruel reminder that the global economy will be dealing with virus aftershocks well into 2021.
-UPDATE 2-‘Sick man of Europe’: UK cut off over fears about new COVID strain -UPDATE 2-S.Korea’s capital to ban gatherings larger than four as coronavirus deaths rise
2/ TUNNEL VISION
With the clock ticking and British and European negotiators in the tunnel, weary investors are looking again at unloved British assets.
Some argue they might deserve a second chance. Since the 2016 Brexit referendum vote, global investors have ditched British assets, with the country’s stock market suffering $60 billion of outflows.
The pound is among the most undervalued of the major currencies on a trade-weighted basis, while equity risk premia for the stock market are above their long-term average.
With policymakers likely to keep monetary conditions ultra-easy, Britain’s economy may benefit in 2021 from the nationwide rollout of a COVID-19 vaccine.
-Brexit deal or no deal, meat supply lines will choke on red tape
3/ BALANCING ACT
China left its benchmark lending rate unchanged on Monday as expected, though improving economic fundamentals have raised speculation about a rate hike next year.
Risks to the recovery are emerging, however, highlighted lately by a slew of defaults and prompting the PBOC to pour cash into the banking system - an accommodative move against an expected drift toward tightening. The annual closed-door Central Economic Work Conference - to be held soon - will focus on this balancing act.
As global investors tip Chinese debt as a top buy, perhaps recent resistance to the yuan’s rise and a widening gap between its onshore and offshore prices points to discomfort on one side of the trade - and complacency on the other.
- UPDATE 1-China leaves lending benchmark LPR unchanged but rate hike expectations grow - China c.bank injects record 950 bln yuan of medium-term funds after bond defaults
4/ JOINING THE CLUB
Tesla joins the S&P 500 on Monday, and index funds will snap up some $80 billion worth of the electric carmaker’s shares to adjust portfolios.
Tesla shares have surged almost 700% year-to-date, putting its stock market value at over $600 billion and making it the sixth most valuable listed U.S.-company.
Some say its share price is far ahead of fundamentals and there is a hot debate on where the stock will go from here. Analysts have an average price target of $396.30 per share, more than a third below its current price - though estimates vary from $40 to $774 per share.
-Tesla heads to the S&P after meteoric rise and some investors want more -Tesla to see unprecedented trade ahead of S&P 500 debut
5/ TURKEY TIME
Turkey’s central bank governor, Naci Agbal, has another chance to confirm the country’s return to orthodox monetary policy on Dec. 24.
Markets cheered his November move to bump the benchmark up to 15% as well as the commitment to put price stability at the centre of monetary policy.
A Reuters poll showed analysts expect the central bank to raise rates again between 100 and 200 basis points. With geopolitical tensions in no short supply, investors want to see the central bank follow through on Agbal’s pledges. -UPDATE 2-Turkey says will not reverse Russian S-400S purchase despite US sanctions -Turkish locals’ forex holdings at new record high as of Dec. 11 -cenbank
Reporting by Dhara Ranasinghe, Karin Strohecker and Saikat Chatterjee in London, Ira Iosebashvili in New York and Tom Westbrook in Singapore, compiled by Karin Strohecker; editing by Larry King