China currency spikes in prep for Biden win – MARKETS

China's currency jumped by the most since 2016, Rolls Royce stock has doubled this week while oil prices rise more on Norwegian strikes.

 

SUMMARY

 

  • European markets rise in face of Spain entering state of Alert in Madrid
  • Rolls Royce stock doubles in a week
  • Chinese renminbi sees biggest daily gain since 2016
  • UK GDP misses expectations as recovery slows
  • Oil price strength to end if Biden wins, renews Iran nuclear deal?

 

INSPIRATION

"Someone's sitting in the shade today because someone planted a tree a long time ago." -Warren Buffett

MARKETS

Stocks in Europe were mostly lower on Friday as mounting virus cases bring on stronger lockdown measures that in turn drag on the economic recovery. A case in point was UK August GDP that rose 2.1% in the month- a gigantic rise by historical standards – but slower than needed to keep a V-shape recovery intact.

 

Mining stocks led gains on the FTSE 100, which bucked the trend of weaker trends across European markets. Rolls Royce shares led the UK benchmark higher again on Friday. The shares have gained 50% this week for the week weekly return since listing in 1987. The £5 billion capital raise has put solvency concerns to the side and given investors confidence to look past virus travel issues and invest for the long term.

 

Stocks on Wall Street opened on a firmer footing -but it was large cap tech stocks that were performing best rather than stimulus-friendly small caps like in the previous two days. That comes as Senate majority leader Mitch McConnel cast doubt on chances for a deal before the election- calling the situation ‘murky’.

 

The onshore Chinese yuan jumped by 1.2% on Friday- the most in four years. That was following heightened demand for the currency over the Chinese holiday week. The offshore rate traded in Hong Kong had already been gaining on rising belief in a new China-friendly Biden administration – as well as data showing much hotter than expected activity in the country’s service sector. The Caixin services PMI rose from 50.7 to 54.8 in September. Donald Trump has been the most hawkish President on China in decades while Biden has said he would roll back the tariffs.

 

Oil prices are on a hot streak thanks to a shutdown in Norwegian oil output because of strikes in the country. Traders have bought into a big dip earlier in the week following a surprise build in US inventories that signal slowing demand.

 

Looking beyond Norway, there is also an idea Biden would bring the Iran nuclear deal back into operation. That would lift sanctions on the country and allow Iran to export its oil to many more countries, which would no longer face the wrath of the US. A sudden dearth of Iranian supply is bearish for the oil price under Biden. Especially in the context of tepid demand during the pandemic.

 

 

 

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