This week saw another strong risk on rally as a combination of positive factors came together. Firstly, news President Trump was prepared to start proceedings to transfer power to President elect Joe Biden relieved markets. Secondly, news that Janet Yellen would be appointed as Treasury Secretary encouraged risk as she is a vocal dove. Thirdly, positive vaccine news from across the world ranging from the West’s Pfizer to Russia’s Sputnik vaccine encouraged signs of coming global normality. This all sent risk on and allowed the Dow Jones index above 30,000 for the first ever time ahead of the US Thanksgiving holiday on Thursday.

Other key events from the past week

  • EUR: Key PMI data, November 23. Dropping eurozone PMI’s affirmed a second dip for the economy this week. The good news is the drop was helped by stronger manufacturing. Will the ECB now deliver more easing in December?
  • GBP: Fading Brexit optimism? November 25. EU Chief Negotiator Barnier told UK’s Chief Brexit negotiator Frost that if the most problematic points don’t change then the European negotiators have little reason to make the trip to London. Watch out for heavy GBP selling if negotiations stop altogether!
  • S&P500: Strong period for US stocks, November 20-Dec 06. The S&P500 started its strong seasonal pattern well. The S&P500 has gained value in eight of the last ten years from Nov 21 through to Dec 04.

Key events for the coming week

  • Oil: OPEC+ meets, November 30. OPEC+ meets this week to decide on output policy for next year. The recent rally in oil will need confirmation of the news that January’s planned output hike are delayed. If that news is not forthcoming then Brent’s 25% gain this month looks vulnerable to a correction lower.
  • AUD: Interest rate decision, December 01. This is the first central bank decision of December, but the RBA are not expected to change interest rates. However, investors will carefully watch for any change in forward guidance.
  • Vaccine Optimism: Global growth coming, December 04. Will this week register another strong rally in stocks on vaccine optimism?