Macroeconomics: The Day Ahead – 21 December 2020

Good Morning: The Long & the Short of it and The Bigger Picture

Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist

  • Virus mutation fears likely to offset US fiscal package agreement as  holiday fortnight gets under way; light data and events schedule has UK Lloyds Business Barometer, Korea Trade and as expected no change to  China LPR rates and ongoing Brexit impasse; only US Chicago Fed Activity Index ahead
  • Vaccine hopes in danger of hitting the rocks of rapid infection rate rise, mutation fears; thin trading conditions likely to exacerbate  volatility


As the holiday fortnight gets under way, the roster of scheduled data and events is modest and unlikely to impact markets, as it mulls the positive news that the US Congress has finally agreed on a fiscal support package (far more will be needed), which should be ratified today, against another Brexit talks deadline proving to be little than another rhetorical ruse. More significantly markets are left to ponder the UK and Europe’s measures to contain a rapid escalation in pandemic infection rates, though it remains unclear whether the much more rapid infection rate is due to a variant, or a more worrying mutation – the latter being a particular concern given that the only ‘silver lining’ about Covid-19 has been its low mutation rate relative to other viruses. Only time will tell what the implications are for the hopes vested in the various vaccines and a return to less constraints on movement and economic activity, but in the short-term this serves as a sharp reminder that dismissing the immense short-term challenges of the virus is replete with risk. In terms of the schedule, there are the sharp rebound in the UK’s Lloyds Business Barometer from -21 to-4, though the fact is that the data collection period was 25 November to 10 December renders this historical given events over the past 10 days. There are also the weak South Korea Dec 1-20 trade data (Exports 1.2% y/y from 11.1%, Imports -8.0% from 1.3%) and as expected no change in China’s 1 & 5-yr Loan Prime Rates to consider, while the only data item of any note ahead is the US Chicago Fed National Activity Index, with the bond auction calendar seeing sales of 20-yr in the US and 10-yr in Canada. Given the thin trading conditions, any further adverse news on virus developments could well be a source of sharp increase in market volatility, particularly given increasing risks of social unrest in reaction to such news, as well as very skewed overall positioning in many asset classes.


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