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30 October 2020

USD/JPY bounces-off lows near 104.10, not out of the woods yet

USD/JPY remains under heavy selling pressure ahead of the European open, as the bears eye a break below the September low of 104.00 amid persistent risk-off mood.

Thursday’s sharp rebound from five-week lows of 104.03 to 104.72 is almost nearing its end, as the sellers have returned with pomp and show this Friday.

The spot faces a triple whammy from COVID-19 resurgence-led risk aversion on one hand while easing travel restrictions in Japan and broad-based US dollar retreat also add to the weight on the major.

The safe-haven Japanese yen remains strongly bid, as surging coronavirus cases in the US and Europe dampen the market sentiment and drag the Asian stocks lower. The Nikkei 22 index closed 1.52% lower on the day while the S&P 500 futures slump over 2%.

Further, the Japanese government lowering infection risk advisory for China, Australia and others to level 2 from level 3 also helped the yen recover lost ground.

Meanwhile, the US dollar pullback from monthly highs against its main competitors, in the face of falling Treasury yields, exacerbated the pain in USD/JPY.

Looking ahead, it remains to be seen if the bulls manage to defend the 104 mark, as the US dollar could resurge if the risk-aversion deepens in European trading.

The solid US Q3 GDP-led recovery could be revived on fresh haven demand for the buck ahead of the US macro news and election next week.

Coronavirus update: Another record daily surge of 18,681, most of Germany deemed as ‘high risk’

Germany reported another record daily increase in coronavirus infections, up by 18,681 the latest statistics released by the Robert Koch Institute (RKI) showed Friday.

The total tally stands now stands at 499,694, closing on the 500K mark. On Thursday, the total count rose by 16,774.

The new deaths jumped by 77, as the total count accelerated to 10,349. Meanwhile, the active cases in the country stood around 130K.

According to the RKI, 314 districts out of the total /412 in Germany are now deemed as ‘high risk’.

Chancellor Angela Merkel warned Thursday that the health authorities are near the limits of their capacity while adding that the number of people in virus patients in ICU has doubled in the last 10 days.

Meanwhile, Spanish health authorities announced a state of emergency until early May, giving regions legal backing to decide curfews and restrict travel to try and contain the rapid spread of the virus.

While Europe battles with the second-wave, Australian officials reported lowest number of active COVID-19 cases in the country in four-months. The OZ nation reported just under 200 active cases, down from a peak of just over 8,000 in mid-August, per Reuters.

Market reaction

EUR/USD stalled its recovery just shy of the 1.1700 level, now trading flat at 1.1678, as COVID-19 fears continue to spook markets. Focus on key Eurozone macro data.

Mixed Bag of Quarterly Reports from Tech-Heavyweights Could Pressure US Stock Indexes on Friday

U.S. stock indexes posted a volatile reaction to a mixed bag of quarterly reports from top-tier technology companies after the closing bell on Thursday. Yesterday’s late reports came amid turbulence on Wall Street, with soaring coronavirus cases and uncertainty about a fiscal relief bill in Washington dimming the outlook for an economic recovery and knocking over 3% off the S&P 500 so far this week.

After the cash market close on Thursday, Alphabet (Google) rallied, Apple sank, Twitter tumbled and Facebook dropped. Share swings in these companies following their earnings reports after the bell sent exchange-traded funds tracking the S&P 500 and NASDAQ Composite down about 1% each, suggesting downside pressure on Wall Street on Friday.

Alphabet Sales Growth Revived as Advertisers Flock Back to Google

Google parent Alphabet Inc on Thursday powered back to sales growth, beating analysts’ estimates for the third quarter as businesses initially hobbled by the coronavirus pandemic resumed advertising with the internet’s biggest supplier of ads.

Alphabet shares, up 13% on the year, rose 8.5% after hours to $1,689.89.

Apple’s Late iPhone Launch Temporarily Wiped $100 Billion Off Its Stock Value

The late launch of new 5G phones caused Apple Inc’s customers to put off buying new devices, leading the company on Thursday to report the steepest quarterly drop in iPhone sales in two years.

Apple fell over 5% at one point in after-hours trade, wiping $100 billion from its stock market value.

Since 2013, Apple has delivered new iPhones each September like clockwork. But pandemic-induced delays pushed the announcement back a month, with some devices still yet to ship.

Even as booming sales of Macs and AirPods boosted overall revenue and profit above what analysts had expected, iPhone sales dropped 20.7% to $26.4 billion.

Twitter Warns US Election Could Affect Ad Sales, Shares Drop 16%

Twitter Inc on Thursday added fewer users than Wall Street had expected and said a rise in expenses would accelerate in the fourth quarter, sending its shares tumbling 16%.

The San Francisco-based social media company said it expected expenses to increase by close to 20% in the fourth quarter compared with a year ago due to an increase in investments.

The company also cautioned that it was hard to predict how advertisers would react as the U.S. presidential election nears on November 3.

Shares of Twitter fell to $44.00 in after-market trading.

Facebook Anticipates Tougher 2021 Even as Pandemic Boosts Ad Revenue

Facebook Inc on Thursday warned of a tougher 2021 despite beating analysts’ estimates for quarterly revenue as businesses adjusting to the global coronavirus pandemic continued to rely on the company’s digital ad tools.

The world’s biggest social media company said in its outlook that it faced “a significant amount of uncertainty,” citing pending privacy changes by Apple and a possible reversal in the pandemic-prompted shift to online commerce.

“Considering that online commerce in our largest ad vertical, a change in this trend could serve as a headwind to our 2021 ad revenue growth,” it said.

Shares of the company were lower in extended trading.

Amazon Sees Pandemic Boosting Holiday Sales and Investment in Delivery Inc on Thursday forecast a jump in holiday sales – and costs related to COVID-19 – as consumers continued to shop more online during the pandemic.

A company executive added that heightened spending on delivery infrastructure would likely continue over years, and shares fell 2% in after-hours trading.

For the fourth quarter, Amazon said it expects net sales of $112 billion to $121 billion. That would mark the company’s first over $100 billion and follows a third-quarter revenue beat that analysts such as eMarketer’s Andrew Lipsman did not expect.

“While it was clear that the pandemic-driven shift to e-commerce would keep Amazon’s topline elevated, it surprised by easily surpassing an already high bar,” Lipsman said.

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