Advanced Share Registry : Market News 05 Jan 2021

America's toxic political landscape and a mutant strain of the Covid-19 tapped the brakes from the markets fresh record highs for its worst day in over two months. That wasn't particularly hard to do but after a record Bull run but the modest 1.25 per cent retrace left most commentators breathlessly calling it a slump. Calmer voices know that's child's play and expect a correction in the order of five to ten per cent to take some excessive heat from markets.

If the Georgia runoff for two Senate seats favours Democrats, the party will control all three branches which isn't perceived as a market-friendly outcome as President-elect Joe Biden may reverse Trump's corporate tax cuts, which threatens company earnings and stock prices. While One-party rule isn't incredibly exotic in America, the current political paranoia most surely is and its spooking allies worldwide. Trump's claims of voter fraud without substantiation are rocking its Constitutional foundation and has now officially divided the GOP. Eleven Senators have declared themselves part of Team Trump, separate from the Grand Old Party, personified by Senate Leader Mitch McConnell. They will now -somehow- contest Biden's confirmation, but it's likely grandstanding ahead of the 2024 elections. International analysts understand that this diminishes global Western power just as Communist Chinas ascent accelerates.

The Dow was down 550 before buyers rushed in after Boeing's 5.1% loss and Coca-Colas' 4.3% decline eliminated 88 points from the index on their own. Apple also blew headwinds after an analyst's downgrade, but ten-year treasuries may have had the most significant influence. The 10-year breakeven rate is what holders of inflation-protected Treasuries anticipate inflation will average over the next decade. That ticked up to 2.01% for a high since November 2018. More importantly, it is near the Federal Reserve's key 2% inflation target. While the inflation target is a more nuanced calculation and may take two years to achieve, it reminds markets that low rates don't last forever, especially when they're near zero. Ironically, this market-threatening scenario of higher rates is driven by the vaccine's anticipated normalisation of consumer behaviour together with the stimulus funding them. In other words, optimism.

The spread of a more infectious variant of the Covid pathogen, first reported in Britain is causing growing alarm among public health experts. Now discovered in New York State, the stock market has yet to react as it awaits full scientific appraisal. Another version in South Africa is also raising anxieties as it indicates the virus can change its genetic code at a rate never before seen. The U.K. Health Secretary Matt Hancock said, 'I'm incredibly worried about the South African variant,'. Young people under the age of 20 may be more affected, according to anecdotal evidence from South Africa with many becoming severely ill. There is no evidence that current Covid-19 vaccines won't work against the new strains. With around 90% efficacy, there's plenty of wiggle room to remain effective, even if both mutations deliver higher viral loads. If current vaccines require modification, that process would take 4 to 6 weeks. Vaccine rollouts have also slowed dramatically in many regions as logistical hurdles arise. Some of the two-shot vaccine deliveries have increased the time between shots to reach more people sooner with at least one shot. Daily cases in the U.S. soared to a record 300,000 following the New Year holiday.

Dow Jones	30223.89	-382.59	-1.3%
US S&P500	3700.65	-55.42	-1.5%
US Nasdaq	12698.45	-189.835	-1.5%
UK FTSE	6571.88	+111.36	+1.7%
German Dax	13726.74	+7.96	+0.1%
Gold Futures ($US/oz)	1946.6	+51.50	+2.7%
Spot Iron Ore ($US/t)	159.20	0	0%

Europe's STOXX 600 index increased by 0.7% as Brexits conclusion, and the EU's more efficient vaccine rollout plays out its momentum. The UK FTSE gained a 1.7% and Germanys Dax index of 0.1% despite the third lockdown across England initiated. Japan too is considering another State of emergency for the Tokyo area as its constitution doesn't allow lockdowns. Our markets opened down 50 points despite a strong performance from BHP and RIO.

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