Daily Digest:
w/c 17 June 2024: The US data highlight this week is Retail Sales on Tuesday, with global Flash PMI data on Wednesday. Plus on the central bank side we get the RBA, PBoC, SNB and BoE all in play

Global Markets Outlook 2021


Initial Parameters:

  • Chart analysis is technical and taken from medium-term historical pattern
  • Technical projections based on a twelve-month time horizon
  • Targets set are based on the most recent, significant technical adjustment
  • Analysis is based on Elliot Wave and Fibonacci techniques
  • Technical analysis only guides; exogenous factors can shock any market
  • Markets, being capricious, forecasts are subject to revision
  • Fundamental analysis can be commissioned on request
  • Equity sector analysis is thematic

United States of America, T Bills:

  • Across the Treasury Bill curve too much cash has chased too little paper
  • There is a real prospect of negative yields across the T-Bill curve
  • The secured overnight financing rate (SOFR) will follow this path

US Treasury Notes and Bond; 2 ~ 30 year

  • Since July 2020, T10 note and T30 bond yields have steadily risen
  • 2/10 steepened by 53.4 bps since the start of 2020 to Dec 31
  • Treasury Department has to quickly signal the path of borrowing

US Treasury 2/10 Spread (bps)

  • As Fed has delivered accommodation, so 2/10 spread has recovered
  • Any bill shortage will impact the curve out to the T2, T3 and T5
  • There will be further steepening

US Treasury Butterfly T2 -(2 x T5) + T10

  • Butterfly (Barbell) spread has recovered since April
  • The recovery in the economy is supported by this move
  • There will be further improvement under Biden and accommodative Fed

Eurozone ~ 2 year (bps) over Germany:

  • Complacency widespread since “…whatever it takes” and “OMT”… … the front end of the market has been skewed by ECB policy
  • Italy is a reason to worry as Conte lacks the backing for basic reform

Eurozone ~ 2 year (bps) over Germany:

Why does France yield less than Germany? G2 > F2 3bps Dec 31, 2020!

Eurozone ~ 10 year (bps) over Germany:

  • Same for 10 year paper…
  • Ever since “…whatever it takes” and “OMT”…
  • … the long end of the market has been equally skewed by ECB policy
  • Look at Italy, trading at a significant margin to Spanish spreads

Eurozone ~ 10 year (bps) over Germany:

France hardly moved, average spread > Germany in 2020 was 33.3bps

Eurozone ~ Greece; problem overlooked:

  • Relief from EU/EZ budget demands aids attempts to recover lost growth
  • Large fiscal gap and Debt:GDP at 176.6%, however, GGB10 YTM 0.630%
  • Consumer Confidence decreased to -48.30 points in November

Eurozone ~ Greek inflation collapses

  • Consumer prices in Greece decreased 2.1% YoY in November of 2020
  • It is the eighth straight month of deflation
  • Structural issues not resolved, with youth unemployment at 33%

UK Gilts (%):

  • UK front end has broken into a declining channel during 2020
  • BoE kept rates at 0.1%; may go negative, bond buying still £875 Billion
  • Trade deal with EU will stabilise UK GDP growth; COVID-19 still impedes

UK Gilt Yields (%):

  • Negative yields out to the 5-Year as 48% of all issuance yields < 0%
  • That means £1.25 Trillion ($1.71 Trillion) is a cost to investors to hold
  • 2-Year ended at an all-time high, booking best price gain since 2011

US, European and Chinese Equities

Technical analysis in each chart is over the 12-Month trading range
Given extreme volatility we have shown 50 and 200 day moving averages for 2020

Developed cf. Emerging Market Equities:

  • Post March/April collapse developed and emerging equities rebound
  • Emerging equities have closed the gap and more sought than EM debt
  • Expectation of good cash flow from domestic demand recovery

US Equities:

  • Main US equity indices enjoyed a steady expansion since March
  • There will still highly volatile sessions as COVID-19 rampages
  • Markets still optimistic about “Biden Boost” via infrastructure; stay bullish

CBOE Volatility VIX:

S&P 500 Volatility Index:

Dow Industrials 12 – Month & Fibonacci

S&P 500 12 – Month & Fibonacci:

NASDAQ 12-Month & Fibonacci:

European Equities, leading markets

  • All recovered after suffering a setback on COVID-19 worries
  • DAX is the most secure investment; indeed it is pulling away from the rest
  • IBEX 35 has underachieved with respect to its peer group

DAX 12-Month & Fibonacci:

CAC 40 12-Month & Fibonacci:

FTSE MIB 12 – Month & Fibonacci:

IBEX 35 Fibonacci:

FTSE 100, the key “Non-Euro” European:

  • FTSE 100 has found breaking back above the 7000 level difficult
  • “Brexit” is over…at least in the main, FTSE to rise on vaccine hopes
  • FTSE 100 will press ahead in 2021 as private sector recovers

FTSE 100 Fibonacci:

CSI 300 12 – Month:

  • CSI 300 extends gains to make new 5 1⁄2 -year highs
  • Driven by consumer stocks as consumer confidence seeking new record
  • Investors hope for more measures to spur the country’s consumption

CSI 300 Fibonacci:

Spotlight Indices: 14 Equity Sectors:

  • Cyclical…
  • Auto…Basic Resources…Capital Goods…Consumer Cyclical… Financial…Travel & Tourism
  • Defensive…
  • Consumer Staples…Health Care…Tobacco…Utilities
  • Sensitive…
  • Communications…Defence…Energy…Technology

We asses on a modified traffic light scale:

Equity Sector 2020 Performance:

Equity Sector 2020 Performance:


  • Global light vehicle production fell to 69.3 million units
  • Sales in 202 were seen at 69.6 million, -18.0%
  • The pandemic remains a clear and present danger to the autos sector
  • High levels of accommodation have boosted shares
  • New car sales will rise by 15% in 2021
  • Commercial-vehicle sales will increase by 16% in 2021 mirroring the collapse in 2020
  • Automakers forced to review global operations
  • This will result in plant closures and job losses
  • Therefore, the industry will consolidate
  • Electric vehicle sales are set to rise from 2.5 million in 2020 to 3.4 million this year, mostly in Europe

Basic Resources:

  • Mining firms had over produced before COVID-19 hit
  • Major players to book productivity gains
  • That can be boosted by commodity price rises in 2021
  • Much depends on Bidens’s infrastructure plans
  • China will be a big spender on domestic infrastructure
  • It will, however, pare back the Belt & Road activities
  • The ongoing labour disputes in Latin America may well boost copper
  • We will see a reduction in tariffs

Capital Goods:

  • Q3 return better than expected after a weak H1 2020
  • Expect good activity in Q3 and into 20201
  • In 2021 aggregate sector revenues to increase by 5% after a more than 8% drop in 2020
  • Driven by economic growth and increased industrial investment in most end markets
  • Customer activity is linked to the economic cycle
  • Best share performance to be seen in APAC region
  • However, do not miss a N. America and European bounce

Consumer Cyclical:

PowerPoint Presentation

  • Retail sales declined by 5% in 2020
  • Investors are looking for an earning recovery
  • They will gain 4% in 2021; it will not be even
  • ❖  Africa 1% ~ 3%
  • ❖  Asia 5% ~ 7%
  • ❖  Europe 1% ~ 3%
  • ❖  North America 4%~6%
  • ❖  South America 2% ~ 4%
  • COVID-19 accelerated the questions over a bricks and mortar retail approach
  • Consumers will increase migration to online
  • This will require sellers invest in sophisticated order and delivery systems
  • High end luxury will thrive
  • There will be more bankruptcies among once famous names


  • Financial services successfully migrated online
  • Banks were crucial in stabilising the economy
  • Transmitted government stimulus and relief programs
  • Consequences of COVID-19 not on the same scale as those during the Global Financial Crisis of 2008–10
  • There will, however, be a new competitive landscape
  • Branches will close amid increased digitalisation
  • COVID-19 has shown only competent digital banks will survive…
  • …Focus on social distancing, personal safety etc.
  • Progress fettered as deep provision for NPL’s is made
  • In the US, Average ROE fell to 5.6% in 2020, this year will be 8.0% but in 2022 it will bounce to 11.6%

Travel & Tourism:

  • Last year really dealt the sector a severe blow … -54.2% by April
  • United Nations World Tourism Organisation (UNWTO) show that international tourist arrivals declined 70% in the first eight months of 2020 cf. 2019
  • Amounts to 800 million fewer international arrivals year-to-date for 2020, and a loss of S$730 billion in tourism revenues
  • There have been signs of tourism demand shifting to domestic travel in China
  • Once vaccines are widely adopted Europe and America’s can follow
  • 80% of industry experts expect a recovery to begin in travel during 2021…
  • …However, the industry will not be at pre COVID-19 levels until 2023

Consumer Staples:

  • Consumer Staples 6th best sector in 2020
  • e-Retailing continues to surge
  • Over 50% of e-commerce in 2018 will be in China
  • The recovery reversed in October because money has moved to cyclicals
  • In retailing the timing and trajectory of the recovery back to pre-pandemic norms is up for debate
  • Until there is a full return to the workplace the market dynamic for “Staples” looks favourable for online sales
  • There will be a greater presence for the “disruptors”
  • Store chains with heavy value of “Bricks and Mortar” assets are set to struggle
  • Increase in M&A as bottom line is squeezed
  • With over 260 sub groups it is often hard to be in the right area of a key defensive sector

Health Care:

  • National health services under budget strain, globally
  • However, state budgets will rise by 6% as public will demand greater resources post COVID-19
  • State systems cannot have a blank cheque, they have to be accountable
  • Can health services smoothly deliver the vaccine?
  • There will be a struggle to recover lost ground in non COVID-19 care
  • Can Biden afford to reverse light touch to US regulation
  • Biotech firms to work even closer with “Big Pharma”
  • Expanded use of smart computer modelling for trials
  • This is an industry where R&D will garner high levels of investment attention


  • Sales declined in 2020, however, operating profit is set to rebound 5% ~ 10% (Moody’s)
  • Long-term impact of COVID-19 on consumption too early to gauge
  • Traditional tobacco sales will decline5% as consumers switch to lower priced products
  • This hasten the move to alternative products although this will see tighter regulation
  • The curiosity is the regulation will prove a barrier to entry and so protect profits of existing key players
  • Leverage ratios will continue to improve despite high dividend payments
  • Free cash flow and available cash balances will be used to repay pending debt maturities


PowerPoint Presentation

  • Global utilities face 2021 with issues of how supplies are provided front and centre for the industry
  • Competition authorities will investigate the excess of “Monopoly Power”
  • Therefore, can the leading incumbents retain their level of market share?
  • Challenge is delivering for customers and shareholders at a time of transformation
  • Internet of Things (IoT) will drive the “Smart Home”
  • This will drive a world of Demand Side Response (DSR)
  • Major hurdles to overcome are: ❖ Decarbonisation with 2030 and 2050 targets Security of supply – especially for water
    Affordability of supply

• Are utilities sufficiently resilient to the pressures of changing demographics and climate?

Communications & Media

  • Delays to events such as the Tokyo Olympics, European Football Championships and the latest James Bond movie hit revenues
  • Advertising revenue fell 7% in 2020; it will rebound 6% in 2021 to $573 Billion (Magna Research)
  • Advertising in APAC will grow the fastest
  • US will be slowest after the 2020 election $ splurge
  • The shift in advertising to online will continue
  • Thus, print advertising will retreat further
  • TV advertising will rise 2% (Zenith Media) and radio by 1%
  • Cinema badly needs a return of customers, however, they may only make money on blockbusters
  • On demand and streaming will rise dramatically as many movies will go straight to Amazon, Netflix etc


  • Delays to full capacity commercial travel means defence contractors will outperform civilian plane manufacturers
  • Countries will spend on strengthening their military forces as geopolitical tensions intensify
  • Global defence spending is expected to grow 2.8% in 2021, so exceeding $2 Trillion mark
  • Under Biden defence spending in the US is likely to remain flat in 2021
  • As funding continues to increase and costs decline, the space industry will experience increased opportunities
  • Look for growth in secure satellite broadband
  • Space will increasingly become a military domain and so space launch services are also expected to record strong growth of 15% YoY in 2021 (Deloitte)


  • Demand for energy collapsed during the pandemic
  • On April 20, 2020 WTI closed at -$37.63/barrel
  • Since then crude oil volatility as barely flickered
  • Little improvement seen in the market in H1 2021
  • The long-term, H2 2021 and 2022 one can be optimistic about a rebound of oil demand
  • OPEC+ will be the dominant factor for 2021 oil supply
  • Under Biden we may see oil flows from Iran and Venezuela
  • Prices will slowly rise in H2 2021, however, caution is advised, given uncertainties regarding OPEC spare capacity and COVID-19 vaccine deployment
  • Renewables, nuclear, and renewable fuel growth to accelerate and further challenge fossil fuels


PowerPoint Presentation

  • The outlook for technology is stable
  • It is supported by declining macro uncertainties and reduced supply chain disruption
  • Industry volatility will reduce
  • Secular growth supported by technology adoption across various industries will reduce the industry’s reliance on IT demand
  • We look for single-digit overall technology hardware spending growth in 2021 driven by
  • ❖  Data centre capacity expansion
  • ❖  5G buildout
  • ❖  Increasing content in auto and industrial functions

• M&A to continue fuelled by

  • ❖  Investor confidence
  • ❖  Innovation stream
  • ❖  Cheap capital
  • ❖  Push to create earnings growth by acquisitions

Foreign Exchange Rates

Technical analysis in each chart is over the 12-Month trading range

EURUSD: In 2021; $ will make gains

GBPUSD: £ to fade as BoE go negative

EURGBP: € will gain as Brexit bites

USDJPY: Ready to breakout for $ gains

USDCHF: Bear trend will reverse at 0.8372

USDCAD: 1.2971 is key to US gains

USDJPY: Break 104.66; heralds $ upside

BTCUSD: Can you handle the volatility?

Commodities Energy, Metals Food Products

Technical analysis in each chart is over the 12-Month trading range

Thomson Reuters/Core Commodity CRB

Crude Oil WTI USD/Barrel: Ignore the – ve

Heating Oil USD/Gallon:

Natural Gas USD/Mm BTU:

Gold USD/Troy Oz:

Silver USD/Troy Oz:

Copper USD/lb:

Iron Ore Fines 62% Fe USD/Tonne:

Grains…Corn USD/Bushel:

Grains…Wheat USD/Bushel:

Grains…Soybeans USD/Bushel:

Soft…Cocoa USD/Tonne:

Soft…Coffee USD/lb:

Soft…Cotton USD/lb:

Soft…Orange Juice Concentrate USD/lb:

Soft…Sugar USD/lb:

Meat…Live Cattle USD/lb:

Macroeconomic Strategist

Stephen Pope is the Managing Partner of Spotlight Group. He has worked in the world of finance since 1982 and has performed d... Continued

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