Monex Morning Report – Fri 11 Dec 2020

OVERNIGHT HIGHLIGHTS

Dow slips, Nasdaq gains as surge in jobless claims reinforces need for financial aid before year end; Asia stocks head for mixed start

ECB expands and extends its bond buying as coronavirus resurgence weighs on the recovery; EU leaders set to approve budget as Poland, Hungary accept deal

Top Market News

Pelosi says bipartisan talks on COVID-19 relief making ‘great progress’

U.S. House of Representatives Speaker Nancy Pelosi said on Thursday that a bipartisan group of lawmakers has made “great progress” in talks aimed at hammering out an agreement to deliver COVID-19 relief to American families and businesses. Pelosi, who views the bipartisan talks as the path forward for Congress to enact a new “emergency supplemental” package of coronavirus aid, told reporters that she still needs to see legislative text from the group. “But I think they’ve made great progress,” Pelosi said. “I think the values and the priorities that they’ve established are what we need to do right away.”

Originating Source

ECB expands and extends its bond buying as coronavirus resurgence weighs on the recovery

“The European Central Bank on Thursday expanded its massive monetary stimulus program by another 500 billion euros ($605 billion), as a second wave of lockdown measures weighs on the euro area’s economic recovery. Markets had largely expected the central bank to add to its bond buying, having vowed in October to “recalibrate its instruments” as a resurgence in coronavirus cases across the Continent led to further national shutdowns. The ECB held interest rates on its main refinancing operations, marginal lending facility and deposit facility at 0.00%, 0.25% and -0.50%, respectively. The central bank launched its Pandemic Emergency Purchase Programme (PEPP) earlier this year in a bid to shore up the bloc’s economy in the wake of the pandemic. Following Thursday’s expansion, the total asset purchase value is now 1.85 trillion euros, and the ECB extended the horizon for purchases under the PEPP to March 2022. Reinvestments of assets maturing from the PEPP have also been extended until the end of 2023. ”

Originating Source

Lagarde Says ECB May Not Use All of New Emergency Bond Purchases

President Christine Lagarde said the the scale of additional emergency bond purchases will depend on the economic situation and the bank may not use all of the expanded program. “If favorable financing conditions can be maintained with purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full,” Lagarde said Thursday. “Equally, the envelope can be recalibrated if required to maintain favorable financing conditions to help counter the negative pandemic shock to the path of inflation.” The comments came after the ECB said it will boost the emergency bond program by 500 billion euros ($605 billion) and lengthen it by nine months.

Originating Source

EU leaders set to approve budget as Poland, Hungary accept deal

Hungary and Poland lifted their veto over a landmark European Union stimulus package in exchange for a delay in a sanctioning process that could strip them of access to the funds. The compromise brokered by Germany will be put to the bloc’s leaders meeting on Thursday in Brussels, where they’ll likely approve the deal, according to an official familiar with the discussions. An agreement will pave the way for the flow of $2.2 trillion to the continent’s battered economies. Hungary and Poland vehemently opposed making funding conditioned on rule-of-law standards and threatened to torpedo the EU’s 750 billion-euro ($909 billion) pandemic aid fund and the 2021-2027 budget. The proposal still ties disbursements from the package to democratic standards, though such sanctions can’t be triggered before the European Court of Justice has ruled on the legality of the new rules, a process that could take more than a year to complete, said the official, who asked not to be identified because the process is private.

Originating Source

Boris Johnson: no-deal Brexit now a ‘strong possibility’

Boris Johnson has ordered ministers to prepare for the “strong possibility” of a no-deal Brexit, warning that the UK risks being “locked in the EU’s orbit” as senior Tories urge him to find an agreement. After a three-hour summit with the European commission chief, Ursula von der Leyen, failed to bridge major gaps between them, the prime minister said he was prepared to “go the extra mile” by flying to Paris or Berlin for face-to-face talks with EU leaders. But he said the EU’s current offer was unacceptable because the UK could not be treated like its twin. “It was put to me that this was kind of a bit like twins, and the UK is one twin the EU is another, and if the EU decides to have a haircut then the UK is going to have a haircut or else face punishment. Or if the EU decides to buy an expensive handbag then the UK has to buy an expensive handbag too or else face tariffs,” he said.

Originating Source

China to sanction U.S. officials, curb some diplomat travel

China said it will sanction more U.S. officials and place new travel restrictions on American diplomats in retaliation for measures taken by the Trump administration over Hong Kong. Chinese Foreign Ministry spokeswoman Hua Chunying didn’t provide specific names of those sanctioned, but said they included people in the executive and legislative branches and their immediate families, as well as non-government organizations. China would also revoke visa-free entry to Hong Kong and Macau for U.S. diplomatic passport holders, Hua told a regular briefing in Hong Kong on Thursday. The U.S. announced sanctions Monday against 14 members of China’s National People’s Congress, the country’s rubber-stamp legislature, as President Donald Trump tries to ratchet up pressure on Beijing before President-elect Joe Biden takes office. The U.S. has taken a slew of actions against Beijing in recent weeks, including restricting travel visas for Communist Party members and banning cotton imports from a military-linked firm in Xinjiang.

Originating Source

China to collect extra anti-subsidy duties on Australian wine

China will start collecting extra duties on Australian wine from Friday, further ratcheting up tensions with Australia and handing another blow to a local industry already hit by tariffs last month. Anti-subsidy tariffs of between 6.3%-6.4% will be charged on the wine imports, starting Dec. 11, China’s Commerce Ministry said in a statement Thursday. That comes on top of anti-dumping tariffs of 107.1%-212.1% which were imposed last month.

Originating Source

U.S. FDA advisers wrestle with ethical issues linked to authorizing Pfizer’s COVID-19 vaccine

A panel of outside advisers to the U.S. Food and Drug Administration meeting on Thursday to weigh authorizing Pfizer Inc’s coronavirus vaccine for emergency use were wrestling with when people in the clinical trial who received a placebo should be allowed to get the shots. The committee is expected to vote sometime after 3:10 p.m. ET (20:10 GMT) on whether the vaccine, developed with German partner BioNTech SE, has shown effectiveness in preventing COVID-19 and if its benefits outweigh the risks. Documents prepared by the FDA ahead of the meeting did not point out any new safety or efficacy issues, raising hopes the vaccine will soon be authorized in the United States. It has already received regulatory green lights from the UK and Canada. Pfizer has asked for broad authorization for use of its two-dose vaccine in people aged 16 to 85.

Originating Source

Top Trump News

China’s Soybean Deal Signals Early Jump Into 2021 U.S. Market

China, the world’s top soybean importer, is getting an early jump on purchases from the U.S. for next year. The Asian nation bought 126,000 metric tons for shipping after Sept. 1, the start of the next marketing year, U.S. Department of Agriculture data showed Thursday. That’s the earliest for a forward purchase since 2016 and confirms a Bloomberg report from Dec. 7. Dry weather has threatened yield prospects in South America, potentially limiting available supplies from the harvest beginning in February. That may have prompted the earlier-than-usual deal for U.S. soybeans that won’t be planted until April. China’s imports rose to a record in November from a year earlier on demand for feed to bolster the domestic hog herd.

Originating Source

Biden picks more Obama veterans for key roles

President-elect Joe Biden has tapped Denis McDonough, the onetime chief of staff to President Barack Obama, to serve as secretary of Veterans Affairs, Biden’s transition team announced Thursday. McDonough, 51, had served as Obama’s chief of staff for the entirety of the former president’s second term in office. McDonough had previously been Obama’s deputy national security advisor, as well as the chief of staff of the National Security Council. Rice, 56, an alumna of the administrations of Obama and former President Bill Clinton, will not require confirmation by the Senate to serve as domestic policy director in Biden’s White House. She served as U.S. ambassador to the U.N. from 2009 until 2013, when she was selected as Obama’s national security advisor.

Originating Source

Melania Trump ‘just wants to go home’

In mid-November, as President Donald Trump railed against the election results, his wife, first lady Melania Trump publicly agreed with his sentiments. But privately, a handful of days after the final state tally, the first lady tasked an emissary with discreetly finding out what was available to her in terms of budget and staff allocation for post-White House life. While the President is busy figuring out a way to stay in the White House, the first lady is determining what to put in storage, what goes to Trump’s New York City digs, and what should be tagged for shipment to Mar-a-Lago in Palm Beach, Florida.

Originating Source

Economic Indicators

United Kingdom Balance of Trade

The UK posted a trade deficit of GBP 1.74 billion in October of 2020 compared to a surplus of GBP 0.61 billion in the previous month. It was the first monthly trade shortfall since March. Exports fell 3.6 percent to GBP 47.99 billion, led by a 5.9 percent decline in goods shipments and a 0.7 percent drop in services exports. Meantime, imports rose 1.2 percent to GBP 49.72 billion, as 2.8 percent increase in purchases of goods partly offset a 3.7 percent decline in acquisitions of services.

United Kingdom Industrial Production

Industrial production in the United Kingdom shrank 5.5 percent year-on-year in October of 2020, less than forecasts of a 6.5 percent drop. Still, it marks the 19th consecutive month of falling industrial output due to the coronavirus pandemic and Brexit uncertainty. All sectors recorded declines except water supply, sewerage and waste management.

United Kingdom GDP YoY

The British economy shrank 8.2 percent year-on-year in October of 2020, compared to forecasts of an 8.3 percent fall. It marks the 8th consecutive month of falling economic output due to the coronavirus pandemic.

United States CPI

Annual inflation rate in the US was unchanged at 1.2% in November of 2020, the same as in October and slightly higher than market forecasts of 1.1%. Prices increased faster for new vehicles (1.6% vs 1.5%) but slowed for food (3.7% vs 3.9%), shelter (1.9% vs 2%) and used cars and trucks (10.9% vs 11.5%). Also, cost of medical care commodities (-1.1% vs -0.8% in September) and energy (-9.4% vs -9.2%) declined further (-9.4% vs -9.2%) while deflation softened for transportation services (-3.4% vs -5.1%) and apparel (-5.2% vs -5.5%). On a monthly basis, consumer prices increased 0.2%, higher than a flat reading in October and expectations of 0.1%.

United States Initial Jobless Claims

The number of Americans filing for unemployment benefits increased to 853 thousand in the week ended December 5th, from the previous week’s revised level of 716 thousand and well above market expectations of 725 thousand. It was the highest number since mid-September amid rising COVID-19 cases and new lockdowns across the country. On a non-seasonally adjusted basis, the number of claims was up to 948 thousand, compared with 719 thousand in the previous week. Also, about 428 thousand people applied for help from the Pandemic Unemployment Assistance scheme, which covers workers that do not qualify for initial claims, compared with 288 thousand in the previous period.

Japan Producer Prices Change

Producer prices in Japan decreased 2.2 percent year-on-year in November of 2020 after declining 2.1 percent in October, matching market expectations. It was the sharpest decline in six months, mainly explained by petroleum & coal products (-18.5 percent vs -16.2 percent in October), chemicals (-4.8 percent vs -5.7 percent), and iron & steel (-2.6 percent vs -2.8 percent), and lumber & wood products (-2.0 percent vs -2.3 percent). In addition, deflation was recorded in metal products (-0.5 percent vs -0.1 percent), electrical machinery & equipment (-0.3 percent vs 1.4 percent), information & communications equipment (-0.5 percent vs -0.7 percent), and production machinery (-1.5 percent vs -1.7 percent). On a monthly basis, producer prices were unchanged after falling 0.2 percent in October.

Economic Calendar

Friday

EU Leaders Summit