Monex Morning Report – Fri 13 Nov 2020

OVERNIGHT HIGHLIGHTS

Dow ends day with 300-point loss as COVID-19 fears spook stock market; Asian stocks set to follow U.S. lower

White House leaves stimulus to congress after months of impasse; Powell warns of U.S. economy risk with pandemic at deadliest yet

White House leaves stimulus to congress after months of impasse

The Trump administration is stepping back from negotiations on a new stimulus package and leaving it up to Senate Majority Leader Mitch McConnell to revive long-stalled talks with House Speaker Nancy Pelosi, according to people familiar with the situation. While the White House probably would consult with GOP lawmakers on details of a Covid-19 relief bill, it’s now unlikely to take the lead on talks, according to the people, who spoke on condition of anonymity to discuss internal deliberations. The White House would only take over if negotiations have to be restarted completely, the people said. The White House didn’t respond to multiple requests for comment. The move greatly diminishes the chances of a trillion-dollar stimulus for the U.S. economy before January. President Donald Trump had committed to pursuing a large-scale stimulus after the election, even saying he would approve a $2 trillion bill, but has since focused on attempting to overturn President-elect Joe Biden’s victories in battleground states. That leaves the negotiations at a stalemate, with neither McConnell nor Pelosi backing away from earlier positions, even as the further spread of the coronavirus threatens to weaken the recovery from earlier pandemic-induced shutdowns.

Originating Source

McConnell rejects Dem demand for big Covid relief package, stands by push for ‘highly targeted’ bill

Senate Majority Leader Mitch McConnell on Thursday continued to reject the call from Democrats for a big coronavirus stimulus package, saying, “that’s not a place I think we’re willing to go” and reiterated his push for a bill that’s “highly targeted at what the residual problems are.” McConnell said of House Speaker Nancy Pelosi and Sen. Chuck Schumer, “I gather she and the Democratic leader in the Senate still are looking at something dramatically larger. That’s not a place I think we’re willing to go.”

Originating Source

Trump administration bans U.S. investments in firms linked to Chinese military

The Trump administration on Thursday unveiled an executive order prohibiting U.S. investments in Chinese firms that Washington says are owned or controlled by the Chinese military, ramping up pressure on Beijing after the U.S. election. The order, which was first reported by Reuters, could impact some of China’s biggest companies, including telecoms firms China Telecom (NYSE:CHA) Corp Ltd, China Mobile (NYSE:CHL) Ltd and surveillance equipment maker Hikvision. The move is designed to deter U.S. investment firms, pension funds and others from buying and selling shares of 31 Chinese companies that were designated by the Defense Department as backed by the Chinese military earlier this year.

Originating Source

BoE’s Bailey hopes for ‘goodwill’ after Brexit transition ends

Bank of England Governor Andrew Bailey said he hoped a spirit of goodwill would prevail between Britain and European Union countries to smooth over inevitable trade disruptions when a post-Brexit transition period ends on Jan. 1. Last week the BoE said many smaller British companies appeared unready for the reintroduction of customs checks in under seven weeks’ time, and estimated that border delays were likely to cost Britain 1% of GDP – around 5 billion pounds ($6.55 billion) – in the first three months of next year. This disruption would be even greater if Britain and the EU failed to reach a trade deal, leading to new tariffs on goods. Bailey also told a panel discussion with U.S. Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde that he felt “very uncomfortable” at the huge amount of economic uncertainty created by COVID. “We are living in a world of huge uncertainty and unpredictability, and I don’t like to say that,” he said. “It’s a very, very difficult place to be in.”

Originating Source

Powell warns of U.S. economy risk with pandemic at deadliest yet

Three of the world’s top central bankers warned Thursday that the prospect of a Covid-19 vaccine isn’t enough to put an end to the economic challenges created by the pandemic. “We do see the economy continuing on a solid path of recovery, but the main risk we see to that is clearly the further spread of the disease here in the United States,” Federal Reserve Chair Jerome Powell said during a panel discussion at a virtual conference hosted by the European Central Bank. “With the virus now spreading, the next few months could be challenging.”

Originating Source

BOJ’s monetary policy can play bigger role in COVID-19 world, says central bank policymaker

The Bank of Japan’s monetary policy can play a bigger role in helping to alleviate the pain caused by structural changes to the economy brought about by COVID-19, its board member Seiji Adachi said on Thursday. Government and central bank relief measures likely succeeded in addressing immediate economic shock from the coronavirus pandemic with Japan’s jobless rate, at 3%, much lower than around 7-8% for European and U.S. countries, Adachi said. But jobs losses are increasing for temporary workers in service industries, while corporate bankruptcies may rise if the economy takes longer to emerge from the pandemic’s hit, he said.

Originating Source

It’s not good news’: Victorian timber exports to China halted

Chinese authorities have suspended timber exports from Victoria in the latest escalation of tensions between Australia and its biggest trading partner, raising fears of local job losses. The trade block comes after reports of curbs being placed on Australian exports of lobster, barley, wine, copper and coal destined for China, although Chinese authorities have not officially confirmed the restrictions. China’s customs agency then issued a notice saying it had detected a bark beetle in Queensland logs heading to China. On Thursday the Australian Forestry Products Association confirmed Chinese customs authorities had cited similar concerns about pests in Victorian timber, resulting in the suspension of local exports.

Originating Source

Japan’s economy seen clawing back half of pandemic losses

Japan’s sharp economic rebound in the last quarter likely recovered only around half the growth lost during the pandemic, official data is expected to show Monday, with weak business investment contributing to slowing momentum going forward. Economists see gross domestic product jumping at an annualized pace of 18.9% in the three months through September, helped by improved trade with the U.S. and China, a comeback for the auto industry and the biggest increase in household spending since the start of the millennium. That would be the biggest growth spurt since 1968, leaving the economy a little less than halfway back to its pre-pandemic size. It will take three years for GDP to regain its peak before Covid and a 2019 sales tax hike, according to economist Yoshimasa Maruyama at SMBC Nikko Securities.

Originating Source

Top Trump News

Trump’s final Fed picks

President Donald Trump looks set to put his final stamp on the Federal Reserve just weeks after being voted out of office, with the Senate expected to approve his picks soon to fill the last two open seats at the U.S. central bank. Senate votes on Trump’s former economic adviser Judy Shelton and St. Louis Fed research director Christopher Waller could take place as early as next week, Republican Senator John Cornyn told Bloomberg News on Thursday. Cornyn’s communications director confirmed the comments to Reuters. Republican leaders have previously said they would not advance the nominations unless they were confident that Shelton, who has drawn criticism for being too partisan for the job, has the support needed for approval. But Republicans’ control of the Senate, currently by 53 members, is only assured until January, giving them cause to act now.

Originating Source

Republicans

More Republicans on Thursday broke with President Donald Trump’s refusal to cooperate with Joe Biden, saying Biden is entitled to intelligence briefings even if they were not ready to recognize the Democrat as the winner of the Nov. 3 election. Most Republican officials and lawmakers publicly remained behind the Trump campaign’s push to contest the result through lawsuits challenging vote counts in individual states as the president, without evidence, claims widespread voting fraud. State election officials have said no widespread fraud occurred. Biden, meanwhile, moved ahead with the work of preparing to govern, speaking with Pope Francis as his fellow Democrats in Congress blasted Republican election “shenanigans” and urged action on the coronavirus pandemic. With a few states still counting ballots, Biden has won enough of election battleground states to surpass the 270 electoral votes needed in the state-by-state Electoral College that determines the next president.

Originating Source

Trump campaign senior adviser

Trump campaign senior adviser Kayleigh McEnany previewed “a number of affidavits” to be filed in Pennsylvania Thursday, alleging an “unequal system.” “You’ll hear from the president at the right moment … right now he’s letting this litigation play out, letting his lawyers take the lead on this while he stays hard at work for the American people on COVID and other matters,” McEnany told “Fox & Friends” about President Trump’s response to the election results. McEnany shared one example from a Pennsylvania voter who alleged she received a ballot in the mail but didn’t request one, so she discarded it. When she went to the polls to cast her ballot, she said she was told she had already voted by mail and could not vote at the polls.

Originating Source

Economic Indicators

U.S. Core Consumer Price Index (CPI) MoM

US core consumer prices, which exclude volatile items such as food and energy, was unchanged in October of 2020, after rising 0.2 percent in the previous month and compared with market expectations of a 0.2 percent gain.

U.S. Initial Jobless Claims

The number of Americans filing for unemployment benefits declined to 709 thousand in the week ended November 7th, from the previous week’s revised level of 757 thousand and below market expectations of 735 thousand. It is the lowest number since late March but still well above pre-pandemic levels. On a non-seasonally adjusted basis, the number of claims declined to 723 thousand, compared with 744 thousand in the previous week. Also, more than 298 thousand people applied for help from the Pandemic Unemployment Assistance scheme, which covers workers that do not qualify for initial claims, compared with 362 thousand in the previous period.

United States Crude Oil Stocks Change

US crude oil inventories rose by 4.278 million barrels in the week ended November 6th, 2020, following a 7.998 million drop in the previous period and compared with market expectations of a 0.913 million decrease, according to the EIA Petroleum Status Report. Meantime, gasoline inventories were down by 2.309 million barrels, while markets had forecast a decline of 0.263 million.

United Kingdom Balance of Trade

The UK trade surplus fell to GBP 0.61 billion in September of 2020 from an upwardly revised 2.85 billion in the prior month. It was the smallest trade surplus in six months. Exports rose 2.6 percent to GBP 49.76 billion, boosted by a 3.3 percent increase in goods shipments and a 1.7 percent rise in services exports. Meantime, imports climbed 7.7 percent to GBP 49.15 billion driven by a 10.2 percent surge in purchases of goods and a 0.8 percent increase in acquisitions of services.

United Kingdom GDP Growth Rate

UK GDP expanded 15.5 percent in the three months to September 2020, partially recovering from a record contraction of 19.8 percent seen in the previous period and compared with market expectations of a 15.8 percent growth, a preliminary estimate showed. This was the strongest pace of expansion in the economy since the series began in 1955, reflecting the continued easing of lockdown restrictions as well as some recovery of activity from the steep contraction in April. Household consumption increased 18.3 percent (vs -26.3 percent in Q2) driven by higher spending on restaurants and hotels and transport, and gross fixed capital formation rose 15.1 percent (vs -21.6 percent in Q2) boosted by dwellings investment and business investment. Still, household consumption and business investment remained well below pre-pandemic levels. Public spending advanced 7.8 percent (vs -14.6 percent in Q2), while net external demand contributed negatively to the GDP as imports rose more than exports.

Germany Consumer Price Index (CPI) MoM

The Consumer Price Index in Germany increased 0.10 percent in October of 2020 over the previous month.

Economic Calendar