Monex Morning Report – Fri 18 Dec 2020

OVERNIGHT HIGHLIGHTS

Wall Street ends at record highs as investors eye fiscal stimulus; Asian equities set for a mixed start

Stimulus talks could spill into weekend as lawmakers scramble to complete deal; Britain, EU strike pessimistic tone in post-Brexit trade talks

Top Market News

Stimulus talks could spill into weekend as lawmakers scramble to complete deal

White House officials and congressional leaders are trying to address a number of lingering policy disagreements as they race to finalize an approximately $900 billion coronavirus relief package, with growing signs that the talks will drag into the weekend. Among the most vexing issues is whether to curb the powers of the Federal Reserve and how to structure a new round of stimulus checks. They are also clashing over over aid for theaters and music venues and relief for cities and states, among other things. Lawmakers have fought over many of these issues since May, but they were suddenly trying to resolve them all at once on Thursday, creating a chaotic scene with numerous lawmakers all unsure about the latest state of play. Negotiators were hoping to resolve all of their differences and pass matching bills through the House and the Senate by Friday night, in order to marry the stimulus bill with a must-pass government funding package. But the prospects of this all happening appeared to slip away late Thursday. They must pass at least a stop-gap spending bill by Friday night to avoid a government shutdown on Saturday. Then they can continue negotiating the stimulus bill through the weekend. “We need to complete this work and complete it right away,” Senate Majority Leader Mitch McConnell (R-Ky.) said late Thursday. “The Senate’s not going anywhere until we have Covid relief out the door…In the meantime, we’re going to stay productive.”

Originating Source

Britain, EU strike pessimistic tone in post-Brexit trade talks

Britain and the European Union struck a pessimistic tone in trade talks on Thursday, with a spokesman for Prime Minister Boris Johnson saying it was “very likely” there would be no agreement unless the bloc changed its position “substantially”. Just over two weeks before Britain finally leaves the bloc’s orbit, European Commission President Ursula von der Leyen was also downbeat, saying it would be “very challenging” to overcome the “big differences” that remained. Both sides have called on the other to shift position to try to safeguard almost a trillion dollars worth of trade from tariffs and quotas when a so-called transition period ends on Dec. 31. Since Britain left the EU in January, the talks have been largely hamstrung over two issues – the bloc’s fishing rights in British waters and on creating a so-called level playing field providing fair competition rules for both sides. After a call between Johnson and von der Leyen to take stock on the talks, a spokesman for the British leader said: “The prime minister underlined that the negotiations were now in a serious situation.”

Originating Source

BOJ set to hold fire, extend fund programmes to ease pandemic strain

The Bank of Japan is expected to extend on Friday a package of steps aimed at easing corporate funding strains caused by the coronavirus, as a renewed spike in infections cloud prospects of recovery from the health-crisis-induced economic slump. With markets stable and overseas demand showing signs of life, however, the central bank is likely to keep interest rates steady and maintain its view the world’s third-largest economy is gradually emerging from the pandemic’s initial damage. “While firms are wary of spending, business sentiment is recovering and inflation expectations are bottoming out,” said Hiroshi Ugai, chief Japan economist at JPMorgan (NYSE:JPM) Securities. “Aside from an expected extension in its fund-aid programme, the BOJ won’t take steps to prop up growth and inflation.”

Originating Source

Bank of England holds rates steady as coronavirus outlook remains uncertain

The Bank of England kept its main lending rate at 0.1%, having cut twice from 0.75% since the onset of the pandemic in March, and retained its target stock of asset purchases at £895 billion ($1.2 trillion). At its last meeting in November, the Monetary Policy Committee (MPC) voted to expand its bond buying as England entered a month-long national lockdown amid a resurgence in Covid-19 cases. In Thursday’s report, the MPC noted that the successful trialing and initial rollout of vaccines was likely to reduce the downside risk to the economic outlook identified in November.

Originating Source

Myefo: Australia’s economic recovery lifts government revenue and shrinks deficit to $198bn

The Australian government’s projected deficit will shrink to $197.7bn this year, as better jobs numbers, higher tax receipts and decreased spending on wage subsidies boost government coffers. On Thursday the treasurer, Josh Frydenberg, and finance minister, Simon Birmingham, released the mid-year economic and fiscal update showing the effects of Australia’s return to growth in September at the tipping point of the Covid-19 recession. Frydenberg told reporters in Canberra that unemployment is set to reach the pre-pandemic level of 5.25% in four years, after peaking at 7.5% in March 2021. Despite the faster-than-expected labour market recovery, Frydenberg announced the jobseeker coronavirus supplement will be extended to March. He also signalled the government will not aim to pay back debt until unemployment is “comfortably below” 6%, which he suggested was back in the range of 5.25% to 5.5%.

Originating Source

More than 30 states file suit demanding breakup of Google

More than 30 states filed an antitrust suit against Google on Thursday that demands a breakup of the search giant, accusing it of abusing its control over online search to squeeze out competitors and make inroads into new markets such as home speakers. The suit — the third major antitrust complaint against Google since late October, and the second in two days — adds to the mounting effort by multiple governments to rein in the world’s biggest tech companies. The lawsuit was filed in Washington, D.C., in the same federal court where the Justice Department filed its own antitrust case in October. The twin suits pose a major threat to Google’s core business. Thursday’s complaint — filed by 35 states plus Puerto Rico, Guam and Washington, D.C. — alleges Google has maintained its monopoly in the search market by abusing its power in other markets such as smart speakers, voice assistants, connected cars and digital advertising.

Originating Source

Robinhood pays $65 million to settle SEC probe over misleading communications with customers

Robinhood agreed to pay $US65 million to settle Securities and Exchange Commission charges that allege the discount brokerage misled customers on the quality of its trading service. The regulator argued Robinhood made “misleading statements and omissions” about how it made money with high-speed trading companies, according to a Thursday press release. Like other brokerages, Robinhood sells its orders to trading firms for execution in a process known as “payment for order flow”. The SEC’s order alleges the brokerage routinely provided inferior trade prices, even as Robinhood marketed its trades as commission-free and executed with quality that matched or beat peers. The second-rate prices have cost clients a total of $US34.1 million even after accounting for the lack of commission fees, according to the SEC.

Originating Source

France’s Macron tests positive as Europe battles virus surge

French President Emmanuel Macron became the latest head of state to test positive for coronavirus on Thursday, forcing several other European leaders into quarantine as the continent struggles with a winter surge in infections. With Europe now approaching 500,000 deaths since Covid-19 first emerged a year ago, the EU has pledged to start vaccination campaigns across the bloc by the end of the year in a bid to curb the spread of the disease. With inoculations seen as the only way to bring the global pandemic to an end, American experts were set to discuss Thursday if US pharma company Moderna’s vaccine should be authorised — the latest to seek approval after the rollout of the Pfizer-BioNTech jab. Macron was tested for coronavirus after he suffered the first symptoms and will now self isolate for seven days, his office said in a statement. “He will continue to work and carry out his activities remotely.” The French leader joins US President Donald Trump and British Prime Minister Boris Johnson who were both briefly hospitalised earlier this year after contracting the virus that has killed 1.6 million people worldwide and caused economic havoc around the globe.

Originating Source

Top Trump News

Biden picks U.S. Representative Deb Haaland to be Interior Secretary -source

President-Elect Joe Biden will nominate Representative Deb Haaland to serve as his Interior Secretary, according to a person familiar with the matter, a pick that would make her the first Native American Cabinet secretary. Reuters had reported Tuesday that Haaland was the leading candidate for the job overseeing the department, which employs more than 70,000 people across the United States and oversees more than 20% of the nation’s surface, including tribal lands and national parks like Yellowstone and Yosemite. Haaland, a Democratic congresswoman from New Mexico since 2019 and a member of the Laguna Pueblo tribe, told Reuters in a recent interview she would seek to usher in an expansion of renewable energy production on federal land to contribute to the fight against climate change, and undo President Donald Trump’s focus on bolstering fossil fuels output.

Originating Source

Biden vows to punish those behind hack against U.S. government

U.S. President-Elect Joe Biden said Thursday that a recently uncovered far-reaching cybersecurity breach against the U.S. government was a matter of “great concern” and vowed swift action in response once he takes office next month. Biden, who will become president on Jan. 20, said his team will make the breach a top priority and would impose “substantial costs” on parties responsible for such cyberattacks. “Our adversaries should know that, as President, I will not stand idly by in the face of cyber assaults on our nation,” he said in a statement.

Originating Source

Donald Trump Encourages Americans to ‘Get Those Shots’ Amid Vaccine Rollout

President Donald Trump is encouraging Americans to “get those shots,” as the coronavirus vaccine begins to roll out in the United States. In a tweet, Trump wrote, “All-time Stock Market high. The Vaccine and the Vaccine rollout are getting the best of reviews. Moving along really well. Get those “shots” everyone! Also, the stimulus talks looking very good.” Earlier this week, the first non-trial Pfizer vaccine was given to Sandra Lindsay, a critical care nurse in New York City, with the medication going on to be sent out around the nation. “I feel hopeful today, relieved. I feel like healing is coming,” Lindsay said in a statement after being inoculated. “I hope this marks the beginning of the end of a very painful time in our country.” Trump’s new comments on the vaccine have sparked many comments on Twitter, where some users are cheering on the vaccine, and others are questioning Trump’s handling of the pandemic overall. Scroll down to read what they are saying. “All-time Stock Market high. The Vaccine and the Vaccine rollout are getting the best of reviews. Moving along really well. Get those ‘shots’ everyone! Also, stimulus talks looking very good.”

Originating Source

Economic Indicators

Australia Unemployment Rate

Australia’s seasonally adjusted unemployment rate unexpectedly was at 6.8% in November 2020, compared with market consensus and October’s figure of 7%. This was the lowest jobless rate since August, as the economy emerged gradually from the COVID-19 hit. The number of unemployed declined by 17,300 to 942,100 people, as people looking for full-time work was down by 11,400 to 673,000 and those looking for only part-time work rose by 5,900 to 269,100. Employment grew by 90,000 to 12,860,700, beating estimates of a 50,000 gain, as full-time employment went up by 84,200 to 8,725,700, and part-time employment gained 5,800 to 4,135,000. The participation rate rose to a ten-month high of 66.1% in November from 65.8% in October, above forecasts of 66%. The underemployment rate fell to 9.4% from 10.4% in the prior month, and the underutilization rate dropped 1.2 points to 16.2%. Monthly hours worked in all jobs rose 42.8 million hours, or 2.5% to 1,752 million hours.

Euro Area CPI

Eurozone consumer prices fell for a third consecutive month by 0.3 percent year-on-year in November 2020, the steepest decline since April 2016, amid subdued demand due to the coronavirus crisis. Prices fell for both energy (-8.3 percent vs -8.2 percent in October) and non-energy industrial goods (-0.3 percent vs -0.1 percent). At the same time, food, alcohol & tobacco increased at a slightly softer pace (1.9 percent vs 2.0 percent) and services inflation picked up (0.6 percent vs 0.4 percent). The annual core inflation, which excludes volatile prices of energy, food, alcohol & tobacco and at which the ECB looks in its policy decisions, was unchanged at 0.2 percent, the lowest on record. 

United States Initial Jobless Claims

The number of Americans filing for unemployment benefits increased to 885 thousand in the week ended December 12th, from the previous week’s revised level of 862 thousand and well above market expectations of 800 thousand. It was the highest number since early September, amid record increases in COVID-19 cases, deaths and hospitalizations and new lockdowns across the country. On a non-seasonally adjusted basis, the number of claims was down to 935 thousand, compared with 956 thousand in the previous week. Also, about 455 thousand people applied for help from the Pandemic Unemployment Assistance scheme, which covers workers that do not qualify for initial claims, compared with 415 thousand in the previous period.

United States Housing Starts

US housing starts jumped 1.2% month-over-month to a seasonally adjusted annual rate of 1.547 million in November of 2020, beating market forecasts of 1.53 million. It is a new high reading since February. Single-family housing starts edged up 0.4 percent to 1.186 million and units in buildings with five units or more jumped 8 percent to 352,000. Housing starts surged 58.8 percent to 135,000 in the Northeast and 8.2 percent to 407 thousand in the West. In contrast, housing starts fell 4.9 percent to 196 thousand in the Midwest and 6 percent to 809 thousand in the South.

Economic Calendar

Friday

U.K. Retail Sales MoM

Friday

Germany Ifo Business Climate Index