Monex Morning Report – Fri 23 Oct 2020

OVERNIGHT HIGHLIGHTS

Dow ends with 150-point gain in choppy session after Pelosi gives lift to hopes for coronavirus relief package; Asia stocks to a mixed start as traders readied for the final presidential debate

Pelosi says ‘just about there’ on stimulus; senate hurdle awaits; UK’s Sunak stumps up more cash for COVID-hit businesses

Top Market News

Pelosi says ‘just about there’ on stimulus; senate hurdle awaits

House Speaker Nancy Pelosi said she and Treasury Secretary Steven Mnuchin are “just about there” on resolving a key piece of a coronavirus relief package, even as there are significant differences still being negotiated. Pelosi said she and Mnuchin were nearing agreement on how to allocate money for testing and tracing to safely reopen schools and the economy, a central element for the speaker in the talks. She said they still haven’t settled three of the main sticking points: Democrats’ demands for aid to state and local governments, school funding and Republican insistence on a liability shield for employers. Pelosi and Mnuchin were scheduled to talk by phone again Thursday afternoon as they rush to forge a compromise that would allow introduction of stimulus legislation in the House. But as of 4 p.m. in Washington the call hadn’t taken place. Pelosi said they were waiting to hear from the heads of committees that would be drawing up a bill on some of the details “but that hasn’t happened yet.” U.S. stocks rose as banks rallied on a jump in Treasury yields, but investors remained fixated on the talks in Washington.

Originating Source

Feds say Russia and Iran have interfered with the presidential election

Director of National Intelligence John Ratcliffe said Wednesday both Iran and Russia have obtained US voter registration information in an effort to interfere in the election, including Iran posing as the far-right group Proud Boys to send intimidating emails to voters. Ratcliffe, appearing alongside FBI Director Chris Wray, said at a hastily arranged news conference Wednesday evening that Iran was responsible for the email campaign, made to look like it came from the Proud Boys, as well as spreading disinformation about voter fraud through a video linked in some of the emails. “This data can be used by foreign actors to attempt to communicate false information to registered voters that they hope will cause confusion, sow chaos and undermine your confidence in American democracy,” Ratcliffe said. “We have already seen Iran sending spoof emails designed to intimidate voters, incite social unrest and damage President (Donald) Trump,” Ratcliffe added. “You may have seen some reporting on this in the last 24 hours, or you may have even been one of the recipients of those emails.”

Originating Source

Gilead’s Remdesivir is first virus drug to get FDA approval

The U.S. Food and Drug Administration approved Gilead Sciences Inc.’s antiviral therapy remdesivir on Thursday, making it the first drug to obtain formal clearance for treating the coronavirus. Regulators had granted an emergency-use authorization for remdesivir earlier this year, and since then the drug has become a widely used therapy in hospitalized Covid-19 patients. It was given to President Donald Trump this month when he was diagnosed with the virus. The approval of remdesivir, sold under the brand name Veklury, will allow Gilead to market the drug and talk about its benefits to doctors, nurses, and patients. That could help solidify its position as a go-to medicine for Covid-19 patients even as other drugs for the disease begin to reach the market. “Veklury is now the first and only approved Covid-19 treatment in the United States,” Gilead said in a statement. While the drug was in short supply initially, Gilead said that the medicine is now widely available in hospitals across the country as manufacturing capacity has rapidly expanded.

Originating Source

UK’s Sunak stumps up more cash for COVID-hit businesses

British finance minister Rishi Sunak was forced to offer billions of pounds more of financial help on Thursday to businesses grappling with a resurgent COVID-19 pandemic, which looks increasingly likely to derail the economic recovery. Sunak told parliament that the government would shoulder more of the burden for paying wages of staff who return part-time to struggling businesses, and would offer more money to hospitality companies and the self-employed. The move, Sunak’s third major announcement in the space of a month, marks a further turnaround after he resisted calls to make government support schemes more generous. Opponents, policy analysts and some businesses said it was obvious that more help would be needed, and that it should have come sooner.

Originating Source

BoE’s Haldane says UK spending ‘remarkably resilient’

British household spending has been “remarkably resilient” through the coronavirus pandemic, Bank of England Chief Economist Andy Haldane said on Thursday. Haldane noted that U.S. household spending had suffered relatively little from a second wave of cases there over the summer, which might also prove the case in Britain. Haldane, who has taken a more upbeat view of Britain’s recovery than many of his colleagues at the BoE, was speaking at a conference on economics hosted by the National Institute of Economic and Social Research.

Originating Source

Putin reveals Russia’s position on the OPEC + agreement

Russian President Vladimir Putin revealed today, his country’s position on extending the OPEC + agreement led by Saudi Arabia to 2021, amid a slow growth in the global economy and an increase in new cases of the Coronavirus around the world. He said that Russia was not ruling out maintaining the current restrictions on global oil production instead of easing them as planned. “We do not rule out retaining the current production restrictions, rather than lifting them at the speed that we had planned,” he added. He continued, “If necessary, we may decide on new cuts. But we do not see the need for that at the present time.” OPEC + oil ministers will hold a meeting via the Internet on December 1, where they will embark on new strategies for crude markets. “Russia is unwilling to either a jump in (oil) prices, nor a decline in it. In this regard, our interests are compatible with those of the American partners,” Putin said. OPEC +, the alliance of the world’s largest crude producers led by Saudi Arabia, cuts production by 7.7 million barrels per day to support the declining oil market.

Originating Source

Intel revenues drop 4% to $18.3 billion for Q3 2020 as competition heats up

Intel reported earnings that matched Wall Street’s expectations during what was another tumultuous quarter for the world economy. For the third quarter ended September 30, the big PC chipmaker posted non-GAAP earnings per share (EPS) of $1.11 a share on revenue of $18.3 billion, compared with non-GAAP EPS of $1.42 a share on revenue of $19.2 billion a year earlier. CEO Bob Swan described the results as “solid” and said they exceeded Intel’s own expectations “despite pandemic-related impacts in significant portions of the business.” Intel’s shares are down 8% this year, and the company’s market value at $229.2 billion remains lower than its biggest U.S. rival, Nvidia, which is valued at $330.1 billion. Intel’s stock price is down 10% to $48.30 a share in after-hours trading, as a number of the company’s business lines were weak. Intel faces tough competition from Nvidia in AI and graphics chips, while Advanced Micro Devices is much more competitive in central processing units (CPUs).

Originating Source

Coca-Cola looks to energize growth amid pandemic slump

The Coca-Cola Company said Thursday it was shaking up its product mix as part of an effort to revive sales which have been slumping during the coronavirus pandemic. The soft drink giant reported third-quarter sales down nine percent from a year ago to $8.7 billion, while profits tumbled 33 percent to $1.7 billion. Coca-Cola said it saw an improvement in trends versus the prior quarter, stronger sales to consumers partly offsetting the decline in sales at bars, restaurants, stadiums and other channels. Shares rose three percent in pre-market trade on the results. As part of its response to the pandemic, Coca-Cola said it was continuing its organizational and product changes. It now expects to cut the number of product brands to around 200, a 50 percent cut, phasing out some drinks like Zico coconut water and Tab diet cola. It has already shed other brands such as Odwalla juices. “Throughout this year’s crisis, our system has remained focused on its beverages for life strategy,” said chairman and chief executive James Quincey.

Originating Source

Top Trump News

Senate panel approves Barrett

The Republican-led U.S. Senate Judiciary Committee on Thursday approved President Donald Trump’s nomination of Amy Coney Barrett to a lifetime Supreme Court seat despite a Democratic boycott, clearing the way for a final Senate confirmation vote planned for Monday. By a 12-0 vote, the panel approved Barrett with all Republican members voting yes and the 10 committee Democrats boycotting the meeting after calling the confirmation process a sham. With Trump’s fellow Republicans holding a 53-47 Senate majority, Barrett’s confirmation appears certain. Trump, who asked the Senate to confirm Barrett before the Nov. 3 U.S. election in which he is being challenged by Democrat Joe Biden, applauded the committee vote, writing on Twitter: “Big day for America!” Barrett, 48, has been a federal appeals court judge since 2017 and previously was a legal scholar the University of Notre Dame in Indiana. Her confirmation would give the top U.S. judicial body a 6-3 conservative majority, including three justices named by Trump.

Originating Source

Interview released

United States President Donald Trump has posted a complete and uncut version of an interview he did with CBS News’s 60 Minutes program to Facebook ahead of the show’s scheduled Sunday broadcast. CBS News called the White House’s decision to release the interview “unprecedented”.Mr Trump released the footage on the same day that he is set to take on Democratic presidential candidate Joe Biden in their final presidential debate. The broadcaster said the interview would air on Sunday as planned.

Originating Source

Auto parts firm pension cuts

President Donald Trump ordered a review of decade-old pension cuts to some retirees at a former General Motors GM.N auto parts unit, the White House said on Thursday, 12 days before the Nov. 3 U.S. presidential election. In a memo released by the White House, Trump ordered the heads of the Treasury, Commerce and Labor departments to address cuts to non-union retiree pension payments within 90 days at Delphi Corp after the pension plan was turned over to the Pension Benefit Guaranty Corp (PBGC) in 2009. The cuts affected about 20,000 salaried retirees, including about 5,000 in Ohio, a battleground state that could help decide an election pitting the Republican Trump against Democrat Joe Biden, the former vice president under President Barack Obama. The memo stops short of any specific plan to restore the pension cuts of Delphi salaried retirees, who experienced reductions of up to 70%. The intense interest in an obscure pension issue suggested how close the race for president has become.

Originating Source

Economic Indicators

U.S. Initial Jobless Claims

The number of Americans filing for unemployment benefits declined to 787 thousand in the week ended October 17th, from the previous week’s revised level of 842 thousand and below market expectations of 860 thousand. Most of the drop can be attributed to California, where the claims declined to 159 thousand following a 2-week pause to whittle down a massive backlog and improve fraud prevention. On a non-seasonally adjusted basis, the number of initial claims dropped to 757 thousand, from 830 thousand in the previous week. Also, more than 345 thousand people applied for help from the Pandemic Unemployment Assistance scheme, which covers workers that do not qualify for initial claims, compared with 337 thousand in the previous period.

U.S. Existing Home Sales

Sales of previously owned houses in the US jumped 9.4% from the previous month to 6.54 million units in September of 2020, the most since May of 2006 and above market expectations of 6.3 million. It was the fourth consecutive month of gains amid record-low interest rates and as people try to move away from the big cities as they have more flexible work arrangements due to the coronavirus pandemic. Each of the four major regions witnessed increases, with the Northeast seeing the highest climb. Sales in vacation destination counties have seen a strong acceleration since July, with a 34 percent year-over-year gain in September. There were 1.47 million previously owned homes on the market, the lowest ever since records begun in 1982 and down 19.2 percent from the previous year. The median existing house price jumped 14.8 percent compared to September of 2019 to a record USD 311,800.

United Kingdom Interest Rate

The Bank of England voted unanimously to maintain Bank Rate at a record low of 0.1% and the size of its bond-buying program at £745 billion during its September meeting. Policymakers noted that domestic economic data have been a little stronger than expected in August, while the outlook for the economy remains unusually uncertain due to the coronavirus pandemic and recent Brexit developments, leaving the door open to negative interest rates and more QE. CPI inflation is expected to remain below 1% until early 2021 and unemployment will probably remain elevated for some time. The central bank also said it does not intend to tighten monetary policy until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.

New Zealand Consumer Price Index (CPI) QoQ

The Consumer Price Index in New Zealand increased 0.70 percent in September of 2020 over the previous month. The inflation rate in New Zealand was recorded at 1.40 percent in the third quarter of 2020.

U.K. CBI Industrial Trends Orders

The Confederation of British Industry’s order book balance rose 14 points to -34 in October 2020, its highest level since March and beating market expectations of -45. Still, the latest reading suggested conditions remain tough in the manufacturing sector. The gauge for export order book increased to -46 from -56, while output expectations returned to positive territory (15 vs -6).

Economic Calendar

Friday

Existing Home Sales (Sep)

Friday

U.S. Markit Composite PMI