Monex Morning Report – Fri 25 Sep 2020

OVERNIGHT HIGHLIGHTS

Dow ekes out gain in turbulent trade as Wall Street struggles to shrug off market uncertainty; Asia looks set for modest stock gains

Mnuchin, Powell say some $380 billion in unused aid could help U.S. economy; U.S. House Democrats crafting new $2.2 trillion COVID-19 relief package

Top Market News

Mnuchin, Powell say some $380 billion in unused aid could help U.S. economy

As much as $380 billion from the U.S. Congress’ last big coronavirus aid package is unused and could help households and businesses if lawmakers approve, Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin said on Thursday. That is far short of the $500 billion to $1 trillion many economists had expected in new fiscal stimulus for the flagging recovery. But rising tensions between Republicans and Democrats have made a new relief package ahead of the Nov. 3 election look increasingly unlikely. The unused money, authorized by Congress in March as part of a $2.3 trillion aid package but not yet spent, could go a long way to tide over businesses and keep people who have lost work from losing their homes. “It would not cost an extra penny,” Mnuchin told members of the Senate Banking Committee in a hearing on Capitol Hill, where he appeared jointly with Powell. Congress would need to give permission for reshuffling the money, he said.

Originating Source

Mnuchin and Pelosi inch toward resuming stimulus talks as economy continues to struggle

Treasury Secretary Steven Mnuchin said on Thursday that he and Speaker Nancy Pelosi agreed to resume talks on another economic relief package amid concerns that the recovery will soon sputter without additional fiscal support. “I’ve probably spoken to Speaker Pelosi 15 or 20 times in the last few days on the CR,” Mnuchin told the Senate Banking Committee, referring to a continuing resolution to extend government funding, “and we’ve agreed to continue to have discussions about the CARES Act.” The comments, made at a Senate Banking Committee hearing, came as jobless claims rose to 825,000 last week and as stock markets remained volatile. Yet the ability to reach a deal remains unclear. At the hearing, Mr. Mnuchin was critical of Democrats for making negotiations conditional on an agreement for a broad package that would cost more than $2 trillion and said he hoped that Republicans and Democrats could pass targeted legislation on the items where they agree. Ms. Pelosi said on Thursday that she expected to return to the negotiating table with Mr. Mnuchin “hopefully soon.”

Originating Source

U.S. House Democrats crafting new $2.2 trillion COVID-19 relief package

Democrats in the U.S. House of Representatives are working on a $2.2 trillion coronavirus stimulus package that could be voted on next week, a key lawmaker said on Thursday, as House Speaker Nancy Pelosi reiterated that she is ready to negotiate with the White House. With formal COVID-19 relief talks stalled for nearly seven weeks, House Ways and Means Committee Chairman Richard Neal said new legislative efforts got under way this week after Federal Reserve Chairman Jerome Powell said in congressional testimony that lawmakers needed to provide further support for an economy reeling from the pandemic. “The contours are already there. I think now it’s about time frame and things like that,” Neal told reporters when asked about the potential for new legislation. He predicted a vote could come within days. “I assume, since the House is scheduled to break for the election cycle, then I think next week’s … appropriate,” said Neal, adding that Pelosi would determine when a legislative package might be introduced.

Originating Source

Fed’s Bullard: Not reasonable to make second virus wave a baseline outlook for U.S. economy

It is unreasonable to expect a second wave of coronavirus infections to push the U.S. recovery off track given the steady progress in tamping down deaths from the pandemic, St. Louis Fed President James Bullard said on Thursday. Saying he wanted to “push back” on forecasts of a slowing recovery and a resurgent virus, Bullard noted the fatality rates were “unlikely to reach the level of March and April” because of improving treatment and more vigilance among high risk individuals in protecting themselves. That, he argues, will allow the economic recovery to continue.

Originating Source

Fed’s Evans says U.S. taking unnecessary risks with lack of more fiscal aid

The United States should extend more help to the millions of Americans who have lost work in the coronavirus crisis, Chicago Federal Reserve Bank President Charles Evans said Thursday in the latest blunt warning from a top Fed official on the likely fallout of the impasse in Congress over further pandemic relief. “We are taking a very serious and unnecessary risk if we do not extend federal assistance to out-of-work households,” Evans said in remarks prepared for delivery to the Illinois Chamber of Commerce. “The potential hole in aggregate demand may be large, and in my view more fiscal relief is needed in order to limit further damage to households and businesses, especially those in vulnerable communities.” Republican and Democratic lawmakers have failed to pass any new aid since their March $2.3 trillion package, credited with helping the U.S. economy avoid even worse job loss and business failures than it has suffered. Much of the aid to small businesses has been depleted; extra funds funneled to the unemployed have run out; and help to the airline industry has run out, opening the door to massive layoffs starting next month.

Originating Source

U.S. Senate advances stopgap funding bill to avoid government shutdown

The U.S. Senate on Thursday voted to advance a stopgap funding bill to keep the federal government operating through Dec. 11, paving the way for final passage before a deadline next week. With government funding running out on Sept. 30, the legislation would continue funding most programs at current levels, and thus avoid a government shutdown in the middle of a pandemic and ahead of the Nov. 3 elections. The Republican-majority Senate voted 93-2 to open debate on the measure. It was unclear when the vote on final passage would take place, but Senator Richard Shelby, Republican chairman of the Appropriations Committee, told reporters it might not happen before next Tuesday. The House passed the temporary spending bill Tuesday after Democrats struck a deal with the White House and Republicans on aid for farmers and nutritional assistance for children.

Originating Source

White House has money to ‘repurpose’ for additional coronavirus stimulus, Kudlow says

White House economic adviser Larry Kudlow said the administration had relief dollars left over from the CARES Act that it could put toward other stimulus measures. When asked on Thursday whether he thought a new stimulus package could possibly pass Congress now that the Supreme Court vacancy has become a key issue, Kudlow indicated he didn’t think the administration’s relief plans would be affected by the judicial situation “at the moment.” “Our side has an efficient targeted assistance package, stuff we think is necessary,” Kudlow said, adding that there is money left over that could be “repurposed” toward those efforts. During the first round of PPP relief, the Small Business Administration said more than 5.2 million loans were approved, valued at a cumulative $525 billion. There is about $130 billion that has not been used.

Originating Source

UK finance minister to provide as much economic support as possible: health minister

Britain’s finance minister will provide as much support for jobs as possible when he announces his economic winter plan later on Thursday, said his colleague health minister Matt Hancock. “What you can be assured of is that we’ll put in as much economic support to help people get through this as feasibly possible,” Hancock told LBC Radio. “He (the finance minister) has an economic winter plan that he’ll be bringing forward later.”

Originating Source

Top Trump News

U.S. ban on TikTok

The Trump administration was ordered to postpone a U.S. ban on TikTok set for Sunday or respond by Friday to a request by the app’s Chinese owner for a court order temporarily blocking the ban. The owner, ByteDance Ltd., is seeking a preliminary injunction on the ban even as it continues to pursue approvals from the administration for a sale of the video-sharing app’s U.S. operations to Oracle Corp. and Walmart Inc. forced by President Donald Trump. It has asked the court to weigh its request ahead of the prohibition, which takes effect just before midnight on Sunday. Following a hearing on Thursday, U.S. District Judge Carl Nichols gave the U.S. until 2:30 p.m. Friday to agree to delay its deadline or file court papers opposing ByteDance’s bid for the injunction. Without a delay of the ban, the judge would hold a hearing on the injunction request on Sunday morning.

Originating Source

Another COVID shutdown

President Donald Trump would “in no way” support another economic shutdown should the coronavirus pandemic worsen, White House Economic Council Director Larry Kudlow said Thursday. “He will completely oppose that,” Kudlow told Fox Business’ Stuart Varney. “President Trump today me this yesterday in the Oval (Office), in no way, shape or form will he support another economy-wide shutdown. Absolutely not. It’s not necessary. We’re in much better shape, and if there are issues, we could target them, absolutely target them, not get back to where we were last late winter and spring.”

Originating Source

Campaign in Florida

President Donald Trump headed to the battleground states of North Carolina and Florida on Thursday amid outrage over his refusal to commit to a peaceful transfer of power following the Nov. 3 U.S. election and two days before he will announce his pick to fill a Supreme Court vacancy. Trump’s refusal to embrace a core tenet of U.S. democracy, coupled with his unfounded claims that a surge in voting by mail will lead to a “rigged” election, have Democrats increasingly worried that he will seek to undermine the results of the contest between him and Democratic challenger Joe Biden. U.S. Senate Republican Leader Mitch McConnell and some other Republicans distanced themselves from the Republican president’s remarks on Wednesday, when he said he would “see what happens” before accepting the outcome. “The winner of the November 3rd election will be inaugurated on January 20th,” McConnell wrote on Twitter on Thursday. “There will be an orderly transition just as there has been every four years since 1792.”

Originating Source

Economic Indicators

“Germany Ifo Business Climate Index Create Alert”

The Ifo Business Climate indicator for Germany rose by 0.9 points from the previous month to 93.4 in September 2020, the highest level since February but below market expectations of 93.8. Companies once again assessed their current situation as better than in the previous month (89.2 vs 87.9 in August), while they also expect their business to recover further in coming months (97.7 vs 97.2) as the economy appeared to stabilize despite rising COVID-19 infection numbers. Sentiment improved among manufacturers (-0.2 vs -5.6), traders (0.3 vs -4.8) and constructors (3.3 vs 0.0), while confidence among service providers deteriorated (6.9 vs 7.7).

United States Initial Jobless Claims

The number of Americans filling for unemployment benefits rose by 870K in the week ended September 19th 2020, higher than an upwardly revised 866K in the previous week and above market expectations of 840K. The number remained well above 665K filed at the peak of the Great Recession in March 2009, suggesting the labor market recovery stalled as government support decreases. The previous week level was revised by 6K from 860K. On a non-seasonally adjusted basis, claims rose the most in NY (9.403K), Georgia (6.387K) and California (4.439K) while Illinois (-4.271K) and Michigan (-4.092K) saw the biggest declines. Meanwhile, the 4-week moving average which removes week-to-week volatility was 878,250, a decrease of 35,250 from the previous week’s revised average. Continuing claims fell to 12,580,000, a decrease of 167,000 from the previous week’s revised level.

United States New Home Sales

Sales of new single-family homes in the United States jumped 4.8 percent from the previous month to a seasonally adjusted annual rate of 1,011 thousand in August of 2020, surprising markets that were expecting a fall to 895 thousand. It is the highest reading since September of 2006 as the housing market continues to recover from the coronavirus hit, prompted by record low interest rates and increasing demand as people move away from the big cities. New home sales increased in the South (13.4 percent to 636 thousand) and the Northeast (5 percent to 42 thousand) but fell in the Midwest (-21.4 percent to 99 thousand after a 59.5 percent rise in July) and the West (-1.7 percent to 234 thousand). The average sales price went down to $369,000 from $392,700 a year earlier. The number of new houses for sale available on the market fell 3.1 percent to 282 thousand.

United States Kansas Fed Manufacturing Index

The Kansas City Fed’s Manufacturing Production Index fell to +18 in September 2020, from the previous month’s near two-year high of +23, suggesting factory output increased at a slower pace and remained lower than a year ago. Food and beverage activity growth slowed from previous months, when activity bounced back more sharply. Meanwhile, shipments, new orders, and employment all rose at a slower pace, while order backlog and supplier delivery time increased. Looking ahead, expectations for future activity were positive, even as firms anticipated slightly lower wage and salary growth in the year ahead.

Economic Calendar

Friday

U.S. New Home Sales

Friday

U.S. Core Durable Goods Orders MoM