Monex Morning Report – Fri 4 Dec 2020

OVERNIGHT HIGHLIGHTS

Dow pulls back from record, S&P 500 finishes lower on doubt about vaccine distribution; Asia stocks set to slip

OPEC+ clinches compromise on gradual easing of output cuts; $908 billion coronavirus aid bill draws conservative backing in U.S. Congress

Pfizer shares fall after Dow Jones reports supply chain problems

Pfizer shares fell as much as 3.1% after Dow Jones reported that the company expected to ship half of the Covid-19 vaccines it had originally planned for 2020 because of supply-chain problems. Pfizer and BioNTech had hoped to roll out 100 million vaccines world-wide by the end of 2020; the plan has now been reduced to 50 million, DJ reported. Company still expects to roll out more than a billion doses in 2021. “Scaling up the raw material supply chain took longer than expected,” a company spokeswoman told Dow Jones. “And it’s important to highlight that the outcome of the clinical trial was somewhat later than the initial projection,” she said.

Originating Source

$908 billion coronavirus aid bill draws conservative backing in U.S. Congress

A bipartisan, $908 billion coronavirus aid plan gained momentum in the U.S. Congress on Thursday as conservative lawmakers expressed their support and Senate and House of Representatives leaders huddled. Still unclear, however, was how far beyond $500 billion in spending Senate Majority Leader Mitch McConnell would agree to after months of insisting that anything approaching $1 trillion was unnecessary. McConnell was feeling pressure from even some fellow conservatives, who before the Nov. 3 elections were not eager to approve of Washington shoveling out money beyond the $3 trillion already enacted. The deepening severity of the coronavirus pandemic, with diagnosed cases exploding and deaths in the United States topping 270,000, appeared to be giving Republicans second thoughts about their long opposition to a comprehensive aid bill. More and more, said Senator Bill Cassidy, Republicans “recognize that things are getting worse. And that if the economy goes into a recession, it really gets worse.” Cassidy is one of the backers of that measure, which includes extending federal unemployment benefits, providing more loan and grant money for small businesses and aid to state and local governments.

Originating Source

OPEC+ clinches compromise on gradual easing of output cuts

OPEC+ agreed to ease oil-output cuts next year after almost a week of fraught negotiations that exposed a new rift at the heart of the cartel. The group will add 500,000 barrels a day of production to the market in January, and ministers will then hold monthly consultations to decide on the next steps. That’s a much shorter time frame than OPEC+ usually operates under, and before this week the expectation had been that the group would hold off putting more oil onto the fragile market for another three months. But the compromise deal avoided a breakdown of OPEC+ unity, which had become a growing risk after days of tense talks exposed a new split between core cartel members, the United Arab Emirates and Saudi Arabia. The meeting postponed by two days and then delayed again on Thursday. And in another sign of tension, Saudi Energy Minister Abdulaziz bin Salman didn’t chair the meeting as usual, leaving his Russian counterpart to do it alone. “It’s very excruciating, it’s very tiring, it’s sometimes very frustrating,” he said of the talks. Still, the oil market is seeing the “light at the end of the tunnel.” Oil rose on news of the deal, with Brent crude ending the day at $48.71 a barrel, the highest settlement for the benchmark in nine months.

Originating Source

U.S. labels four more Chinese companies as military-controlled

The Pentagon expanded a list of Chinese companies it says are owned or controlled by China’s military, exposing them to increased scrutiny and potential sanctions by the U.S. The four companies added to the list, which was sent in a report to Congress on Thursday, are China National Offshore Oil Corp., Semiconductor Manufacturing International Corp., China Construction Technology Co. and China International Engineering Consulting Corp., according to a person familiar with the list. The decision to expand the list, which was reported by Reuters last week, comes after the Trump administration for the first time earlier this year listed 31 Chinese companies for being tied to the People’s Liberation Army. Those companies included Huawei Technologies Co. and Hangzhou Hikvision Digital Technology Co., as well as a number of state-run enterprises. Officials at the Pentagon didn’t immediately respond to a request for comment on the report of additional listings. The list of companies said to be affiliated with the PLA was mandated under the Defense Authorization Act of 1999, but no administration ever put out the required report. President Donald Trump has the authority under the International Emergency Economics Powers Act of 1977 to level financial sanctions against those companies.

Originating Source

China to allow Australian coal cargo ashore despite ban

China is set to allow a shipment of Australian coal into the country, according to a person familiar with the matter, despite a ban on such imports remaining in place as tensions between Beijing and Canberra escalate. A cargo of 135,000 tons of Australian thermal coal on the vessel Alpha Era, which has been waiting since late May to unload at the southern Chinese port of Fangchenggang, is expected to clear customs and is bound for a local user, said the person, who asked not to be identified because the information is private. It isn’t clear why the cargo is expected to clear customs, said the person. A separate person familiar with the ban on Australian coal, though not the Alpha Era cargo, said the order barring such shipments remained unchanged. The person with knowledge of the Alpha Era said customs didn’t explain why they were processing the cargo. While it remains unclear why an exception seems to have been made for the Alpha Era cargo, the shipment did arrive at Fangchenggang in late May. That’s about five months before Chinese officials verbally ordered traders to stop purchasing Australian coal.

Originating Source

Australia adopts new veto powers over foreign agreements

Australia’s parliament on Thursday passed legislation giving the federal government power to veto any agreement struck with foreign states, a move likely to anger China and intensify a bitter diplomatic spat between the two countries. The law allows the federal government to block any agreement between Australian states, councils or institutions and a foreign government, such as a controversial 2018 deal between the state of Victoria and China. “Australia’s policies and plans, the rules that we make for our country are made here in Australia according to our needs and our interests,” Prime Minister Scott Morrison told reporters in Canberra. Morrison has stressed the law is not aimed at any country but it is widely seen by analysts as directed at China. “It creates another trigger for the relationship to deteriorate,” said Melissa Conley Tyler, a research fellow at the Asia Institute of the University of Melbourne.

Originating Source

BOJ’s Suzuki says central bank should allow yield curve to steepen more

Bank of Japan (BOJ) board member Hitoshi Suzuki said on Thursday the central bank should allow super-long bond yields to rise moderately as part of efforts to make its stimulus programme sustainable. Under its yield curve control policy, the BOJ seeks to keep short-term interest rates at around -0.1% and 10-year bond yields at around zero as part of efforts to revive the economy with low borrowing costs. But years of ultra-low rates have strained financial institutions’ profits, stoking fears that they may not earn enough to boost lending and help support the economy. “Allowing the super-long end of the yield curve to steepen moderately, while keeping 10-year bond yields around zero, would help financial institutions earn more profits,” Suzuki told business leaders in Fukushima, northeastern Japan. “As such, this will be desirable from the standpoint of maintaining financial system stability, as our monetary easing is prolonged,” he said. Suzuki also said the BOJ must seek to make its policy framework “sustainable and flexible”, including its purchases of risky assets such as exchange-traded funds.

Originating Source

Facebook could face an antitrust lawsuit from at least 20 states as soon as next week

State attorneys general are preparing to file an antitrust lawsuit against Facebook as soon as next week, sources familiar with the matter told CNBC’s Ylan Mui. At least 20 to 30 states could join in, the sources said. The news comes as multiple outlets have reported the Federal Trade Commission is likely to file its own antitrust lawsuit against the social media giant. It’s still unclear where the FTC may choose to bring a case — either in federal court or before its administrative law judge. If it chooses to bring the case in-house, it cannot combine its lawsuit with the states. Reuters previously reported the states were planning an antitrust case against Facebook. Both the FTC and the state AGs, led by New York’s Letitia James, have been investigating Facebook since last year. Though the full scope of their probes remain private, Facebook’s past acquisitions of Instagram and WhatsApp have long been considered a source for additional scrutiny by enforcement advocates.

Originating Source

Top Trump News

NYC Outbreak Worsens; California Warns of Lockdown

New York City’s average number of coronavirus cases and its infection rate hit the highest levels since May, while statewide daily infections closed in on 10,000. New Jersey reported record cases. California will impose a new shelter-at-home order if hospitals start running short of intensive-care capacity. Iowa reported record deaths. Pfizer expects to ship half the Covid-19 vaccines it originally planned for 2020 due to supply-chain problems, Dow Jones reported. Moderna Inc.’s vaccine appears to offer protection against the coronavirus that will last a minimum of three months and potentially much longer, researchers found. The latest wave of Covid-19 has inundated the Sun Belt, adding pressure on tourism-dependent cities brutalized by infections and deaths in July and August. Facebook said it will start removing false claims about immunizations that have been debunked by public health experts.

Originating Source

Fresh Iran-related sanctions

The United States on Thursday imposed fresh Iran-related sanctions, blacklisting an entity and an individual as Washington continues to ramp up pressure on Tehran during U.S. President Donald Trump’s final months in office. The U.S. Treasury Department in a statement said that it had slapped sanctions on Shahid Meisami Group and its director, accusing the entity of being involved in Iran’s chemical weapons research and linked to the Iranian Organization of Defensive Innovation and Research, blacklisted by Washington and formerly headed by the Islamic Republic’s top nuclear scientist killed last week. The move comes days after the killing of Mohsen Fakhrizadeh. Iran’s supreme leader promised on Saturday to retaliate for the killing, raising the threat of a new confrontation with the West and Israel in the remaining weeks of Trump’s presidency.

Originating Source

Biden warns ‘more people may die’

President-elect Joe Biden on Monday warned that the biggest threat to the country and to his transition posed by President Donald Trump’s refusal to concede the 2020 race is that “more people may die.” Biden made the stark warning during remarks about the economy from Wilmington, Delaware, during which he was asked by NBC News’s Geoff Bennett about the dangers created by Trump’s delay in the transfer of power to Biden. “More people may die, if we don’t coordinate,” Biden replied. Biden added that getting a Covid-19 vaccine to over 300 million Americans is a “huge, huge, huge undertaking” that would be further complicated by a delay by the White House to initiate the presidential transition. “If we have to wait until Jan. 20 to start that planning, it puts us behind over a month, month and a half. And so it’s important that it be done, that there be coordination now. Now or as rapidly as we can get that done,” Biden said.

Originating Source

Economic Indicators

Australia Markit Composite PMI

The IHS Markit Australia Composite PMI increased to 54.9 points in November of 2020 from 53.5 in the previous month and compared to a preliminary reading of 54.7, a final reading showed. The latest reading pointed to the third consecutive expansion in private sector activity and the fastest since July, as both the manufacturing and service sectors gathered pace. Jobs growth was reported for the first time since January, and the rate of expansion was the swiftest in almost two years. On the price front, input costs accelerated, and, consequently, output charges increased. Finally, business sentiment continued to improve and was the strongest for over two years.

Australia Balance of Trade

Australia’s trade surplus increased to AUD 7.46 billion in October 2020 from an upwardly revised AUD 5.82 billion in the previous month and easily beating market consensus of a AUD 5.8 billion surplus. This was the biggest trade surplus since April, amid improving global demand as more countries reopen their economies following an easing of COVID-19 lockdowns. Exports rose 5 percent to AUD 35.72 billion, while imports edged up 1 percent to AUD 28.26 billion. Considering the first ten months of the year, the trade surplus widened slightly to AUD 60.92 billion from AUD 59.24 billion in the same period of 2019.

Australia Home Loans

The value of new loans granted for owner-occupied homes in Australia rose 0.8 percent from the previous month to AUD 17.39 billion in October 2020, much softer than a 6 percent gain in September, amid a fresh wave of COVID-19 cases in some Australian states.

China Services PMI

The Caixin China General Services PMI rose to 57.8 in November 2020 from 56.8 in October, pointing to the second fastest growth in services activity in over a decade, amid a further recovery in consumer demand after the country curbed its COVID-19 outbreak. New orders expanded for the seventh month in a row, touching the highest level since April 2010. Also, new export orders advanced for the first time in five months and employment rose at the strongest rate since October 2010. On the cost front, inflation pressure became evident. The measures for input prices and prices that businesses charged both rose further into expansionary territory, hitting the highest readings since August 2010 and February 2010, respectively. Looking ahead, sentiment reached the highest point since April 2011.

Germany Composite PMI

The IHS Markit Germany Composite PMI was revised slightly lower to 51.7 in November of 2020 from a preliminary estimate of 52. The reading pointed to a sharp slowdown in private sector activity, amid the introduction of new lockdown measures to combat a second wave of coronavirus infections. Services shrank at a faster pace (46 vs 49.5) while factory growth remained robust (57.8 vs 58.2). The recent upturn in new business across the private sector nearly stalled in November. This was despite another steep manufacturing-led increase in export sales. Job creation rose marginally for the first time in nine months. Finally, expectations towards output over the next 12 months improved to a 31-month high in November.

Euro Area Services PMI

The IHS Markit Eurozone Services PMI was revised higher to 41.7 in November 2020, from a preliminary estimate of 41.3 and compared with October’s final 46.9. Still, the latest reading signaled the sharpest contraction in services activity since May amid renewed efforts to curb the spread of the coronavirus pandemic. New business placed at service providers collapsed to an extent not seen since May, with new export business again declining to a considerable degree. At the same time, employment continued to fall and outstanding business contracted sharply. On the price front, input costs rose modestly, while output charge deflation deepened as services providers respond to the challenging business environment by offering discounts. Looking ahead, service providers grew more optimistic about the year ahead.

United States Initial Jobless Claims

The number of Americans filing for unemployment benefits dropped to 712 thousand in the week ended November 28th, from the previous week’s revised level of 787 thousand and well below market expectations of 775 thousand. Still, initial claims remained well above pre-pandemic levels, amid rising COVID-19 cases and new lockdowns across the country. On a non-seasonally adjusted basis, the number of claims was down to 714 thousand, compared with 836 thousand in the previous week. Also, nearly 289 thousand people applied for help from the Pandemic Unemployment Assistance scheme, which covers workers that do not qualify for initial claims, compared with 319 thousand in the previous period.

The IHS Markit US Composite PMI was revised higher to 58.6 in November 2020, up from a preliminary estimate of 57.9 and compared with October’s 56.3. The latest reading signaled the steepest month of expansion in the US private sector business activity since March 2015, as manufacturing and service sector firms both recorded faster expansions in output. New order growth was the strongest since mid-2018, largely driven by domestic demand, as both goods producers and service providers indicated only marginal upturns in new export business. In addition, employment rose the most since the survey began in 2009. On the price front, both input costs and output charges rose at record rates. Looking ahead, business expectations strengthened to the highest since May 2014 amid vaccine hopes and signs of pent-up demand being released.

Economic Calendar

Friday

Australia Retail Sales MoM

Friday

Nonfarm Payrolls (Nov)