Monex Morning Report – Tue 1 Dec 2020

OVERNIGHT HIGHLIGHTS

Dow sinks 272 points, but books best November since 1928, and best month since ’87; USD gains

Australia demands China apology for ‘repugnant’ afghan tweet; Biden to nominate Janet Yellen as US treasury secretary

Australia demands China apology for ‘repugnant’ afghan tweet

Australian Prime Minister Scott Morrison said he was seeking an apology from China after a diplomat in Beijing tweeted an image purporting to show an Australian soldier holding a knife to the throat of an Afghan child. The tweet, posted by Chinese Foreign Ministry spokesman Zhao Lijian, was “repugnant,” Morrison told reporters in Canberra on Monday. The Australian premier said the image was doctored and called for Twitter to remove it. “The Chinese government should be totally ashamed of this post,” Morrison said. The tweet will diminish China’s global reputation, he said. Morrison’s calls for an apology further ramps up tensions between the nations, following China’s decision to impose crippling anti-dumping duties on its wine over the weekend. Diplomatic ties have plummeted this year after Australia called for independent investigators to be allowed into Wuhan to probe the origin of the pandemic, leading to a series of trade reprisals. Zhao’s boss later dismissed Morrison’s demand for apology, asking at a briefing in Beijing whether the Australian leader “lacks a sense of right and wrong.” Foreign Ministry spokeswoman Hua Chunying told reporters that it was the Australian side that should apologize to Afghanistan and denied any link between the tweet to the broader dispute between the two sides.

Originating Source

U.S. imposes Venezuela-related sanctions targeting Chinese firm

The United States on Monday imposed sanctions on Chinese firm China National Electronics Import & Export Corporation (CEIEC), accusing it of supporting Venezuelan President Nicolas Maduro’s efforts to undermine democracy. The U.S. Treasury Department in a statement said the Chinese company supported the leftist government of Maduro in its “efforts to restrict internet service and conduct digital surveillance and cyber operations against political opponents.” “The illegitimate Maduro regime’s reliance on entities like CEIEC to advance its authoritarian agenda further illustrates the regime’s prioritization of power over democratic values and processes,” Treasury Secretary Steven Mnuchin said in the statement. “The United States will not hesitate to target anyone helping to suppress the democratic will of the Venezuelan people and others around the world,” he added. Venezuela’s information ministry did not immediately respond to an email seeking comment about the Treasury’s announcement. Comment by CEIEC was being sought.

Originating Source

OPEC deal on delaying output hike is elusive as tensions simmer

OPEC talks ended without an agreement on next year’s oil output, with ministers punting the final decision into a second day of discussions as tensions in the cartel simmered. The coalition is debating whether to maintain its supply cuts at current levels, or increase output as planned next year. Market-watchers have been expecting a three month delay — and if the group doesn’t deliver the recent rally in crude prices could be undermined. At stake also is the credibility of the cartel whose actions have underpinned the market since the spectacular oil crash earlier this year. The run-up to the meeting has seen new cracks emerging in the relationship between the United Arab Emirates — a core part of the cartel — and other members. Saudi Arabia’s Energy Minister Prince Abdulaziz Bin Salman signaled his dissatisfaction with the situation on Monday by telling others he may resign as co-chair of a committee that oversees the OPEC+ deal. “Tomorrow’s meeting will be tough” but will probably reach a consensus, Iranian Oil Minister Bijan Namdar Zanganeh told the Shana news agency.

Originating Source

Moderna will ask for emergency FDA approval Today

Moderna will apply for emergency FDA approval of its COVID-19 vaccine on Monday after promising data revealed it is 94.1 percent effective. The company will apply for approval both in the US and in the EU and hopes to be able to distribute the first doses in December. The first people to receive the vaccine will be those at highest risk of severe symptoms and frontline healthcare workers, but an exact plan on how it will be rolled out has not yet been revealed by the federal government. Some states, like New York, say they plan to review the safety of it first for themselves before making it available. Moderna says its data also showed a 100% success rate in preventing severe cases. The filing sets Moderna’s product up to be the second vaccine likely to receive U.S. emergency use authorization this year. ‘We believe that we have a vaccine that is very highly efficacious. We now have the data to prove it. We expect to be playing a major part in turning around this pandemic,’ Moderna Chief Medical Officer Dr. Tal Zaks said in an interview.

Originating Source

Biden to nominate Janet Yellen as US treasury secretary

US President-elect Joe Biden has named ex-Federal Reserve chair Janet Yellen as his nominee for treasury secretary. If confirmed by the Senate, she would be the first woman ever to hold the post. She was among several women chosen for top economic positions. The Biden transition team said others were set to break racial barriers if confirmed. Mr Biden has pledged to build a diverse administration. He earlier appointed an all-female senior press team. His transition team said his picks for senior economic roles would help “lift America out of the current economic downturn and build back better”. Mr Biden has also announced the formation of a Presidential Inaugural Committee ahead of his swearing-in on 20 January. The committee will be responsible for organising inauguration-related activities. The nominations come as Arizona and Wisconsin officially certified Mr Biden as the winner in those states. President Donald Trump is expected to issue legal challenges to the vote in both states.

Originating Source

Powell sees hope and uncertainties for economy in vaccines

Federal Reserve Chair Jerome Powell is cautioning lawmakers that the U.S. economy remains in a damaged and uncertain state despite progress made in the development of Covid-19 vaccines. “Recent news on the vaccine front is very positive for the medium term,” Powell said in testimony released Monday ahead of a Tuesday hearing before the Senate Banking Committee. “For now, significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups.” Powell also pointed with concern to the resurgence of the virus across the U.S. and around the world. “The rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months,” he said. Powell gave no indication how the central bank may respond to those worries when it conducts its next policy meeting scheduled for Dec. 15-16, though reiterated that it would use all of its tools to help the economy recover.

Originating Source

BoE’s Tenreyro sees little immediate economic boost from COVID-19 vaccine

Bank of England policymaker Silvana Tenreyro said on Monday that progress in the development of COVID-19 vaccines was only likely to translate into a significant economic boost once they had been widely rolled out in Britain. Tenreyro struck a more cautious line than the BoE’s Chief Economist, Andy Haldane, who said last week that news of effective coronavirus vaccines had improved financial market conditions and business confidence. Consumer spending was unlikely to pick up markedly until public health restrictions were relaxed and people felt safe enough to go and socialise, which would not be until vaccines were widely available, Tenreyro said. “As economists, we often focus on the idea that positive news about the economic situation in the future will lead more confident consumers to spend more today,” she told an event hosted by the Resolution Foundation think-tank and the Money Macro and Finance Society. “But since the positive news is about future health outcomes, some may be more inclined to postpone spending on many goods and services until vaccines and reduced health risks actually arrive.”

Originating Source

Treasury’s Mnuchin urges Congress to tap unused CARES Act funds for COVID relief

U.S. Treasury Secretary Steven Mnuchin on Monday urged Congress to tap into $455 billion of unused emergency relief funds to fuel an additional, targeted round of pandemic economic assistance for American households and businesses. “Based on recent economic data, I continue to believe that a targeted fiscal package is the most appropriate federal response,” Mnuchin said in prepared testimony to the Senate Banking Committee released ahead of a hearing scheduled for Tuesday. Mnuchin will appear alongside Federal Reserve Chair Jerome Powell. “I strongly encourage Congress to use the $455 billion in unused funds from the CARES Act to pass an additional bill with bipartisan support,” Mnuchin said. “The Administration is standing ready to support Congress in this effort to help American workers and small businesses that continue to struggle with the impact of COVID-19.”

Originating Source

Top Trump News

Biden to receive his first presidential daily briefing

President-elect Joe Biden on Monday will receive his first presidential daily briefing since winning the 2020 election after the Trump administration delayed approving the transition process. The report, which Vice President-elect Kamala Harris is also scheduled to receive, is a classified document outlining high-level intelligence and analysis on a range of national security issues. It’s prepared by the director of national intelligence and includes information from the CIA and other elements of the intelligence community.

Originating Source

Trump to add China’s SMIC and CNOOC to defense blacklist

The Trump administration is poised to add China’s top chipmaker SMIC and national offshore oil and gas producer CNOOC to a blacklist of alleged Chinese military companies, according to a document and sources, curbing their access to U.S. investors and escalating tensions with Beijing weeks before President-elect Joe Biden takes office. Reuters reported earlier this month that the Department of Defense was planning to designate four more Chinese companies as owned or controlled by the Chinese military, bringing the number of Chinese companies affected to 35.

Originating Source

Biden’s doctor says he has hairline fractures in his foot

“President-elect Joe Biden has hairline fractures in his “”mid-foot”” and will “”likely require a walking boot for several weeks,”” his doctor said in a statement Sunday, after Biden slipped while playing with his dog, Major, Saturday. “”Initial x-rays did not show any obvious fracture, but his clinical exam warranted more detailed imaging,”” Dr. Kevin O’Connor said Sunday. “”Follow-up CT scan confirmed hairline (small) fractures of President-elect Biden’s lateral and intermediate cuneiform bones, which are in the mid-foot. It is anticipated that he will likely require a walking boot for several weeks.”” Earlier Sunday, Biden’s office announced he was going to be examined by an orthopedist “”out of an abundance of caution”” after he twisted his ankle playing with the dog. On Sunday evening, President Donald Trump tweeted, “”Get well soon!”””

Originating Source

Economic Indicators

China NBS Manufacturing PMI

The official NBS Manufacturing PMI for China rose to 52.1 in November 2020 from 51.4 a month earlier, beating market expectations of 51.5. The latest reading signaled the ninth straight month of growth in factory activity and the strongest since September 2017, as the economy continued to recover after the government lifted COVID-19 lockdowns and ramped up investment. There were faster increases in output (54.7 vs 53.9 in October), new orders (53.9 vs 52.8) and export sales (51.5 vs 51.0). At the same time, employment fell less than in a month earlier (49.5 vs 49.3). On the price front, input costs and output charges rose sharply. Looking ahead, business sentiment strengthened (60.1 vs 59.3).

China Non Manufacturing PMI

The official NBS Non-Manufacturing PMI for China increased to 56.4 in November 2020 from 56.2 a month earlier. The reading pointed to the ninth straight month of growth in the service sector and the fastest since June 2012, as the economy recovered further from the COVID-19 crisis. New business continued to rise (52.8 vs 53.0 in October), amid a softer decline in new export orders (49.0 vs 47.0). Meanwhile, employment fell further (48.9 vs 49.4). Prices data showed input cost went up for the seventh month in a row and at a faster rate (52.7 vs 50.9), while selling prices rose for the first time in three months (51.0 vs 49.4). Finally, business sentiment weakened but remained positive (61.2 vs 62.9).

United Kingdom Consumer Credit

Consumer credit in the United Kingdom dropped by 0.6 billion in October of 2020, following a GBP 0.6 billion decline in the previous month. Borrowing on credit cards went down by GBP 0.4 billion, and other loans and advances declined by GBP 0.1 billion. The weakness in consumer credit net flows pushed the annual growth rate down further in October to -5.6%, a new series low since it began in 1994.

Germany CPI

Consumer prices in Germany are expected to decrease 0.3 percent from a year earlier in November 2020, the largest decline since January 2015 and compared to market expectations of a 0.1 percent fall, a preliminary estimate showed. Prices have been pressured by subdued domestic demand and the government’s announcement in July of a temporary VAT rate cut until the end of the year as part of a stimulus package to help Europe’s largest economy recover from the coronavirus shock. Goods prices should fall 1.8 percent (vs -1.5 percent in October) led by a decline in energy cost (-7.7 percent vs -6.8 percent). Food inflation is set to remain unchanged at 1.4 percent. At the same time, service inflation is seen picking up slightly to 1.1 percent from 1.0 percent. On a monthly basis, consumer prices are expected to decrease by 0.8 percent in November.

United States Pending Home Sales

Contracts to buy previously owned homes in the US jumped 20.2 percent year over year in October, following a 20.8 percent rise in September as mortgage rates and the inventory of homes for sale remain at historic lows. At the same time, pending home sales went down 1.1 percent compared to the previous month, defying forecasts of a 1 percent gain, and marking the second straight month of declines as demand slowed due to high asking prices and low availability. Contract activity was mixed among four major US regions, with the only positive month-over-month growth happening in the South, although each region achieved year-over-year gains in pending home sales transactions.

Australia Markit Manufacturing PMI

The IHS Markit Manufacturing PMI in Australia rose to 55.8 in November of 2020 from 54.2 in October, a final estimate showed. The latest reading pointed to the fifth straight month of expansion and also the highest for nearly three years. The headline was mainly nudged by new orders, which expanded at the swiftest rate since January 2019, while the rate of job creation was the fastest since early 2018. On the price front, inflationary pressures intensified amid firmer freight fees and higher raw material costs. Looking ahead, expectations about output over the coming year remained positive, with confidence based on planned capacity on the rise.

Economic Calendar

Tuesday

DE German Manufacturing PMI (Nov)

Tuesday

AU RBA Interest Rate Decision

Wednesday

AU GDP (QoQ) (Q3)

Wednesday

US ISM Manufacturing PMI (Nov)

Thursday

US ADP Nonfarm Employment Change (Nov)

Thursday

US Crude Oil Inventories

Friday

US Initial Jobless Claims

Friday

US ISM Non-Manufacturing PMI (Nov)