Monex Morning Report – Mon 14 Dec 2020

OVERNIGHT HIGHLIGHTS

U.S. stocks end mostly lower Friday amid setbacks on U.S. fiscal stimulus and Brexit; Pound rises in early trade as Brexit talks extend

Senate approves one-week funding bill to avert midnight shutdown; Leaders to push Brexit trade talks beyond Sunday deadline

Top Market News

Senate approves one-week funding bill to avert midnight shutdown

“The Senate cleared a one-week government funding bill on Friday by voice vote, forestalling the threat of a government shutdown at midnight and capping off hours of drama after several senators threatened to hold up the resolution. The last-minute agreement to fast-track the short-term funding fix came after a handful of senators dropped efforts to tack on other provisions. President Donald Trump signed the measure on Friday night. The House had easily passed it on Wednesday. The bill buys congressional negotiators a little more time to finish up talks on a $1.4 trillion omnibus spending package that would boost federal agency budgets for the rest of the fiscal year, in addition to billions of dollars in pandemic aid that millions of Americans will lose over the holidays. Sen. Bernie Sanders (I-Vt.) — who had been pushing for a vote on another round of stimulus checks — relented after threatening to block passage of a broader funding bill next week without a vote on direct payments. “If I have anything to say about it — and I guess I do — we’re not going to go home for the Christmas holidays unless we make sure that we provide for the millions of families in this country who are suffering,” Sanders said on the Senate floor. ”

Originating Source

Leaders to push Brexit trade talks beyond Sunday deadline

“London and Brussels agreed on Sunday to “”go the extra mile”” in coming days to try to reach an elusive trade agreement despite missing their latest deadline to avert a turbulent exit for Britain from the European Union’s orbit at the end of the month. British Prime Minister Boris Johnson and the president of the EU’s executive Commission, Ursula von der Leyen had given negotiators a Sunday deadline to find a way to resolve an impasse on arrangements that would guarantee Britain zero-tariff and zero-quota access to the EU’s single market. On Sunday they mandated negotiators to continue, although Johnson sounded a downbeat note on prospects for a breakthrough. “”Despite the exhaustion after almost a year of negotiations, despite the fact that deadlines have been missed over and over we think it is responsible at this point to go the extra mile,”” Johnson and von der Leyen said in a joint statement. Britain quit the EU in January but remains an informal member until Dec. 31 – the end of a transition period during which it has remained in the EU single market and customs union. ”

Originating Source

BoE has limited power to calm market after Brexit transition: Bailey

Governor Andrew Bailey said on Friday there was a limit to the Bank of England’s ability to avoid all disruption or volatility in financial markets after Britain’s Brexit transition period with the European Union ends on Dec. 31. “I don’t want us to be in a situation, were it to occur, where people say ‘well you haven’t done this and you haven’t done that’ but I have to say there is a limit to what we can do,” Bailey said at a news conference following the publication of the BoE’s Financial Stability Report. EU customers of British financial institutions would be affected by decisions made by euro zone authorities, Bailey said. Prime Minister Boris Johnson has said there is “a strong possibility” Britain and the EU would fail to secure an agreement on trade.

Originating Source

ECB’s Villeroy says financing conditions focus of latest stimulus decision

The European Central Bank is targeting favourable financing conditions rather than pumping a given amount of liquidity into the economy with its latest stimulus decision, ECB policymaker Francois Villeroy de Galhau said on Friday. The ECB said on Thursday it was increasing the overall size of its Pandemic Emergency Purchase Programme (PEPP) by 500 billion euros to 1.85 trillion euros. It extended the scheme by nine months to March 2022. Villeroy, who is also head of France’s central bank, said on BFM Business radio that the aim was not “to invest a certain amount each month, but rather a result”, which is favourable financing conditions for the economy. “We will do less if the financing conditions remain favourable like today. If the opposite is needed, we will do more,” he said.

Originating Source

U.S. Supreme Court swiftly ends Trump-backed Texas bid to upend election results

The U.S. Supreme Court on Friday rejected a long-shot lawsuit by Texas and backed by President Donald Trump seeking to throw out voting results in four states, dealing him a likely fatal blow in his quest to undo his election loss to President-elect Joe Biden. The decision allows the U.S. Electoral College to press ahead with a meeting on Monday, where it is expected to formally cast its votes and make Biden’s victory official. In a brief order, the justices said Texas did not have legal standing to bring the case, abruptly ending what Trump had touted this week as his best hope for overturning the election.

Originating Source

Pfizer Vaccine Cleared in U.S., a Landmark in Covid-19 Fight

Pfizer Inc. gained emergency U.S. authorization for its Covid-19 vaccine on Friday, completing an unprecedented scientific sprint that could eventually help bring an end to a pandemic that has killed nearly 300,000 Americans. The Food and Drug Administration’s decision to authorize use of Pfizer and partner BioNTech SE’s vaccine will now set in motion a complicated immunization drive that will launch across the country in coming days. Gen. Gustave F. Perna, the chief operating officer for the government vaccine program Operation Warp Speed, said at a news briefing Saturday that vaccines are being packaged and will arrive at the first administration sites on Monday. Among the first to be inoculated will be health-care workers and seniors living in long-term care facilities. The shot is a landmark achievement, built from a breakthrough technology in a matter of months, in the face of a pandemic that has sickened millions worldwide. It has already been cleared by regulators in the U.K., Canada and other countries.

Originating Source

German lockdown: Merkel announces tough new COVID curbs

On Sunday, Chancellor Angela Merkel announced that most stores would shut from Wednesday, along with schools and day care centers. The new restrictions will be in effect until at least January 10 to help tackle the second wave of the coronavirus pandemic, which threatens to overwhelm the country’s health system. In a news conference that followed a meeting of federal and state leaders, she said the country urgently needed to address the exponential rise in COVID-19 infections. The decision is set to cause a major disruption for retailers, the education system and the public in the lead-up to the Christmas holidays.

Originating Source

Bank of Japan likely to extend corporate aid programs next week

The Bank of Japan is likely to decide next week to extend a range of steps aimed at easing corporate funding strains as a resurgence of coronavirus infections clouds the economic outlook, sources familiar with its thinking said. The measures, due to expire in March, will likely be extended for at least half a year as a precaution against the deepening pain from COVID-19, four sources said on condition of anonymity as they were not authorized to speak publicly. “With so much uncertainty over the outlook, it’s desirable for the BOJ to reach a decision on the extension as early as possible,” said one of the sources. That view was echoed by three other sources. Markets widely expect the BOJ to extend the measures and have been focusing on how quickly the bank would reach the decision. There is a slim chance a decision may be postponed until the BOJ’s rate review in January, if some in the board prefer to wait for more data on corporate funding strains, they said.

Originating Source

Top Trump News

Trump, Pence, other top officials to be offered COVID-19 vaccine: source

U.S. President Donald Trump, Vice President Mike Pence and other top U.S. officials will be offered the newly approved COVID-19 vaccine beginning Monday, according to a source familiar with the plans. Essential personnel at the White House and certain officials in all three branches of government were to be vaccinated within the next 10 days, said the source.

Originating Source

First U.S. shots in COVID-19 vaccine campaign coming Monday, Army general says

The first shots in a massive U.S. COVID-19 vaccine campaign will be administered as early as Monday, with Pfizer Inc and partners aiming to start shipments across the hard-hit country on Sunday, an Army general organizing the rollout said. Healthcare workers and elderly people in long-term care facilities are expected to be the main recipients of the first wave of 2.9 million shots this month, with healthcare worker inoculations as soon as Monday and nursing home residents by the end of next week, U.S. Army General Gustave Perna said on a Saturday press call. Despite months of preparation, distributing and administering the vaccine to as many as 330 million recipients poses a major logistical challenge, he said. The vaccine has complex shipping requirements and must be stored at -70 Celsius. “We have a lot of work to do. We are not taking a victory lap. We know road ahead of us will be tough,” Perna said. Pfizer’s vaccine was authorized for use by U.S. regulators on Friday. Cases are surging in the United States, with thousands of deaths per day, while hospital intensive care units across the country are nearing capacity. More than 295,000 Americans have died of COVID-19.

Originating Source

U.S. House Democrat slams Trump trade policies, urges Biden to work with allies

The head of the powerful U.S. House of Representatives Ways and Means Committee on Friday slammed what he called President Donald Trump’s “unsophisticated response” to China’s ambitions and called for a major recalibration of U.S. policies. Chairman Richard Neal, a Democrat, urged the future administration of fellow-Democrat Joe Biden to formulate a package of programs and investment to counterbalance China, including through re-energized cooperation with European allies. Instead of pausing trade talks to focus first on domestic issues, as Biden has said he plans to do, Neal urged the new administration to embrace European overtures to hammer out a new broad trade deal with Europe. Neal’s comments come a day after Biden chose Katherine Tai – the committee’s chief trade lawyer – to be his chief U.S. trade negotiator. Biden is due to introduce Tai and other top nominees on Friday.

Originating Source

Economic Indicators

U.S. Michigan Consumer Sentiment

The University of Michigan’s consumer sentiment for the US jumped to 81.4 in December of 2020 from 76.9 in November, beating market forecasts of 76.5, preliminary estimates showed. Current economic conditions were assessed more positively (91.8 vs 87) and expectations also improved (74.7 vs 70.5). Meantime, the inflation outlook for the year ahead slowed (2.3% vs 2.8%) while expectations for the next 5 years were unchanged at 2.5%. “Consumer sentiment posted a surprising increase in early December due to a partisan shift in economic prospects. Following Biden’s election, Democrats became much more optimistic, and Republicans much more pessimistic. Just as four years ago, the post-election partisan shifts in economic expectations are too extreme to be justified by economic fundamentals”.

U.S. Producer Price Index (PPI) MoM

Producer prices for final demand in the US edged up 0.1 percent from a month earlier in November 2020, following a 0.3 percent increase in October and slightly missing market consensus of a 0.2 percent gain. Goods prices rose 0.4 percent, the seventh consecutive advance, mainly boosted by a 1.2 percent increase in energy cost. Meanwhile, services prices were unchanged after increasing 0.2 percent in October. The core index which excludes food and energy was also 0.1 percent higher in November, compared with expectations of 0.2 percent. Year-on-year, producer prices went up 0.8 percent and the core index increased 1.4 percent.

Germany CPI MoM

The Consumer Price Index in Germany decreased 0.80 percent in November of 2020 over the previous month. It is the biggest decline in a year.

Economic Calendar

Monday

EU Industrial Production (MoM) (Oct)

Tuesday

CN Industrial Production (YoY)

Tuesday

UK Average Earnings Index +Bonus (Oct)

Wednesday

DE German Manufacturing PMI (Dec)  

Wednesday

UK CPI

Thursday

US Core Retail Sales (MoM) (Nov)

Thursday

US Fed Interest Rate Decision

Thursday

US Crude Oil Inventories

Thursday

AU Employment Change

Friday

US Initial Jobless Claims