Monex Morning Report – Mon 16 Nov 2020

OVERNIGHT HIGHLIGHTS

U.S. stocks surge to close the week, with S&P 500 at record high; Asian stocks set to track U.S. gains

Asia Pacific nations sign biggest regional trade deal; Final states called: Biden projected to win 306 electoral votes to Trump’s 232

Asia Pacific nations sign biggest regional trade deal

Asia Pacific nations including China, Japan and South Korea on Sunday signed the world’s largest regional free-trade agreement, encompassing nearly a third of the world’s population and gross domestic product. Top officials from 15 nations that also include Australia, New Zealand and the 10 members of the Association of Southeast Asian Nations inked the Regional Comprehensive Economic Partnership, or RCEP — nearly a decade in the making — on the final day of the 37th Asean Summit hosted virtually by Vietnam. “The completion of negotiations is a strong message affirming Asean’s role in supporting the multilateral trade system,” Vietnamese Prime Minister Nguyen Xuan Phuc said ahead of the virtual signing ceremony. The agreement will contribute to “developing supply chains that have been disrupted due to the pandemic as well as supporting economic recovery,” he said. A minimum of six Asean countries in addition to three non-Asean partners must ratify RCEP for it to come into force, Singapore’s Minister of Trade and Industry Chan Chun Sing told reporters following the signing. Singapore plans to approve the deal “in the next few months,” he said. Supporters of the trade pact, which covers 2.2 billion people with a combined GDP of $26.2 trillion, said it will bolster pandemic-weakened economies by reducing tariffs, strengthening supply chains with common rules of origin, and codifying new e-commerce rules.

Originating Source

Final states called: Biden projected to win 306 electoral votes to Trump’s 232

CBS News projected on Friday that President-elect Biden will win Georgia and President Trump will win North Carolina, the final two states left to be called. With those two states, Mr. Biden is set to receive 306 Electoral College votes to Mr. Trump’s 232. Mr. Trump made his first public appearance on Friday since Mr. Biden was projected the winner of the election. Mr. Trump spoke to reporters in the Rose Garden about Operation Warp Speed, the plan to distribute a COVID-19 vaccine. Although Mr. Trump has castigated Pfizer for announcing its vaccine progress after the election, he said Friday that New York would not be getting access to the potential vaccine at the same time as the general public for “political reasons” due to the state’s restrictions.

Originating Source

Bank of England’s Bailey hopes for ‘goodwill’ after Brexit transition ends

Bank of England Governor Andrew Bailey said he hoped a spirit of goodwill would prevail between Britain and European Union countries to smooth over inevitable trade disruptions when a post-Brexit transition period ends on Jan. 1. Last week the BoE said many smaller British companies appeared unready for the reintroduction of customs checks in under seven weeks’ time, and estimated that border delays were likely to cost Britain 1% of GDP – around 5 billion pounds – in the first three months of next year. This disruption would be even greater if Britain and the EU failed to reach a trade deal, leading to new tariffs on goods.

Originating Source

Fed’s Williams Says Virus May Weigh on Economy in Coming Months

The latest wave of Covid-19 outbreaks in the U.S. may weigh on economic growth in the coming months, Federal Reserve Bank of New York John Williams said. “That clearly puts a question mark on the ability of the economy to kind of weather this period. I would expect the growth in the fourth quarter and maybe into early next year to slow somewhat,” Williams said Friday during a virtual event hosted by the Financial Times. “I feel relatively positive around how the economy is evolving. That said, there is just a great deal of uncertainty given the rapid rise in cases.” The New York Fed chief’s comments on the outlook echoed similar remarks from Fed Chair Jerome Powell the day before. Speaking Thursday at a European Central Bank forum, Powell said “the next few months could be challenging” for the U.S. economy as the virus spreads.

Originating Source

Fed’s Bullard downplays need for additional massive fiscal stimulus, says job market recovery has been much stronger than last recession

The U.S. labor market improved at a shockingly rapid pace this year compared with the aftermath of the 2008-2009 financial crisis, St. Louis Fed President James Bullard said Friday. In a speech to the Economic Club of Memphis, Bullard also said the economy doesn’t need another massive stimulus package and a more targeted approach would suffice. In his talk, Bullard noted that the payroll growth seen since the summer took four years to achieve in the last recession. “Basically, unemployment has come down from the peak very fast, I’m not sure you can really absorb how shocking this is,” he said. Even broader economic trends “are way better than originally expected,” he added.

Originating Source

Donald Trump says Joe Biden ‘won because the election was rigged’, repeating unsubstantiated claims of fraud

US President Donald Trump has tweeted that president-elect Joe Biden “won” the 2020 presidential election only because “the election was rigged” — reiterating false claims of widespread voting fraud. But in a series of tweets on Sunday local time, Mr Trump repeatedly alleged, without evidence, the 2020 US election was “rigged”. “All of the mechanical ‘glitches’ that took place on Election Night were really THEM getting caught trying to steal votes,” Mr Trump wrote.

Originating Source

Pelosi calls for stimulus talks without offering new proposals

House Speaker Nancy Pelosi called again for negotiations with Republicans on a fiscal-stimulus package, saying the spike in Covid-19 cases is a “red alert,” while stopping short of offering new proposals for a compromise. “Our focus in the lame duck continues to be on Covid relief — this is a red alert,” Pelosi said at a press briefing Friday at the Capitol, referring to the congressional session preceding the installation of the new administration in January. “I urge Republicans to acknowledge the crisis and come to the table to work on Covid relief.” The House returns to session next week, with no public schedule for any renewal in stimulus negotiations. Senate Majority Leader Mitch McConnell, on whom the White House this week effectively placed in charge of representing the Republican side on the issue, underscored Thursday his opposition to a package of the size Pelosi wants. Pelosi and Senate Democratic leader Chuck Schumer Thursday reiterated that their $2.4 trillion proposal needs to be the starting point for talks. McConnell has advocated for about $500 billion, a top-line number well below the Trump administration’s roughly $1.9 trillion negotiating position before Election Day.

Originating Source

U.K. hints Brexit talks could be extended as sisagreements remain

The U.K. hinted that Brexit talks could stretch out beyond this week as the two sides struggle to overcome the key barriers to reaching a trade deal. While officials from both sides of the Brexit divide agree the coming week is crucial, negotiations over a trade agreement have already passed a number of informal deadlines. Environment Secretary George Eustice said Sunday it would be possible to “squeeze out extra time” if the two sides were close to an agreement. Britain’s chief Brexit negotiator David Frost said on Sunday that he was heading back to Brussels for more discussions with his European Union counterpart Michel Barnier, and that the U.K. “will not be changing” its position in the coming talks. There has been “some progress in a positive direction in recent days,” he said, while cautioning that “we may not succeed.”

Originating Source

Top Trump News

Joe Biden ‘won because the election was rigged’

US President Donald Trump has tweeted that president-elect Joe Biden “won” the 2020 presidential election only because “the election was rigged” — reiterating false claims of widespread voting fraud. But in a series of tweets on Sunday local time, Mr Trump repeatedly alleged, without evidence, the 2020 US election was “rigged”. “All of the mechanical ‘glitches’ that took place on Election Night were really THEM getting caught trying to steal votes,” Mr Trump wrote.

Originating Source

Biden advisers urge immediate COVID-19 action

U.S. President-elect Joe Biden’s top advisers on Sunday called for urgent action to address the nation’s “deeply alarming” COVID-19 epidemic and warned that Republican President Donald Trump’s transition delay could further jeopardize the battle against the virus, including vaccine distribution planning. They also urged Congress to immediately pass bipartisan financial relief even before Biden, a Democrat, takes office on Jan. 20, as daily COVID-19 cases shattered U.S. records and strained hospitals nationwide, forcing a wave of new restrictions heading into the U.S. holiday season.

Originating Source

Trump campaign’s Pennsylvania lawsuit

Attorneys from the law firm Porter Wright Morris & Arthur withdrew late Thursday from representing the Trump campaign in a federal lawsuit seeking to block the certification of Pennsylvania’s election results, becoming the third law firm to distance itself from the Trump campaign’s post-election lawsuits and coming amid a public pressure campaign and reported internal dissent over Porter Wright’s role in President Donald Trump’s legal strategy.

Originating Source

Economic Indicators

United States Producer Prices

Producer prices for final demand in the US increased 0.3 percent from a month earlier in October of 2020, following a 0.4 percent rise in September and slightly above market expectations of a 0.2 percent gain. Cost of goods advanced 0.5 percent, after increasing 0.4 percent in the prior month, led by a 2.4 percent jump in cost for foods. Prices of services went up 0.2 percent, lower than 0.4 percent in September, led by a 1.1 percent advance in cost of transportation and warehousing services. Year-on-year, producer prices went up 0.5 percent, after a 0.4 percent gain, marking the largest gain since February. The core index which excludes food and energy went up 0.1 percent month-over-month, below 0.4 percent in September. The annual rate edged lower to 1.1 percent from 1.2 percent.

Euro Area GDP Growth Rate

The Eurozone economy grew by 12.6 percent in the three months to September 2020, recovering from a record slump of 11.8 percent in the previous period and compared with early estimates of a 12.7 percent advance. It was the steepest pace of expansion since 1995, boosted by a rebound in activity and demand as lockdowns imposed to contain the spread of the coronavirus pandemic were gradually lifted. All major economies in the region posted record GDP expansion rates: France (18.2 percent vs -13.7 percent in Q2); Spain (16.7 percent vs -17.8 percent); Italy (16.1 percent vs -13.0 percent); and Germany (8.2 percent vs -9.8 percent). Year-on-year, the GDP shrank by 4.4 percent, easing from a record contraction of 14.8 percent in the second quarter.

United States Consumer Sentiment

The University of Michigan’s consumer sentiment decreased to 77 in November of 2020 from 81.8 in October and against market expectations of 82, a preliminary estimate showed. It is the lowest reading since August as consumers judged future economic prospects less favorably (71.3 vs 79.2 in October), while their assessments of current economic conditions remained largely unchanged (85.8 vs 85.9). Meantime, inflation expectations for the year ahead increased to 2.8% from 2.6% and the 5-year outlook to 2.6% from 2.4%. The outcome of the presidential election as well as the resurgence in covid infections and deaths were responsible for the early November decline. Interviews conducted following the election recorded a substantial negative shift in Republicans’ expectations and no gain among Democrats.

Economic Calendar

Monday

CN Industrial Production (OCT)

Tuesday

AU RBA Meeting Minutes

Wednesday

US Retail Sales (OCT)

Wednesday

UK CPI (OCT)

Wednesday

EU CPI (OCT)

Thursday

AU Employment Change

Thursday

US Building Permits (Oct)

Thursday

US Crude Oil Inventories

Friday

US Initial Jobless Claims

Friday

“US Existing Home Sales (Oct) ”