Monex Morning Report – Mon 2 Nov 2020

OVERNIGHT HIGHLIGHTS

Dow sees worst week and worst month since March as COVID impact weighs, election looms; Stock futures signal higher Asia open

Biden leads Trump nationally, in key states in race’s final days; Europe’s COVID-19 cases double in five weeks, total infections surpass 10 million

Biden leads Trump nationally, in key states in race’s final days

Democratic nominee Joe Biden leads President Donald Trump in a series of polls released Sunday, remaining ahead nationally and in battleground states, although some state races remain extremely close. The New York Times/Siena College polls showed Biden ahead in Pennsylvania, Florida, Arizona and Wisconsin, all key swing states that Trump carried in 2016. A CNN poll showed Biden up in Arizona, Michigan and North Carolina, also states Trump won in 2016. In all four states, Biden was seen as the more empathetic candidate and the one more able to unify the country. An ABC/Washington Post poll had less good news for Biden, showing Trump narrowly ahead in Florida, 50%-48%. The same poll had Biden well ahead, 51%-44% in Pennsylvania. Emerson College released battleground state polls that showed Biden up in Michigan, but the race in Ohio and Iowa within the margin of error and essentially tied. While these polls show Biden running better than Hillary Clinton did four years ago, analysts say Trump still has a narrow but viable path to an election win through the states considered “toss ups” by nonpartisan election handicappers. National polls cannot indicate a winner, since presidents are chosen by state, but they can suggest trends.

Originating Source

U.S. coronavirus cases keep rising in grim march to Election Day

Coronavirus cases continued their grim climb in the United States on Sunday with Midwestern states experiencing record hospitalizations, as increasingly bitter rhetoric kept the virus front and center of campaigning two days before the presidential election. Nearly 87,000 cases were reported on Saturday, with 909 deaths and record hospitalizations for the sixth straight day in the Midwest, according to a Reuters tally. In October, 31 states set records for increases in new cases, 21 for hospitalized COVID-19 patients and 14 for record increases in deaths. President Donald Trump, the Republican seeking re-election against Democratic challenger Joe Biden on Tuesday, downplays the virus and has accused Democrats of overblowing the pandemic that has killed more 230,000 Americans, more than any other country. Biden and fellow Democrats have hammered Trump as a poor leader who failed to contain COVID-19 in the United States, which also leads the world in the daily average number of new cases. Trump’s false accusation Friday that doctors were profiting from COVID-19 deaths drew harsh criticism from the governor of the election battleground state of Wisconsin.

Originating Source

Europe’s COVID-19 cases double in five weeks, total infections surpass 10 million

Just last month, both Latin America and Asia reported over 10 million total cases in their regions. The United States alone has over 9 million cases with a rapidly accelerating outbreak. While Europe almost took nine months to record its first 5 million COVID-19 cases, the next 5 million cases were reported in slightly over a month, according to a Reuters analysis. With 10% of the world’s population, Europe accounts for about 22% of the global caseload of 46.3 million infections. With over 269,000 deaths, the region accounts for some 23% of the global COVID-19 death toll of nearly 1.2 million lives lost. Amid the surging cases, France, Germany and the United Kingdom have announced nationwide lockdowns for at least the next month that are almost as strict as the restrictions in March and April. Portugal has imposed a partial lockdown and Spain and Italy are tightening restrictions. According to Reuters analysis, Europe has reported more than 1.6 million new cases in the past seven days, nearly half the 3.3 million reported worldwide, with over 16,100 deaths, a 44% jump over the previous week. For every 10,000 people in Europe, over 127 coronavirus cases have been reported and about four people have died, according to a Reuters analysis. In the United States there have been 278 cases and seven deaths per 10,000 residents.

Originating Source

McConnell targets early 2021 for new stimulus bill

“Senate Majority Leader Mitch McConnell said Friday a new coronavirus stimulus bill should be considered at the beginning of 2021, not in a post-election lame duck session of Congress as some lawmakers had hoped would happen after pre-election talks failed. “”We probably need to do another package, certainly more modest than the $3 trillion dollar Nancy Pelosi package,”” McConnell told Hugh Hewitt’s radio program. “”I think that’ll be something we’ll need to do right at the beginning of the year.”” The decision could put off for weeks badly needed aid to hard hit Americans and businesses who have been anxious to see more aid quickly approved and stall its impact on the economy. Talks between the administration and congressional Democrats — led by House Speaker Nancy Pelosi — over another stimulus package have floundered for months and members in both parties have expressed hope that getting past the election would remove some of the intense politics that they believe have kept the sides from reaching an agreement. The lack of a deal has left millions of Americans without additional unemployment benefits and money has long run out to aid small businesses, among other entities waiting on money from Washington to respond to the Covid pandemic and its widespread economic fallout.”

Originating Source

UK extends 80% wage subsidies as England goes back into lockdown

Britain’s government will extend by a month its costly coronavirus wage subsidies to ensure workers who are temporarily laid off receive 80% of their pay, Prime Minister Boris Johnson said on Saturday as he announced a new England-wide lockdown. Britain introduced the 80% wage subsidy scheme in March and it had been due to expire on Saturday to be replaced with a more targeted and less generous support. The scheme supported 8.9 million jobs at its peak, and had been forecast to cost around 52 billion pounds ($67.28 billion) over its eight-month lifespan. Firms will have to contribute 5% of the employment costs for workers covered by the extension, the finance ministry said. It also said a mortgage payment holiday scheme would be extended for households and business premises which are required to close because of coronavirus restrictions would get grants of up to 3,000 pounds ($3,881) a month.

Originating Source

Germany suggests new EU trade talks with U.S. after elections

The European Union should try again to reach a trade agreement with Washington after the U.S. election, German Defence Minister Annegret Kramp-Karrenbauer said on Friday. Both sides were faced with the same challenges in their relations to China, said Kramp-Karrenbauer, a close ally of Chancellor Angela Merkel. “China’s aggressive state capitalism, its handling of currency issues, the question of whether we have a level playing field accessing each other’s market, the protection of intellectual property, the unity of state and party,” Kramp-Karrenbauer said.

Originating Source

ECB’s Visco says worsening COVID picture could hit euro zone recovery

Growing coronavirus infection numbers are putting at risk the prospects for continued economic recovery in Italy and the euro zone as a whole, Bank of Italy Governor Ignazio Visco said on Friday. In a speech to bankers in Rome, Visco, who sits on the European Central Bank’s governing council, also said the risk of deflation in the euro zone has declined compared with six months ago but must still not be ignored. Visco noted that global gross domestic product had picked up more strongly than expected in recent months, but a second wave of COVID-19 now rampant in much of Europe “risks producing a new slowdown in production and demand for goods and services in the near term.” Italian GDP rebounded by 16.1% in the third quarter, much stronger than expected, but Visco said the resurgence of the virus “threatens to hit the results achieved” and crimp confidence and spending by both firms and households. He noted the savings rate of Italian families had doubled by the end of the second quarter compared with its 2019 average, and warned that this growing propensity to save could hurt economic growth going forwards.

Originating Source

Brexit talks go into another week as EU, UK push to salvage trade deal

EU and British Brexit negotiators will continue talks in Brussels on Monday and until around mid-week, sources on both sides said on Sunday, in a sign both sides are still pushing to avoid a damaging breakdown in trade in less than nine weeks. Intensive and secretive, the talks are a final bid to seal a new partnership agreement for when Britain’s transition out of the European Union runs its course at the end of this year. If the sides overcome their differences, the new deal would govern everything from trade and energy to transport and fisheries. If they fail, an estimated $900 billion of annual bilateral trade in goods and services would be damaged from Jan.1 by tariffs and quotas. An EU diplomatic source and a UK official said negotiations would continue face-to-face in Brussels on Monday following a full weekend of talks. An update on their progress and the chances of a deal was expected on Wednesday or Thursday, they added. EU Brexit negotiator Michel Barnier said on Friday that “much remains to be done” to seal a deal.

Originating Source

Top Trump News

Midwest and Pennsylvania

Two days before Election Day, President Donald Trump on Sunday sprinted across U.S. battleground states with appearances in Iowa and Michigan as he seeks to rally past Democratic challenger Joe Biden, who in pivotal Pennsylvania implored his supporters to turn out to vote.Trump, aiming to avoid becoming the first incumbent president to lose a re-election bid since fellow Republican George H.W. Bush in 1992, has a frenetic schedule for Sunday, with stops also planned in North Carolina, Georgia and Florida. Biden leads in national opinion polls though the race is seen as close in enough battleground states that Trump could achieve the 270 votes needed to win in the state-by-state Electoral College that determines the overall victor. The former vice president made the latest in a series of appearances in closely contested Pennsylvania, the state where he was born. “We have to earn our democracy. We have to get out and vote,” Biden said at a drive-in rally in a parking lot outside a Philadelphia church, with supporters honking their car horns. “We’re at an inflection point. So we have to vote like we never did before. Every day – every day – is a new reminder of how high the stakes are, of how far the other side will go to try to suppress the turnout, especially here in Philadelphia,” Biden added.

Originating Source

Early voting in U.S. election tops 90 million

More than 90 million Americans have cast ballots in the U.S. presidential election, according to a tally on Saturday from the U.S. Elections Project at the University of Florida, setting the stage for the highest participation rate in over a century. The record-breaking pace, about 65% of the total turnout in 2016, reflects intense interest in the vote, in which incumbent Donald Trump, a Republican, is up against Democratic nominee Joe Biden, a former vice president. Huge numbers of people have voted by mail or at early in-person polling sites amid concerns about exposure to the coronavirus at busy Election Day voting places. Trump trails Biden in national opinion polls amid criticism of the Trump administration’s handling of COVID-19, which has killed nearly 229,000 people in the United States, with numbers of new infections once again breaking daily records as Election Day nears on Tuesday. Democrats hold a significant advantage in early voting due to their embrace of postal ballots, which Republicans have historically cast in large numbers but have shunned amid repeated and unfounded attacks by Trump, who says the system is prone to widespread fraud. Experts have predicted turnout will easily surpass the 138 million who voted in 2016. Only 47 million votes were submitted before Election Day four years ago. In 20 states that report party registration data, 19.9 million registered Democrats have already voted, compared with 13 million Republicans and 10.1 million with no party affiliation. The data does not show for whom the votes were cast.

Originating Source

France

US President Donald Trump on Thursday tweeted solidarity with France after a knife attack in Nice killed three people. “Our hearts are with the people of France. America stands with our oldest Ally in this fight. These Radical Islamic terrorist attacks must stop immediately,” Trump said on Twitter. “No country, France or otherwise can long put up with it!” Prime Minister Jean Castex said France raised its terrorism alert to the highest level.

Originating Source

Economic Indicators

Japan Unemployment Rate

Unemployment Rate in Japan remained unchanged at 3 percent in September from 3 percent in August of 2020.

Australia Producer Price Index (PPI) QoQ

The final demand producer price index in Australia rose by 0.4 percent quarter-on-quarter in the three months to September 2020, after a 1.2 percent fall in the previous period, as the economy recovered further from the COVID-19 crisis. There were rises in prices received for: child care services (48.7 percent), petroleum refining and petroleum fuel manufacturing (10.7 percent), and commercial fishing (12.5 percent). Partially offsetting the rises were computer and electronic equipment (-7.1 percent), other transport equipment (-6 percent), and clothing manufacturing (-8.4 percent). Through the year to the third quarter, the index fell by 0.4 percent, the second straight quarter of decrease since the first quarter 2010.

Germany Retail Sales MoM

Retail sales in Germany shrank 2.2 percent month-over-month in September of 2020, following a downwardly revised 1.8 percent rise in August and much worse than market expectations of a 0.8 percent decline. Year-on-year, retail sales jumped 6.5 percent, compared to forecasts of 6.6 percent. Sales increased for food, beverages and tobacco (6.8 percent), supermarkets, self-service department shops and hypermarkets (7 percent), non-food (6.5 percent), namely internet and mail order business (21.2 percent), furniture, household appliances and building materials (11.1 percent). In contrast, trade in textiles, clothing, shoes and leather goods as well as the retail trade in department stores did not yet return to the previous year’s level (-7.3 percent). Sales were 2.8 percent higher than in February, before the pandemic.

Germany Gross Domestic Product (GDP) QoQ

Germany’s gross domestic product grew by a record 8.2 percent in the three months to September 2020, trying to recover from the historic slump of 9.8 percent seen in the second quarter and beating market consensus of 7.3 percent, a preliminary estimate showed. The expansion was supported by a rebound in household consumption, strong fixed investment in machinery and equipment and a sharp increase in exports. Year-on-year, the economy shrank by 4.3 percent in the third quarter, easing from a record contraction of 11.3 percent in the previous period. The economy was also 4.2 percent smaller when compared with Q4 2019, the quarter before the coronavirus pandemic hit. Meanwhile, Germany’s government has revised upwards its 2020 GDP forecast. It now expects the economy to shrink by 5.5 percent, compared to an initial estimate of 5.8 percent decline, before rebounding by 4.4 percent in 2021.

Eurozone Gross Domestic Product (GDP) QoQ

The Eurozone economy grew by 12.7 percent in the three months to September 2020, recovering from a record slump of 11.8 percent seen during the second quarter and easily beating market expectations of 9.4 percent, a preliminary estimate showed. That was the steepest pace of expansion since comparable data started to being collected in 1995, boosted by a rebound in activity and global demand after European countries lifted lockdowns imposed to contain the spread of the coronavirus pandemic. All major economies in the region posted record increases in GDP: 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 4.3 percent, easing from a record contraction of 14.8 percent in the second quarter.

Eurozone Unemployment Rate

The unemployment rate in the Euro Area was unchanged at 8.3 percent in September of 2020, the same as an upwardly revised 8.3 percent in August and the highest since April of 2018. Figures came in line with market expectations and compare with 7.5 percent a year earlier. 13.612 million people were unemployed in the Euro Area in September, an increase of 75,000 from August and a rise of 1.376 million from a year earlier.

U.S. Michigan Consumer Expectations

The University of Michigan’s consumer sentiment was revised slightly higher to 81.8 in October of 2020, reaching the highest since March. Still, the sentiment remains much below 101 reported in February, before the coronavirus pandemic started. Improvements were seen in both expectations (79.2 vs 78.8 in the advance estimate) and current conditions (85.9 vs 84.9). On the price front, inflation expectations for the year ahead were revised lower to 2.6 percent from 2.7 percent and those for the next 5 years were unchanged at 2.4 percent. “Consumer sentiment remained virtually unchanged from the first half of October (+0.6 points) and was insignificantly different from last month’s figure (+1.4 points). Fear and loathing produced this false sense of stability. Fears were generated by rising covid infection and death rates, and loathing was generated by the hyper-partisanship that has driven the election to ideological extremes”, Surveys of Consumers chief economist, Richard Curtin said.

The official NBS Manufacturing PMI for China was at 51.4 in October 2020, little-changed from a seven-month high of 51.5 in the previous month and compared with market expectations of 51.3. The latest reading pointed to the eighth straight month of growth in factory activity, amid ongoing recovery in the economy from the COVID-19 shock. There were rises in output (53.9 vs 54.0 in September), new orders (52.8 vs 52.8), and export sales (51.0 vs 50.8). Meanwhile, employment fell at a steeper pace (49.3 vs 49.6). At the same time, suppliers’ delivery time was almost stable (50.6 vs 50.7). On the price front, input costs went up faster, rising for the sixth month running (58.8 vs 58.5), while output price inflation accelerated, advancing for the fifth month in a row (53.2 vs 52.5). Looking ahead, business sentiment strengthened (59.3 vs 58.7).

Economic Calendar

Monday

China Caixin Manufacturing Purchasing Managers Index (PMI)

Monday

Germany Manufacturing Purchasing Managers Index (PMI)

Tuesday

U.S. ISM Manufacturing Purchasing Managers Index (PMI)

Tuesday

Australia Interest Rate Decision

Wednesday

U.S. Presidential Election

Wednesday

Australia Retail Sales MoM

Thursday

U.S. ADP Nonfarm Employment Change

Friday

U.S. Initial Jobless Claims

Friday

U.S. Nonfarm Productivity QoQ

Friday

Fed Interest Rate Decision