Monex Morning Report – Mon 21 Sep 2020

OVERNIGHT HIGHLIGHTS

U.S. stocks close lower, notching third straight weekly loss as tech-led sell-off intensifies; U.S. stock futures opened with declines, while equities in Asia were set for a softer start after a dip on Wall Street on Friday

Biden attacks Trump’s plan to name Supreme Court nominee ahead of election; Trump’s WeChat curbs halted by judge on free speech concerns

Top Market News

Fed’s Kashkari says pandemic aid was also ‘banking bailout’

U.S. banks got their second bailout in little more than a decade when Congress cut checks to millions of Americans to help them through the coronavirus crisis, Minneapolis Federal Reserve President Neel Kashkari said on Friday, calling for a new round of reforms to prevent it from happening again. “I applaud Congress’ bold actions to support people affected by the COVID-19 crisis, but we need to be clear that families weren’t the only beneficiaries,” Kashkari said in remarks prepared for delivery to a Council of Institutional Investors conference. But banking losses, he said, would have been much larger had Americans not had that extra cash to spend. “This was also a banking bailout,” he told the group.

Originating Source

EU seeks new powers to penalise tech giants

The EU wants to arm itself with new powers to take on big technology companies, including the ability to force them to break up or sell some of their European operations if their market dominance is deemed to threaten the interests of customers and smaller rivals. EU commissioner Thierry Breton told the Financial Times that the proposed remedies, which he said would only be used in extreme circumstances, also include the ability to exclude large tech groups from the single market altogether. In addition, Brussels is considering a rating system that would allow the public and stakeholders to assess companies’ behaviour in areas such as tax compliance and the speed with which they take down illegal content.

Originating Source

BoE’s Haldane says UK recovering ‘faster than anyone expected’

Britain is recovering faster than anyone had expected from the economic impact of COVID-19, but businesses need better incentives and access to finance to invest in technology, Bank of England chief economist Andy Haldane said. “UK GDP had, by July, recovered around half of its Covid-related losses, rebounding further and faster than anyone expected,” Haldane said in an article for the Mail on Sunday newspaper written jointly with the former chairman of John Lewis Partnership, Charlie Mayfield. Britain’s central bank said in a policy statement on Thursday the economy was recovering faster than it had forecast in August, though prior to that several policymakers had struck a more cautious tone than Haldane.

Originating Source

Canada drops free trade talks with China

A trade agreement between Canada and China is no longer worth pursuing, Canada’s Foreign Affairs Minister François-Philippe Champagne said in an interview to The Globe and Mail, abandoning free trade talks that were initiated four years ago. “I don’t see the conditions being present now for these discussions to continue at this time,” Champagne added. Champagne’s comment shelved the idea of a free trade deal with world’s second-largest economy for which Prime Minister Justin Trudeau was under pressure from domestic critics who charged he was too willing to make concessions in return for more trade with China.

Originating Source

Bank of Japan’s Kuroda says globalisation will be sustained despite COVID-19

Globalisation will be sustained and supply chains will be diversified as firms adjust to novel coronavirus disruption, Japan’s central bank governor said on Friday, challenging an assumption the virus will lead to fragmentation of world trade. Resorting to protectionism was not the answer, Bank of Japan (BOJ) Governor Haruhiko Kuroda said. “Globalisation and global supply chains will continue, although supply chains will be more diversified and more resilient,” Kuroda said at a seminar organised by the Asian Development Bank. Regional financial cooperation was important in coming years as it would offer a safety net in case of another shock, he said. “We will have to continue timely and decisive action, while closely monitoring the impact of COVID-19,” Kuroda said.

Originating Source

Trump to shut off TikTok, WeChat to new US users

The Trump administration will ban WeChat and video-sharing app TikTok from US app stores starting Sunday night US time, a move that will block Americans from downloading the Chinese-owned platforms over concerns they pose a national security threat. The bans affect only new downloads and updates and are less sweeping than expected, particularly for TikTok, giving its parent group ByteDance some breathing space to clinch an agreement over the fate of its US operations. WeChat, an all-in-one messaging, social media and electronic payment app, faces more severe restrictions. Existing TikTok users, on the other hand, will see little change until November 12 when a ban on some technical transactions will kick in, which TikTok said would amount to an effective ban.

Originating Source

Trump’s WeChat curbs halted by judge on free speech concerns

The Trump administration’s curbs on WeChat were put on hold by a judge, upending an effort to halt use of the Chinese-owned app in the U.S. U.S. Magistrate Judge Laurel Beeler in San Francisco issued a preliminary injunction at the request of a group of U.S. WeChat users, who argued the prohibitions would violate the free-speech rights of millions of Chinese-speaking Americans who rely on it. The app, which was supposed to disappear from U.S. app stores on Sunday, has 19 million regular users in the U.S. and 1 billion worldwide. The ruling means that neither WeChat nor TikTok, another Chinese-owned mobile app targeted by President Donald Trump’s executive order, will become immediately unavailable in the U.S. Trump cited national security concerns in banning the apps, but TikTok Inc. and the WeChat users’ group have said the president is trying to bolster his re-election chances by attacking China and Chinese companies.

Originating Source

China’s commerce ministry issues rules on ‘unreliable entities’ list

China’s commerce ministry on Saturday issued rules on its proposed list of “unreliable entities,” part of an intensifying rift with the United States, saying it will target foreign firms and individuals endangering China’s sovereignty and security. After President Donald Trump’s administration imposed additional tariffs on Chinese goods and curbs on Huawei Technologies Co last year, China vowed to draw up a list aimed at punishing foreign firms deemed harmful to Chinese interests. It has yet to publish the list. The United States said on Friday it will ban WeChat and video-sharing app TikTok from U.S. stores starting on Sunday night, a move that will block Americans from downloading the Chinese-owned platforms over concerns they pose a national security threat. China’s list will target foreign firms and individuals violating normal market transactions in China, interrupting deals with Chinese firms or taking discriminatory measures against Chinese firms, the ministry said.

Originating Source

Top Trump News

Oracle’s TikTok Deal

Donald Trump gave his blessing to Oracle Corp.’s bid for the American operations of TikTok, putting the popular video-sharing app on course to escape a U.S. ban imposed as part of his pressure campaign against China. “I approved the deal in concept,” Trump told reporters Saturday as he left the White House for a campaign rally in Fayetteville, North Carolina. “If they get it done, that’s great. If they don’t, that’s OK too.” The new company, which will be called TikTok Global, has agreed to funnel $5 billion in new tax dollars to the U.S. and set up a new education fund, which Trump said would satisfy his demand that the government receive a payment from the deal. “They’re going to be setting up a very large fund,” he said. “That’s their contribution that I’ve been asking for.”

Originating Source

Supreme Court Justice

Democratic presidential candidate Joe Biden urged Senate Republicans not to vote on any candidate nominated to the Supreme Court as the November election approaches, calling his rival Donald Trump’s plan an “exercise in raw political power.” Biden was speaking on Sunday (Monday AEST), the day that a second Senate Republican voiced objections to Trump’s plan to vote quickly on a replacement to liberal Justice Ruth Bader Ginsburg, who died on Friday. Such an appointment by the president, if approved by the Senate, would cement a 6-3 conservative majority that could influence American law and life for decades. “Voters of this country should be heard … they’re the ones who this Constitution envisions should decide who has the power to make this appointment,” Biden said in Philadelphia. “To jam this nomination through the Senate is just an exercise of raw political power.”

Originating Source

Coronavirus vaccine

President Donald Trump said Friday the U.S. will manufacture at least 100 million coronavirus vaccine doses before the end of the year and have enough to inoculate every American by April. “Hundreds of millions of doses will be available every month, and we expect to have enough vaccines for every American by April, and again I’ll say even at that later stage, the delivery will go as fast as it comes,” Trump said at a White House press briefing. Pfizer and Moderna, front-runners in the race for a Covid-19 vaccine, did not immediately respond to requests for comment.

Originating Source

Economic Indicators

Japan’s consumer price

Japan’s consumer price inflation dropped to 0.2 percent yoy in August from 0.3 percent in July 2020, as the pandemic continued to hamper consumption excluding food. Food inflation jumped to 2.9 percent from 1.9 percent. Prices for education continued to drop at a sharp 10.3 percent pace. In contrast, prices for transport & communication rose by 0.2 percent after edging down 0.1 percent in July. Meanwhile, deflation for fuel, light & water charges softened (-1.9 percent vs -2.2 percent). On a monthly basis, consumer prices edged down 0.1 percent after edging up 0.2 percent. Core consumer prices, which exclude fresh food, fell a sharp 0.4 percent after remaining unchanged in the two previous months.

Germany Producer Prices

Producer Prices in Germany remained unchanged at 103.20 points in August, the same as in July of 2020.

United Kingdom Retail Sales MoM

Retail sales in the United Kingdom went up 0.8 percent month-over-month in August of 2020, the fourth consecutive month of growth and resulting in an increase of 4 percent when compared with February’s pre-pandemic level. Figures were slightly better than forecasts of a 0.7% rise. Spending for home improvements continued to rise in August with sales at household goods stores increasing 1.9 percent in August (vs 6.4 percent in July) and staying 9.9 percent up when compared with February. Sales at predominantly food stores rebounded (0.4 percent vs -3 percent) amid government-subsidized meals under the Eat Out to Help Out program. In contrast, online retail sales fell 2.5 percent, but the strong growth experienced over the pandemic has meant that sales were still 46.8 percent higher than February. Non-store retailing was 38.9 percent above February, while clothing stores were still 15.9 percent below February’s pre-pandemic levels. Year-on-year, retail sales increased 2.8 percent.

United States Current Account

The current account deficit in the US widened by $59 billion, or 52.9%, to $170.5 billion in Q2 2020, the biggest gap since Q3 2008. It is equivalent to 3.5% of the GDP, compared to 2.1% in Q1. It mostly reflects an expanded deficit on goods and reduced surpluses on primary income and on services. All major transactions declined in part due to COVID-19, as many businesses were operating at limited capacity or ceased operations, and the movement of travelers across borders was restricted. Exports went down mainly due to petroleum and products; civilian aircraft; parts and engines and passenger cars; and services of travel and air passenger transport. Receipts of primary income also went down mostly due to equity securities and primarily earnings. Receipts of secondary income fell due to primarily private sector fines and penalties and payments dropped on lower primarily private sector fines and penalties, and in general government transfers, primarily international cooperation.

Economic Calendar

Monday

China Exports YoY

Tuesday

UK Gross Domestic Product (GDP) QoQ

Wednesday

US EIA Short-Term Energy Outlook

Wednesday

US Interest Rate Decision

Wednesday

NZ Deposit Facility Rate

Wednesday

DE Initial Jobless Claims

Thursday

US Producer Price Index (PPI) MoM

Thursday

US Crude Oil Inventories

Friday

US Gross Domestic Product (GDP) MoM

Friday

US Core Consumer Price Index (CPI) MoM