Monex Morning Report – Mon 23 Nov 2020

OVERNIGHT HIGHLIGHTS

U.S. stocks end the week on a downbeat as rising COVID cases weigh; Asian stocks poised for muted start

Trump administration to add four more Chinese firms to Pentagon blacklist; Mnuchin clawback of Fed funds ‘deeply irresponsible,’ Biden team says

Top Market News

Trump administration to add four more Chinese firms to Pentagon blacklist: sources

Washington is poised to designate four more Chinese companies as backed by the Chinese military, sources said, curbing their access to U.S. investors as the Trump administration seeks to cement its hawkish China legacy in its waning days. The designations, which have not been previously reported, could be released by the Department of Defense as soon as Friday but may be unveiled next week, said one U.S. official and one person familiar with the matter who declined to be named.

Originating Source

China to Australia: stop treating us as a threat or we won’t pick up the phone

Chinese government ministers won’t start answering phone calls from their Australian counterparts unless Canberra stops treating Beijing as a strategic threat, a senior embassy official has warned. China is urging the Morrison government to make a clear decision on whether it sees Beijing as a “threat” or an “opportunity”, setting this up as a key precondition for resuming ministerial-level talks, which have been frozen since early this year. In a sign there is no clear offramp from the serious diplomatic rift, a Chinese embassy official told Guardian Australia it was up to the Australian government to reflect on what it could do “to arrest the decline of the bilateral relationship” and create a better mood for talks.

Originating Source

Mnuchin clawback of Fed funds ‘deeply irresponsible,’ Biden team says

U.S. Treasury Secretary Steven Mnuchin’s decision to de-fund several Federal Reserve coronavirus lending programs on Dec. 31 is “deeply irresponsible,” President-elect Joe Biden’s transition team said on Friday, and threatens to undermine the country’s fragile economic state. Ending support for Fed programs that “could be used for small businesses across the country when they are facing the prospect of new shutdowns is deeply irresponsible,” Biden’s camp said in a statement. “At this fragile moment, as the COVID and economic crises are re-accelerating, we should be reinforcing the government’s ability to respond and support the economy – not undermining it.”

Originating Source

Senate leader McConnell seeks to ‘repurpose’ expiring Fed lending for coronavirus

Funding for an expiring Federal Reserve lending program that Treasury Secretary Steven Mnuchin terminated should be “repurposed” for a new round of coronavirus aid that the U.S. Congress could craft, Senate Majority Leader Mitch McConnell said in a statement on Friday. “Congress should repurpose this money toward the kinds of urgent, important, and targeted relief measures” Republicans have been advocating, McConnell said, without mentioning any of the initiatives Democrats have been seeking in new legislation.

Originating Source

Travel campaign suspension details to be unveiled in a few days

Japan will try to unveil in the next few days the specifics of how its Go To Travel subsidy program will be suspended in areas with high numbers of coronavirus cases, a senior government official said Sunday. “After deciding on a course of action in the upcoming days, we will implement (the new policy) by working with prefectural governors,” Yasutoshi Nishimura, minister in charge of the government’s coronavirus response, said on public broadcaster NHK, a day after the partial suspension of the program aimed at promoting domestic tourism was announced. The policy flip-flop came after record numbers of infections in many parts of the country and rising criticism of Prime Minister Yoshihide Suga’s slow response to the recent resurgence of coronavirus cases.

Originating Source

Kudlow: economy isn’t slowing down over COVID-19 spread

White House chief economic adviser Larry Kudlow Friday disputed concerns voiced by two Federal Reserve officials who warned this week of economic worries as the coronavirus pandemic continues to surge across the county. “I do not think the economy is slowing down,” Kudlow said on Fox News’ “America’s Newsroom.” “Let me be more precise. People are mistaking the unemployment claims, the initial unemployment claims. In this pandemic, the best number to use is continuing claims, plus the pandemic employment assistance program.” He added that he doesn’t see a slowdown, and he thinks there will be a “pretty good number” in a few weeks for the month of November.

Originating Source

Fed’s Bostic Says Treasury Ending Programs Would Remove Backstop

Federal Reserve Bank of Atlanta President Raphael Bostic said he opposed Treasury Secretary Steven Mnuchin’s move to let some Federal Reserve emergency lending programs expire on Dec. 31, which he warned would remove an important backstop to markets. “Given where the economy is — and there is so much uncertainty that is still out there — it is prudent to keep those things open so that when people, if they do have stress, can draw upon it.” The Trump administration and Federal Reserve publicly disagreed Thursday over whether to extend the central bank’s emergency pandemic lending programs, with the Fed objecting to the Treasury Department’s move toward ending several facilities. “The tools and their presence in and of themselves have been helpful” in restoring market confidence, Bostic said. “So, the presence gave people some confidence and security that there was a backstop, and that is important.”

Originating Source

IMF says state-contingent debt instruments can aid sovereign debt restructurings

The IMF on Thursday said that wider and more standardized use of state-contingent debt instruments (SCDIs), which allow for increased payouts based on improved economic outcomes, could play an important role in sovereign debt restructurings. SCDIs, including warrants linked to GDP growth, are attractive in theory. However, they have been rarely used in practice because fixed income investors have steeply discounted their value, largely due to non-standard designs, illiquidity, and unpredictable risk profiles, the IMF said in a research note ahead of a G20 leaders summit this weekend.

Originating Source

Top Trump News

Trump camp’s lawsuit struck down in Pennsylvania

A judge in Pennsylvania has dismissed a lawsuit from the Trump campaign that sought to invalidate millions of mail-in votes in the battleground state. Judge Matthew Brann said the suit, which rested on allegations of irregularities, was “without merit”. The move paves the way for Pennsylvania to next week certify Joe Biden’s win – he leads by more than 80,000 votes. It is the latest blow to Donald Trump, who is trying to overturn his loss in the 3 November presidential election. He has refused to concede and made allegations of widespread electoral fraud, without providing any evidence. The lack of a concession has upended the process that normally follows a US election.

Originating Source

Biden will rejoin the Paris Climate Accord.

President-elect Joe Biden will re-enter the U.S. into the Paris Climate Agreement, the global pact forged five years ago among nearly 200 nations to avoid the worst impacts of climate change. The move will come after President Donald Trump formally withdrew the country from the climate change agreement on Nov. 4, which was the earliest possible date under its terms. Biden said he will bring the U.S. back into the accord as early as February.

Originating Source

Donald Trump claims election suggests Big Pharma sabotage

President blasted Pfizer and ‘Big Pharma’ – although he misstated the name of the company, calling it ‘FISA,’ that announced the dramatic vaccine breakthrough after the election. ‘Big pharma ran millions of dollars of negative advertisements against me during the campaign – which I won, by the way, but you know, we’ll find that out. Almost 74 million votes,’ Trump said. ‘We had big pharma against us. We had the media against us. We had big tech against us. We had dishonesty against us,’ Trump fumed. The president also accused drug companies of holding out until after the election, without providing evidence of why it did so. ‘So they waited and waited and waited and they thought they’d come out of it a few days after the election. And it would have probably had an impact. Who knows probably it wouldn’t have,’ he said.

Originating Source

Economic Indicators

Japan CPI

Japan’s consumer prices declined 0.4 percent in October year-on-year after remaining unchanged in the previous month, as the pandemic continued to drag consumption. The decline was sharper than the 0.3 percent expected by consensus and was the sharpest in more than 4 years. Food inflation declined to 1.1 percent from 1.9 percent. Prices fell for education (-2.1 percent), culture & recreation (-4 percent), medical care (-0.5 percent), and utilities (-2.9 percent). Also, prices for transport & communication declined 0.9 percent after increasing 0.4 percent in September. On a monthly basis, consumer prices edged down 0.1 percent for the third month. Core consumer prices, which exclude fresh food, dropped 0.7 percent after falling 0.3 percent in the previous month.

Japan Manufacturing PMI

The au Jibun Bank Japan Manufacturing PMI dropped to 48.3 in November 2020, from a final of 48.7 in the prior month and missing market consensus of 49.4, a preliminary estimate showed. The latest reading signaled a deterioration in the health of the manufacturing sector for the 19th consecutive month, with output and new orders falling at faster rates. In addition, employment declined further, albeit marginally, amid a continued fall in buying levels. As for prices, input cost inflation slowed, while output charges fell. Looking ahead, business expectations about the year-ahead outlook slipped to a three-month low.

Germany Producer Price Index (PPI) MoM

Producer Prices in Germany increased to 103.70 points in October from 103.60 in September 2020.

United Kingdom Retail Sales MoM

Retail sales in the UK increased 1.2 percent month-over-month in October of 2020, beating market forecasts of a flat reading. It is the sixth straight month of rising retail sales, boosted by sales for non-store retailing (6.4 percent), household goods stores (3.2 percent) and department stores (3.1 percent). Retail sales are now now 6.7 percent higher than in February 2020, before coronavirus lockdown restrictions were applied in the UK. Year-on-year, retail sales jumped 5.8 percent, also above forecasts of 4.2 percent, as consumers had started Christmas shopping earlier this year, further helped by early discounting from a range of stores. Excluding fuel, retail sales went up 1.3 percent on a monthly basis and 7.8 percent year-on-year.

Economic Calendar

Monday

DE Manufacturing PMI (Nov)  

Monday

UK Composite PMI 

Tuesday

DE GDP (QoQ) (Q3)

Tuesday

DE Ifo Business Climate Index (Nov)

Wednesday

US CB Consumer Confidence (Nov)

Wednesday

UK Autumn Budget  

Thursday

US Initial Jobless Claims

Thursday

US GDP (QoQ) (Q3)

Thursday

US Crude Oil Inventories

Friday

UK Nationwide HPI (MoM)