Monex Morning Report – Mon 30 Nov 2020

OVERNIGHT HIGHLIGHTS

S&P 500, Nasdaq book record closes on Black Friday; Asia stocks look for positive start

WTO complaint ‘next step’ in tariff dispute between Australia and China, trade minister says; OPEC+ fails to agree on output-hike delay before big meeting

WTO complaint ‘next step’ in tariff dispute between Australia and China, trade minister says

The Australian government is continuing its tough talk against Beijing’s trade impositions, with the trade minister Simon Birmingham giving the strongest indication yet that Canberra will take its complaints to the World Trade Organization. China first announced it believed Australian wine was being dumped in China in August and last week the Chinese ministry of commerce announced tariffs on Australian wine products that would double or triple prices making export trade “unviable”. The wine export blow came after tariffs on Australian barley were announced in May. At least 60 ships laden with coal from Australian producers have also been denied permission to enter Chinese ports – leaving them waiting off the coast while Australian authorities attempt to find a resolution to the standoff. Birmingham said on Sunday the trade conflicts were not just harming Australia but threatened global trade confidence, as the world economy struggled to recover from the Covid pandemic. The minister did not label the Chinese government’s actions as “coercion” when asked on ABC’s Insiders program if that was happening. But he said that after attempting to resolve the issues through the Chinese Communist party’s domestic processes, taking the barley issue to the World Trade Organization (WTO) was “the next step”.

Originating Source

House will vote on bill restricting Chinese firms listed in U.S.

The House is set to vote on bipartisan legislation that would impose restrictions on Chinese companies listed on U.S. exchanges, including requiring certification that they’re not under control of a foreign government. The bill’s sponsors say the aim is to ensure foreign companies traded in America are subject to the same independent audit requirements that apply to U.S. firms. In doing so, the measure threatens to boot Chinese companies, including behemoths like Alibaba Group Holding Ltd. and Baidu Inc., out of American stock markets. The Holding Foreign Companies Accountable Act (S. 945) will be considered Wednesday under a streamlined process that limits debate on the House floor, allows no amendments, and requires approval by two-thirds of members present and voting to pass. The Republican-led Senate passed the measure in May; scheduling a House vote now, under an accelerated process typically used for non-controversial matters, signals conditional bipartisan support.

Originating Source

Australia central bank seen holding after success of QE drive

A month into the Reserve Bank of Australia’s A$100 billion ($73.6 billion) bond-buying program, it looks to be doing its job by driving bond yields lower and keeping a lid on currency appreciation The RBA will leave the cash rate and the three-year yield goal at 0.10% at Tuesday’s meeting in Sydney, as unanimously predicted by economists. The quantitative easing program that Governor Philip Lowe and his board unveiled on Nov. 3, has seen A$15 billion worth of bonds purchased in an attempt to lower borrowing costs across the economy. The RBA’s bond buying has had some success in narrowing the gap in longer-dated securities. Since mid-September, when expectations increased that Australia would introduce a QE program, the spread between the U.S. and Australian 10-year yields narrowed and the Aussie dollar depreciated. Both have rebounded somewhat over November on the news of Covid-19 vaccines, but the RBA sees its latest stimulus is working as intended. “I would argue they are both lower than they would be absent the November policy package,” central bank No. 2 Guy Debelle said in a speech to economists last week.

Originating Source

OPEC+ fails to agree on output-hike delay before big meeting

A panel of OPEC+ ministers couldn’t reach an agreement on whether to delay January’s oil-output increase, leaving the matter unresolved before a full meeting of the cartel and its allies on Monday. Most participants in an informal online discussion on Sunday evening supported maintaining the production curbs at current levels into the first quarter, said a delegate. Yet while Russian Deputy Prime Minister Alexander Novak spoke in favor of postponing the supply hike that’s currently scheduled to happen in the new year, the United Arab Emirates and Kazakhstan were opposed, said the delegate, asking not to be named because the talks were private. Unless the agreement is revised this week, they will restart about 1.9 million barrels a day of halted output, potentially pushing the global market back into surplus and undermining the recent surge in crude prices.

Originating Source

BoE’s Haldane sees inflation risks as economies bounce back

Bank of England Chief Economist Andy Haldane said inflation could rise by more than expected as progress on COVID-19 vaccines and huge amounts of stimulus raised the chances of a swift economic bounce-back. “As the economic recovery gathers pace next year, it will be important central banks remain squarely focussed on their core medium-term price stability mandates,” Haldane said in a speech to a University College London webinar on Saturday. Haldane has consistently sounded more upbeat than his fellow interest-rate setters about the prospects for an economic recovery in Britain after the record 25% slump triggered by the first coronavirus lockdown in the spring. The BoE’s nine-member Monetary Policy Committee has stressed that it will not be in a hurry to tighten monetary policy by saying it first wanted to see clear evidence of “significant progress” to hitting its 2% inflation target sustainably.

Originating Source

Germany to double net borrowing for 2021 to fight pandemic impact

Germany plans to almost double the borrowing it had planned for next year to finance emergency aid for businesses during the second wave of the COVID-19 pandemic, Finance Minister Olaf Scholz said on Friday. The parliamentary budget committee agreed to a debt figure of almost 180 billion euros ($215 billion) – the second largest amount of net new borrowing in the history of post-war Germany. “Our goal is to overcome this pandemic and grow out of it with full strength next year,” Scholz said during a virtual news conference, adding that the stimulus package for this year and next would result in new debt of more than 300 billion euros. “We know that these are exceptional budgets in 2020 and 2021,” said Scholz. He added that the budget provided for financial support to be extended until June 2021. The new debt approved for 2020 will “by far” not be exhausted, said Scholz, and much will be postponed until next year.

Originating Source

Google and Facebook to be scrutinized by new U.K. antitrust unit from next year

The U.K. on Friday said a new government unit will work to tackle ongoing concerns about a concentration of power among a small number of tech giants. The Department for Digital, Culture, Media and Sport said it plans to create a Digital Markets Unit (DMU) to enforce “a new code to govern the behavior of platforms that currently dominate the market, such as Google and Facebook.” The code is designed to ensure that consumers, small businesses, and news publishers aren’t disadvantaged by actions taken by tech giants, the government said. Under the new code, some of the world’s biggest tech companies may have to be more transparent about the services they provide and how they use consumers’ data. They may also be forced to give consumers a choice over whether to receive personalized advertising, and they won’t be able to place restrictions on customers that make it difficult for them to use rival platforms. The DMU, which will be part of the Competition and Markets Authority (CMA), will start work in April 2021.

Originating Source

Iran’s top nuclear scientist killed in apparent assassination, state media reports

Iran’s top nuclear scientist was killed Friday in an alleged assassination that the country’s foreign minister linked to Israel. Mohsen Fakhrizadeh, considered one of the masterminds of Iran’s controversial nuclear program, died after his car was apparently ambushed in a district east of Tehran. Photos from the scene showed the shattered windshield of a car, and blood on the road. Iranian state media said the killing appeared to be an assassination. Iran’s Defense Minister Brigadier General Amir Hatami was quoted by Iran’s semi-official news agency ISNA as saying Fakhrizadeh was targeted by gunfire and a Nissan vehicle explosion, before a firefight ensued. Iranian Foreign Minister Zarif called the death “cowardice — with serious indications of Israeli role.” Fakhrizadeh was head of the research center of new technology in the elite Revolutionary Guards, and was a leading figure in Iran’s nuclear program for many years.

Originating Source

Top Trump News

Trump questions whether Supreme Court would hear election challenge as options dwindle

President Donald Trump on Sunday questioned whether the Supreme Court would ever hear a case airing his unproven allegations of widespread election fraud as senior U.S. Republicans said a transition to a Joe Biden presidency looked inevitable. Trump’s comments in a telephone interview with Fox News Channel suggested the Republican president is growing resigned to the results of the Nov. 3 election that handed the White House to his Democratic opponent Biden. They came as the president’s team was dealt another blow, with the completion on Sunday of ballot recounts in Wisconsin’s two largest counties confirming Biden won the hotly-contested state by more than 20,000 votes. Trump campaign attorney Jenna Ellis said the recounts “revealed serious issues regarding the legality of ballots cast,” without elaborating or providing any evidence.

Originating Source

Trump says it will be ‘a very hard thing’ to concede to Biden

President Donald Trump said Thursday that it’s going to be difficult for him to concede the 2020 presidential election to Joe Biden even when the Electoral College is expected to soon formally certify Biden’s victory. “It’s going to be a very hard thing to concede,” Trump told reporters on Thanksgiving evening as he took questions from the press for the first time since the election following a series of video conferences with military service members. Pressed further about whether he would concede once the Electoral College finalizes Biden’s win, Trump said, “If they do, they’ve made a mistake.” When asked, however, whether he would leave the White House under that outcome, Trump said, “Certainly I will.”

Originating Source

Trump U-Turns On Day-Old Promise To Leave White House, Insists Biden ‘Prove’ His Votes Were Legal

Less than a day after saying he would leave the White House should President-elect Joe Biden be voted in by the electoral college, President Donald Trump backtracked, baselessly insisting Friday that Biden “can only enter the White House as President if he can prove” his 80 million votes were not “fraudulently or illegally obtained,” and effectively recanting his closest admission to electoral defeat.

Originating Source

Economic Indicators

Euro Area Consumer Confidence

The consumer confidence indicator in the Euro Area was confirmed at -17.6 in November 2020, the lowest level since May, amid concerns about the impact of a second wave of infections and lockdowns on the economy and labor market. Households reported growing concerns about the expected general economic situation and their expected financial situation, which were matched by more cautious intentions to make major purchases. Consumers’ views on their past financial situation, by contrast, remained broadly unchanged.

Euro Area Economic Sentiment Indicator

The economic sentiment indicator in the Euro Area fell 3.5 points from the previous month to 87.6 in November 2020, remaining well below pre-pandemic levels but still beating market expectations of 86.5. Several countries across the region were forced to re-impose partial lockdowns to curb the rapid spread of COVID-19. By sector, confidence deteriorated among service providers (-17.3 vs -12.1 in October), retailers (-12.7 vs -6.9), manufacturers (-10.1 vs -9.2), constructors (-9.3 vs -8.3) and consumers (-17.6 vs -15.5).

Euro Area Industrial Sentiment

The industry confidence indicator in the Euro Area fell by 0.9 points from the previous month to -10.1 in November 2020, ending six months of increases, as several countries across the bloc imposed new lockdowns. Managers’ appraisals of the stocks of finished products and the current level of overall order books continued improving, but, in the latter case, at a slower pace than in October. At the same time, the deterioration of managers’ production expectations intensified compared to last month.

Euro Area Services Sentiment

The services confidence indicator in the Euro Area tumbled by 5.2 points from the previous month to a four-month low of -17.3 in November 2020, well below market expectations of -15.5, as new lockdowns were imposed across the region to curb the rapid spread of the pandemic. All components of the indicator deteriorated, notably managers’ views on the past business situation, past demand and, most so, expected demand.

Economic Calendar

Monday

CN Manufacturing PMI (Nov)

Tuesday

CN Caixin Manufacturing PMI (Nov)

Tuesday

DE German Manufacturing PMI (Nov)

Tuesday

AU RBA Interest Rate Decision

Wednesday

AU GDP (QoQ) (Q3)

Wednesday

US ISM Manufacturing PMI (Nov)

Thursday

US ADP Nonfarm Employment Change (Nov)

Thursday

US Crude Oil Inventories

Friday

US Initial Jobless Claims

Friday

US ISM Non-Manufacturing PMI (Nov)