Monex Morning Report – Mon 9 Nov 2020

OVERNIGHT HIGHLIGHTS

Dow closes lower but posts best week since April as U.S. election count proceeds; U.S. dollar slips on Biden victory

Biden and aides plan for the ‘hard work of governing’ a divided U.S; McConnell says big stimulus bill not needed after better-than-expected jobs report

Biden and aides plan for the ‘hard work of governing’ a divided U.S

A day after clinching the U.S. presidency, Democrat Joe Biden and his advisers were working on Sunday on how to address the nation’s coronavirus crisis while reinforcing his intention to bridge America’s gaping political divisions. Republican Donald Trump, the first incumbent U.S. president to lose a re-election bid in 28 years, gave no sign of conceding as his campaign pressed ahead with legal fights against the outcome. Illustrating the uphill battle Biden faces after taking office on Jan. 20 in working with lawmakers from Trump’s party, the top Republicans in Congress on Sunday still had not acknowledged the former vice president as the winner. In a speech in his home state of Delaware on Saturday, Biden delivered a message of unity and conciliation, declaring that it is “time to heal” the nation and reaching out to Americans who voted for Trump and to congressional Republicans. “The work starts right away,” Biden Deputy Campaign Manager Kate Bedingfield said.

Originating Source

Democratic senators call for expansion of Fed lending programs

Four Democratic senators, including Minority Leader Chuck Schumer, urged the Federal Reserve and the U.S. Treasury to expand emergency lending programs for businesses and states and municipalities to provide support while Congress debates additional fiscal stimulus. In a Nov. 5 letter to Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin obtained by Bloomberg, the senators asked that the programs be extended beyond their Dec. 31 deadlines, and that changes be made to make them more broadly available. In addition to Schumer, a senator from New York, the letter was signed by Mark Warner of Virginia, Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts. “Absent additional action, these facilities will fail to reach their full potential to support a robust economic recovery,” the senators wrote.

Originating Source

Republicans renew drive for smaller stimulus bill after election

The White House, Senate Republicans and House Democrats all said Friday that talks should resume immediately on a stimulus package, but without giving indications of whether they are willing to make the compromises necessary to get it done. After Democrats failed to make significant gains in congressional elections and the latest jobs numbers showed a bigger-than-expected drop in the U.S. unemployment rate, Senate Majority Leader Mitch McConnell called for a scaled back relief bill. House Speaker Nancy Pelosi also said that coronavirus relief is an immediate need, but she hasn’t signaled whether she would accept a bill less than the $2.4 trillion Democrats had pressed for before the election. “I am calling on the administration to come back to the table,” Pelosi said at a Friday news conference. She said that stimulus is needed now even as the Democrats prepare for Joe Biden — who’s leading in the presidential-election count — to take the White House.

Originating Source

McConnell says big stimulus bill not needed after better-than-expected jobs report

After saying a stimulus bill would be the focus when the Senate returns, Senate Majority Leader Mitch McConnell (R-KY) is now suggesting that a small package may be enough given the pace of the economic recovery. “Our economy is really moving to get back on its feet. That I think clearly ought to affect what size of any rescue package we additionally do,” McConnell told reporters in Kentucky on Friday. “Something smaller, rather than throwing another $3 trillion at this issue, is more appropriate.” After the October jobs report beat estimates, with the addition of 638,000 jobs and an unemployment rate down to 6.9%, McConnell said this “is a stunning indication of a dramatic comeback of the economy,” paired with the surge in GDP in the third quarter. Still, the economic recovery is slowing down. More than 10 million jobs have yet to be recovered and 21 million Americans still rely on some type of unemployment benefits, some of which expire at the end of the year.

Originating Source

RBA: Unemployment rate to peak below 8%, GDP to increase by 5% in 2021

The Reserve Bank (RBA) said in its November Statement on Monetary Policy deterioration in the economy had been less severe than expected, helped by early success in bringing infection rates down. The RBA said the unemployment rate was likely to increase in the short term due to tightened JobSeeker requirements, but would peak far lower than the previously forecasted 10%. “The unemployment rate is expected to peak a little below 8% around the end of the year,” it said. “This peak represents a very high level of spare capacity in the labour market. “The unemployment rate is expected to decline only gradually, to just above 6% by the end of 2022.” The central bank said policy support and a reopened Victoria would enable a quicker recovery in the national economy.

Originating Source

UK PM Johnson says EU trade deal is ‘there to be done’

British Prime Minister Boris Johnson said on Sunday a trade deal with the European Union was “there to be done”, suggesting his view that the agreement’s broad outline was already “pretty clear” was shared in Brussels. After months of talks on a deal to protect trade between the two neighbours from possible quotas and tariffs, the two sides have yet to close significant differences on at least two main sticking points. Any deal should be agreed by mid-November to allow for ratification, with some businesses hoping that the time pressure and a COVID-19 crisis spiralling across much of Europe can focus minds to avoid disruption at the end of the year. The chief negotiators, the EU’s Michel Barnier and Britain’s David Frost, will resume talks in London on Monday to “redouble efforts to reach a deal”, Johnson’s office has said. “I’ve always been a great enthusiast for a trade deal with our European friends and partners,” Johnson told reporters.

Originating Source

Japan’s Aso defends central bank’s ETF buying programme

Japanese Finance Minister Taro Aso on Friday defended the central bank’s purchases of exchange-traded funds (ETF), shrugging off criticism that it was manipulating stock prices. “The Bank of Japan is responsible for specific means of monetary policy,” Aso told parliament. “The BOJ is buying ETFs as part of monetary policy, not to directly affect stock prices,” he added.

Originating Source

ECB’s De Guindos says Eurozone growth in fourth quarter will be negative

European Central Bank Vice-President Luis de Guindos said on Friday that Eurozone growth will likely be negative in the fourth quarter, as countries have imposed new restrictions to the economic activity over the past weeks in a bid to slow the coronavirus contagion. European Commission downgraded on Thursday its GDP forecast expectations for 2020 and 2021 because of the second wave of infections.

Originating Source

Top Trump News

Trump legal challenges

Republicans are trying to raise at least $60 million to fund legal challenges brought by President Donald Trump over the U.S. presidential election’s results, three sources familiar with the matter said on Friday. Trump’s campaign has a filed lawsuits in several states over Tuesday’s election, as Democratic challenger Joe Biden edged closer to winning the White House, extending his leads in battleground states.

Originating Source

There is no evidence of any kind of voter fraud’

Mr Trump launched a flurry of unsubstantiated claims on Twitter today, alleging that “bad things” happened, referring to votes being “illegally received” and insisting he has won “by a lot”.

Originating Source

Trump, Biden supporters

A second day of sometimes dueling demonstrations over the integrity of the U.S. presidential election started early on Thursday in Philadelphia and other cities as ballot counting dragged on in a handful of states that will decide the outcome. Supporters of Joe Biden have rallied around the slogan to “count every vote,” believing a complete tally would show the Democratic former vice president had beaten Republican President Donald Trump. Some ardent Trump backers have countered with cries to “protect the vote” in support of his campaign’s efforts to have some categories of ballots, including some votes submitted by mail, discarded. Both factions appeared outside a vote-counting center in Philadelphia on Thursday morning, where election staff steadily worked through a mountain of still-uncounted mail-in ballots that will determine whether Biden or Trump will take Pennsylvania’s crucial 20 Electoral College votes. A group of Trump supporters held Trump-Pence flags and signs saying: “Vote stops on Election Day” and “Sorry, polls are closed.” Across the street were Biden supporters, who danced to music behind a barricade.

Originating Source

Economic Indicators

U.S. Non Farm Payrolls

The US economy added 638K jobs in October, easing from an upwardly revised 672K in the previous month, but above market expectations of 600K. Still, it is the smallest employment gain since the job market started to recover in May from a record 20.787 million loss in April. The biggest job gains occurred in leisure and hospitality (271K), professional and business services (208K), retail trade (104K), and construction (84K). Meanwhile, employment in government declined by 268K. The outlook for the labour market remains challenging as out of more than 22 million jobs lost in March and April only 12 million were recovered and the new stimulus bill which would provide support to millions of Americans would not be approved anytime soon.

U.S. Average Weekly Hours

The average work week for all employees on private nonfarm payrolls was unchanged at 34.8 hours in October of 2020. In manufacturing, the workweek increased by 0.3 hour to 40.5 hours, and overtime rose by 0.2 hour to 3.2 hours. The average workweek for production and nonsupervisory employees increased by 0.1 hour to 34.2 hours.

U.S. Unemployment Rate

The US unemployment rate dropped to 6.9 percent in October 2020, from the previous month’s 7.9 percent and compared with market expectations of 7.7 percent, as the number of unemployed persons fell by 1.5 million to 11.1 million and the employment rose by 2.2 million to 149.8 million. Still, the jobless rate remained well above pre-pandemic levels of about 3.5 percent, as the labor market recovery from COVID-19 shock showed signs of slowing amid a lack of fiscal stimulus and spiraling new coronavirus infections.

U.S. Manufacturing Payrolls

Manufacturing Payrolls in the United States increased by 38 thousand in October of 2020, below forecasts of 50 thousand.

China Balance of Trade

China’s trade surplus surged to USD 58.44 billion in October 2020 from USD 42.3 billion in the same month the previous year, and far above market expectations of USD 46 billion. Exports jumped by 11.4 percent while imports rose at a softer 4.7 percent. The country’s trade surplus with the US widened to USD 31.37 billion in October from USD 30.75 billion in September. Considering the first ten months of the year, the trade surplus was USD 384.5 billion, as exports were up 0.5 percent from a year earlier to USD 2.05 trillion, while imports dropped 2.3 percent to USD 1.66 trillion.

China Imports

Imports to China rose by 4.7 percent year-on-year to USD 178.74 billion in October 2020, after a 13.2 percent surge a month earlier and less than market estimates of a 9.5 percent increase. This was the second straight month of growth in inbound shipments, as domestic demand recovery from the COVID-19 shocks continued. Purchases of unwrought copper and copper products jumped 43.4 percent yoy to 618,108 tonnes. Also, imports of iron ore grew 14.9% to 106.74 million tonnes, with arrivals from both Brazil and South Africa increasing. In addition, purchases of soybean soared 41% to 8.69 million, due to rising cargoes from Brazil and the US. In contrast, imports of crude oil fell 6.7% to 42.56 million tonnes.

Economic Calendar

Monday

CN Composite PMI

Tuesday

UK Manufacturing PMI (Aug)

Tuesday

DE ZEW Economic Sentiment (Nov)

Tuesday

US EIA Short-Term Energy Outlook 

Wednesday

NZ RBNZ Interest Rate Decision

Wednesday

UK GDP (Q3)  

Thursday

UK Manufacturing Production (MoM) (Sep)

Friday

US Core CPI (Oct)

Friday

US Initial Jobless Claims

Friday

US Crude Oil Inventories