Monex Morning Report – Thur 10 Dec 2020

OVERNIGHT HIGHLIGHTS

Wall Street ends lower on stimulus uncertainty, Facebook weighs; Asian stock futures drop after U.S. tech slide

McConnell says relief talks should drop liability, state aid; Britain advises people with allergy history to avoid Pfizer vaccine

McConnell says relief talks should drop liability, state aid

Senate Majority Leader Mitch McConnell suggested setting aside his top priority of business liability protections in exchange for Democrats dropping their demands for state government aid in a final 2020 pandemic relief package, a strategic retreat he said was aimed at striking a deal. The two issues have been the main stumbling blocks to any agreement on a relief plan for months. McConnell on Tuesday said both should be set aside and the focus put on three areas where both parties agree help is needed: small business assistance, expanded unemployment insurance and funding for vaccine distribution and other anti-coronavirus efforts. “It’s my view, and I think it’s the view shared by literally everybody on both sides of the aisle, that we can’t leave without doing a Covid bill,” McConnell said at a news conference. “The country needs it.”

Originating Source

Britain advises people with allergy history to avoid Pfizer vaccine

Britain’s medicine regulator has advised that people with a history of significant allergic reactions do not get Pfizer-BioNTech’s vaccine after two people reported adverse effects, England’s National Health Service (NHS) said on Wednesday. “As is common with new vaccines the MHRA (regulator) have advised on a precautionary basis that people with a significant history of allergic reactions do not receive this vaccination,” Stephen Powis, national Medical Director for the NHS, said. “Two people with a history of significant allergic reactions responded adversely yesterday. Both are recovering well.”

Originating Source

Brexit deal hangs in balance as UK’s Johnson dines with EU leader

British Prime Minister Boris Johnson began a crisis meeting over dinner in Brussels with the EU’s chief executive on Wednesday, hours after warning the bloc it must make concessions to clinch a Brexit trade deal and avoid a turbulent year-end breakup. Fears of a chaotic no-deal finale to the five-year Brexit crisis were running high as Johnson arrived for talks with European Commission President Ursula von der Leyen. The European Union and Britain have cast the meeting as a chance to break an impasse in negotiations but both acknowledge there is a danger that no trade deal will be in place when Britain finally leaves the bloc’s orbit on Dec. 31. EU diplomats said there was little chance a deal would be agreed over dinner, and the most likely outcome was that they would agree to keep negotiating in a race against time.

Originating Source

U.S. targets North Korea coal shipments with new sanctions

The United States has blacklisted six companies, including several based in China, and four ships accused of illicit exports of North Korean coal, the Treasury Department said on Tuesday. The United Nations Security Council banned North Korean coal exports in 2017. The 15-member body has unanimously boosted sanctions on North Korea since 2006 in a bid to choke off funding for Pyongyang’s nuclear and ballistic missile programs. “The DPRK (North Korea) continues to circumvent the U.N. prohibition on the exportation of coal, a key revenue generator that helps fund its weapons of mass destruction programs,” U.S. Secretary Steven Mnuchin said in a statement.

Originating Source

Bank of Canada keeps rate steady at 0.25%, maintains pledge of it staying low until 2023

The Bank of Canada opted to keep its benchmark interest rate steady at 0.25 per cent on Wednesday, noting that Canada’s economic recovery from COVID-19 is proceeding in line with expectations. The bank said that while new infections and lockdowns continue to hold back Canada’s economy, stronger demand for energy has pushed up the price of oil, which is giving it a boost. And news of looming vaccines rolling out is also helping. “News on the development of effective vaccines is providing reassurance that the pandemic will end and more normal activities will resume, although the pace and breadth of the global rollout of vaccinations remain uncertain,” the bank said. Wednesday’s decision made it clear that is still the plan. “Canada’s economic recovery will continue to require extraordinary monetary policy support,” the bank said. “We remain committed to providing the monetary policy stimulus needed to support the recovery.”

Originating Source

Oil Plunges After EIA Reports Huge Crude Build

The Energy Information Administration reported today a massive crude oil inventory build of 15.189 million barrels for the week to December 4, after a modest draw of 700,000 barrels estimated for the previous week. This week’s rise in crude inventories came close to the largest crude build ever, which was recorded earlier this year for the week ending April 10, when the EIA reported a 19.25 million barrel inventory build. A day earlier, the American Petroleum Institute had reported a crude oil stock build of just of 1.1 million barrels along with much larger builds in gasoline and distillate fuels.

Originating Source

UK drops EU tariffs on Boeing as it seeks post

The UK has abandoned EU tariffs on the plane manufacturer Boeing in the hope of securing a quick post-Brexit trade deal with the US. The UK’s move puts it at odds with the EU, which imposed retaliatory tariffs on US imports worth $4bn (£3bn) after the World Trade Organization (WTO) ruled that the US had given illegal state aid to Boeing, its aerospace champion. The tariff battle is part of a saga of trade disputes centred on illegal subsidies to Airbus, Boeing’s bitter European rival, and the US planemaker. The WTO had previously ruled that EU governments – including the UK, France and Germany – had provided illegal state aid to Airbus. Scotch whisky and woollen jumpers and pullovers were among the UK products hit with 25% tariffs by the US. The UK government acknowledged that its move was aimed at smoothing relations between the UK and the US as the president-elect, Joe Biden, prepares to take office in the White House in January.

Originating Source

Facebook faces U.S. lawsuits that could force sale of Instagram, WhatsApp

Facebook Inc could be forced to sell its prized assets WhatsApp and Instagram after the U.S. Federal Trade Commission and nearly every U.S. state filed lawsuits against the social media company, saying it used a “buy or bury” strategy to snap up rivals and keep smaller competitors at bay. With the filing of the twin lawsuits on Wednesday, Facebook becomes the second big tech company to face a major legal challenge this year after the U.S. Justice Department sued Alphabet Inc’s Google in October, accusing the $1 trillion company of using its market power to fend off rivals. The lawsuits highlight the growing bipartisan consensus to hold Big Tech accountable for its business practices and mark a rare moment of agreement between the Trump administration and Democrats, some of whom have advocated breaking up both Google and Facebook. The complaints on Wednesday accuse Facebook of buying up rivals, focusing specifically on its previous acquisitions of photo-sharing app Instagram for $1 billion in 2012 and messaging app WhatsApp for $19 billion in 2014.

Originating Source

Top Trump News

Pompeo warns of Chinese threat to US colleges, says many ‘basically bought’ by Beijing

Secretary of State Mike Pompeo on Wednesday highlighted the danger China poses to both security and free speech on U.S. college campuses, warning that many U.S. colleges are “basically bought” by Beijing and that they censor themselves to avoid upsetting the communist regime. Pompeo warned that the Chinese regime is “poisoning the well of our higher education institutions for its own ends” and that they “degrade our freedom and America national security.” “If we don’t educate ourselves, if we are not honest about what is taking place, we’ll get schooled by Beijing.”

Originating Source

Trump administration makes new $916 billion offer for COVID-19 aid

The Trump administration proposed a $916 billion coronavirus relief package on Tuesday, after congressional Democrats shot down a suggestion for a pared-down plan from the Senate’s leading Republican, Majority Leader Mitch McConnell. Treasury Secretary Steven Mnuchin said he presented the administration’s $916 billion plan in a conversation with House of Representatives Speaker Nancy Pelosi, a Democrat. Writing on Twitter, he said it included money for state and local governments, a Democratic priority, and liability protections for businesses, a Republican priority. Earlier on Tuesday, McConnell suggested that lawmakers pass a targeted coronavirus relief plan that did not include the liability protections or the state and local government aid, as those have been among the more contentious provisions during months of arguments in Washington about a fresh coronavirus package.

Originating Source

Nevada’s Supreme Court unanimously throws out demand to overturn Joe Biden’s victory

The Supreme Court of Nevada rejected an appeal late Tuesday from President Donald Trump’s campaign to overturn the election results in the state, affirming President-elect Joe Biden’s win in one of the battleground states. ‘To prevail on this appeal, appellants must demonstrate error of law, findings of fact not supported by substantial evidence or an abuse of discretion in the admission or rejection of evidence by the district court,’ the order read. ‘We are not convinced they have done so.’ It was the latest court failure for Trump and his allies, who have lost dozens of cases in state and federal courts in an unsuccessful attempt to nullify the result of the Nov. 3 election. Last week, a district court in Nevada ruled that the Trump campaign had not proven a claim that there had been a malfunction in voting devices and the contest between Trump and Biden had been manipulated.

Originating Source

Economic Indicators

Australia Consumer Confidence

The Melbourne Institute and Westpac Bank Consumer Sentiment Index for Australia jumped 4.1 percent month-over-month to the highest level since October 2010 of 112 in December 2020, after a 2.5 percent rise the previous month. It was the fourth straight month of increase in the index, amid the ongoing success across the nation in containing the COVID-19 outbreak. The index for economic conditions for the next 12 months surged 9.9% to a decade-high of 111.9 and that for economic conditions in the next five years jumped 5.9% to the highest since December 2009 of 121.1. Also, the gauge for family finances vs a year ago climbed 6.9% to 96.1, and time to buy a major household item rose 0.7% to 122.2. In contrast, the index for family finances for the next 12 months fell 1.8% to 108.9. “After only eight months the evidence seems clear that sentiment has fully recovered from the COVID recession,” said Westpac chief economist Bill Evans.

China CPI

The consumer price index in China unexpectedly declined by 0.5 percent year-on-year in November of 2020, after a 0.5 percent rise a month earlier and compared with market consensus of a flat reading. This was the first deflation rate since October of 2009 as food prices dropped for the first time in nearly three years (-2 percent), with prices of pork tumbling after soaring last year due to the African Swine outbreak. Also, there were falls in cost of transport (-3.9 percent vs -3.9 percent in October); rent, fuel, and utilities (-0.6 percent vs -0.7 percent); and clothing (-0.3 percent vs -0.3 percent). Meanwhile, prices of household goods and services were flat (vs -0.1 percent), while cost rose for health (1.5 percent vs 1.5 percent); education (1 percent vs 1.1 percent); and other goods and services (2.5 percent vs 2.4 percent). On a monthly basis, consumer prices fell by 0.6 percent, the steepest drop since May, and following a 0.3 percent decline in October.

Germany Balance of Trade

The trade surplus in Germany narrowed slightly to EUR 19.4 billion in October of 2020 from EUR 21.3 billion a year earlier. Exports shrank 6.5 percent year-on-year to EUR 112 billion, the 8th straight annual decline and imports fell 5.9 percent to EUR 92.7 billion, the 10th consecutive drop. Exports to the Euro Area went down 5.1 percent and those to the UK sank 11.7 percent. Sales to the United States, which have been hit particularly hard by the coronavirus pandemic, dropped 10.5 percent while sales to China edged up 0.3 percent. Imports to the Euro Area decreased 2.9 percent and those from the UK were down 14.7 percent. Purchases from China slumped 3.3 percent, those from the US 18.8 percent and from the UK 17.6 percent. Adjusted for calendar and seasonal effects, exports were still 6.8 percent and imports 5.2 percent lower than in February of 2020, the month before restrictions were imposed due to the coronavirus pandemic.

China Producer Prices Change

China’s producer prices dropped by 1.5 percent year-on-year in November 2020, slowing from a 2.1 percent fall a month earlier and compared with market estimates of a 1.8 percent decline. This was the tenth straight month of falling factory gate prices but the smallest since March, amid signs that the economy continued to recover from the COVID-19 crisis. Prices of means of production declined at a softer rate (-1.8 percent vs -2.7 percent in October), due to extraction (-3.6 percent vs -5.1 percent), raw materials (-4.2 percent vs -6 percent) and processing (-0.8 percent vs -1.2 percent). At the same time, prices of consumer goods fell more (-0.8 percent vs -0.5 percent), as cost decreased for clothing (-1.8 percent vs -1.7 percent), daily use goods (-0.5 percent vs -0.7 percent), and consumer durables (-1.8 percent vs -1.8 percent). Meanwhile, inflation eased sharply for food production (0.1 percent vs 0.8 percent).

China Money Supply M2

Money Supply M2 in China increased 10.7 percent year-on-year to 217200 CNY Billion in November of 2020. It follows a 10.5 percent rise in October and compares with forecasts of a 10.5 percent gain.

China Total Social Financing

Total social financing in China, a broad measure of credit and liquidity in the economy, jumped sharply to CNY 2.13 trillion in November of 2020, following a CNY 1.42 trillion in October and beating forecasts of CNY 2.075 trillion. Outstanding total social financing rose to CNY 283.25 trillion at the end of November.

United States Crude Oil Stocks Change

US crude oil inventories rose by 15.189 million barrels in the week ended December 4th, 2020, the largest increase since a record seen in April and compared with market expectations of a 1.424 million fall, according to the EIA Petroleum Status Report. Meantime, gasoline inventories were up by 4.222 million barrels, while markets had forecast a smaller 2.271 million rise.

The number of job openings in the US increased by 158,000 from a month earlier to 6.652 million in October 2020, beating market expectations of 6.3 million but still remaining below their pre-pandemic level of 7 million. Job openings rose in health care and social assistance (+122,000) and state and local government education (+23,000). The number of job openings was little changed in all four regions. Meanwhile, the number of hires declined by 74,000 to 5.8 million, while total separations including quits, layoffs and discharges, and other separations jumped by 263,000 to 5.1 million. Within separations, the quits rate was unchanged at 2.2 percent while the layoffs and discharges rate increased to 1.2 percent.

Economic Calendar

Thursday

UK GDP

Thursday

UK Manufacturing Production (MoM) (Oct)

Thursday

EU ECB Interest Rate Decision (Dec)

Friday

US Core CPI (MoM) (Nov)

Friday

US Initial Jobless Claims