Monex Morning Report – Thur 10 Sep 2020

OVERNIGHT HIGHLIGHTS

Dow ends 439 points higher as stocks snap three-day losing streak on heavy tech buying; Asian stocks to track U.S. gains as tech rebounds

ECB to take aim at strong euro with hints of more stimulus; Trump admitted he deliberately played down coronavirus threat

Top Market News

IMF says coronavirus crisis ‘far from over’, more support needed

The International Monetary Fund on Wednesday warned that the coronavirus crisis was “far from over” and underscored the need for multilateral cooperation to ensure adequate supplies once a vaccine is developed. In an essay published in Foreign Policy magazine, IMF Managing Director Kristalina Georgieva and chief economist Gita Gopinath said the ongoing economic recovery from the crisis was the result of the rapid implementation and unprecedented scale of government and central bank support, but more efforts would be needed. “The recovery remains very fragile and uneven across regions and sectors. To ensure that the recovery continues, it is essential that support not be prematurely withdrawn,” the two economists wrote in the essay.

Originating Source

U.S. House Speaker warns Britain that breaking Brexit treaty could imperil trade pact

U.S. House of Representatives Speaker Nancy Pelosi warned Britain on Wednesday that ignoring some parts of its European Union divorce treaty could imperil any new trade agreement with the United States. “If the U.K. violates that international treaty and Brexit undermines the Good Friday accord, there will be absolutely no chance of a U.S.-U.K. trade agreement passing the Congress,” the Democratic lawmaker said in a statement. “The Good Friday Agreement is treasured by the American people and will be proudly defended in the United States Congress,” Pelosi said. Britain quit the EU in January but has remained part of its single market, largely free of trade barriers, under an agreement that expires in December. London says that if it cannot negotiate a favorable trade deal to take effect from Jan. 1, it will simply walk away.

Originating Source

ECB forecasts said to show more confidence in economic outlook

Some European Central Bank policy makers have become more confident in their forecasts for the region’s economic recovery, potentially reducing the need for more monetary stimulus this year, according to euro-area officials familiar with the discussions. The latest projections for output and inflation will show only slight changes to the June outlook, the people said, asking not to be named because the report will only be published after the Governing Council meets on Thursday. The euro gained after the report, which signals relief that while the recovery still remains highly uncertain, some of the downside risks that the ECB stressed in its previous round of forecasts haven’t so far materialized.

Originating Source

ECB to take aim at strong euro with hints of more stimulus

The European Central Bank is all but certain to keep policy unchanged on Thursday but with the economic recovery losing momentum and a strong euro dampening already-anaemic inflation expectations, it may set the stage for more stimulus later. Having pulled out the stops this spring to halt a historic economic decline across the 19-country currency bloc, the ECB has time to let governments implement their own countermeasures and for its own ultra-easy policy to seep into the real economy. But hurdles to the rebound from a 12% output drop in the second quarter are proving bigger than expected, and economists say the ECB will eventually be forced into taking more action, possibly as soon as December. Surveys indicate that a recent resurgence in coronavirus infections is sapping investor and consumer confidence, with many fearing fresh restrictions on ordinary life.

Originating Source

Japan’s Suga says strong economy necessary to pursue fiscal reform

Japan’s Chief Cabinet Secretary Yoshihide Suga, a frontrunner to become next prime minister, said on Wednesday that strong economic growth is necessary to pursue fiscal reform. “Reviving Japan’s economy is our priority … A strong economy is necessary for social welfare, national security and fiscal reform,” Suga told a debate hosted by the ruling party. Suga also said he would continue to focus on revitalising regional economies, which he described as among key pillars of Prime Minister Shinzo Abe’s “Abenomics” stimulus policies.

Originating Source

U.S. has canceled more than 1,000 visas for Chinese nationals deemed security risks

The United States has revoked visas for more than 1,000 Chinese nationals under a May 29 presidential proclamation to suspend entry from China of students and researchers deemed security risks, a State Department spokeswoman said on Wednesday. The acting head of the U.S. Department of Homeland Security, Chad Wolf, said earlier that Washington was blocking visas “for certain Chinese graduate students and researchers with ties to China’s military fusion strategy to prevent them from stealing and otherwise appropriating sensitive research.” In a speech, Wolf repeated U.S. charges of unjust business practices and industrial espionage by China, including attempts to steal coronavirus research, and accused it of abusing student visas to exploit American academia. Wolf said the United States was also “preventing goods produced from slave labor from entering our markets, demanding that China respect the inherent dignity of each human being,” an apparent reference to alleged abuses of Muslims in China’s Xinjiang region.

Originating Source

Australia raided homes of Chinese reporters, seized electronics

The breakdown in relations between China and Australia took a new twist, with Beijing accusing Canberra of raiding the homes of Chinese state-media staff in June and seizing their property. The homes of four Chinese journalists in Australia were raided and the authorities confiscated computers and phones, including electronics belonging to their children, Chinese Foreign Ministry spokesman Zhao Lijian said Wednesday. The statement, which confirmed earlier media reports, comes just days after the last two journalists for Australian media in China fled the country following police questioning. The Chinese government has made numerous protests about the issue to Australia, Zhao told a regular news briefing in Beijing. The raids were carried out on journalists from Xinhua News Agency, China Media Group and China News Service, he said, and not all the confiscated items have been returned.

Originating Source

Bank of Canada keeps interest rate at 0.25%

The Bank of Canada is keeping its key interest rate target on hold at 0.25 per cent and says it will stay there until inflation is back on target. The central bank’s key rate has remained at its lower effective bound since March when COVID-19 lockdowns plunged the economy into crisis. In a statement on Wednesday, the central bank’s governing council says that bounce-back activity in the third quarter looks to be faster than it anticipated in July. But it warns of indicators like an uneven rebound in employment and subdued business confidence that points to a slow and choppy recovery process. The bank says its key rate will stay at near-zero until economic slack is absorbed and the two-per-cent inflation target is “sustainably achieved.” The statement reiterated that the central bank stands ready to do whatever is necessary to aid the economy as it recuperates from the COVID-19 crisis, which will include ongoing purchases of federal government bonds.

Originating Source

Top Trump News

The coronavirus

The Trump administration has been forced into damage control after the US President admitted deliberately downplaying the seriousness of the coronavirus early in the pandemic in explosive interviews with veteran journalist Bob Woodward. Trump gave 18 on-the-record interviews to the famous Watergate journalist for his highly anticipated new book Rage, details of which have been leaked to the media ahead of its arrival in American bookshops next week. In a February interview with Woodward, Trump described the coronavirus as “deadly stuff” – even as he was publicly predicting it would miraculously disappear and favourably comparing it to the seasonal flu.

Originating Source

Nobel peace prize nomination

Less than two months before the US election, President Donald Trump seems to have something to celebrate – a nomination for the Nobel Peace Prize. A far-right Norwegian politician has put Mr Trump’s name forward for the 2021 prize, citing the president’s role in the recent peace deal between Israel and the United Arab Emirates. Christian Tybring-Gjedde told Fox News on Wednesday: “For his merit, I think he has done more trying to create peace between nations than most other peace prize nominees.” Adding that he was not a big Trump supporter, he added. “The committee should look at the facts and judge him on the facts – not on the way he behaves sometimes.”

Originating Source

U.S. urban violence

President Donald Trump’s acting homeland security chief on Wednesday acknowledged that white supremacist extremists played a role in this year’s urban violence in the United States, a revision of the administration’s public descriptions of the political motivations of violent protesters. In what was billed as a “2020 State of the Homeland” speech, acting Homeland Security Secretary Chad Wolf initially attributed violence in Portland, Oregon in particular to “violent opportunists” and went on to describe how protesters had attacked federal officers with sledge-hammers, pipes, fireworks, homemade bombs and other weapons. Wolf also attributed violence to both “white supremacist extremists” and “anarchist extremists,” mentioning white supremacists first, in a speech livestreamed on the Department of Homeland Security (DHS) website.

Originating Source

Economic Indicators

Australia Westpac Consumer Sentiment

The Melbourne Institute and Westpac Bank Consumer Sentiment Index for Australia surged 18 percent month-over-month to 93.8 in September 2020, reversing from a 9.5 percent fall a month earlier as Victoria state managed to curb a resurgence of COVID-19 cases while other states in the country prevented a second wave. Economic conditions for the next 12 months jumped 41 percent to 75.6, amid optimism that the damage from the virus could be contained; conditions for the next 5 years rebounded 19 percent to 99.8. Also, finances for the next 12 months sub-index jumped 11.2 percent to 101.2, and those vs a year ago also soared 11.2 percent to 87.5. In addition, time to buy a major household item lifted 16.3 percent to 105.1, due to rising household incomes as the federal government rolled out fiscal supports.

Australia Home Loans MoM

The value of new loans granted for owner-occupied homes in Australia jumped 19.7 percent from the previous month to AUD 14.33 billion in July 2020, as social distancing restrictions eased in most states and territories.

China Consumer Price Index (CPI) YoY

China’s annual inflation rate eased to 2.4 percent in August 2020 from 2.7 percent in the previous month and in line with market expectations. This was the lowest figure since May as food inflation slowed (11.2 percent vs 13.2 percent in July). Meantime, prices for non-food products and services went up 0.1 percent, compared to a flat reading in July, with cost of other goods and services rising faster (6.1 percent vs 5.1 percent in July). At the same time, health inflation was little-changed (1.5 percent vs 1.6 percent), while cost of education, culture & recreation was flat, after a 0.3 percent rise in July. Also, prices continued to fall for transport (-3.9 percent vs -4.4 percent); rent, fuel, and utilities (-0.7 percent vs -0.7 percent); household goods and services (-0.1 percent vs -0.1 percent); and clothing (-0.5 percent vs -0.5 percent). On a monthly basis, consumer prices rose 0.4 percent in August, following a 0.6 percent gain in July.

China Producer Price Index (PPI)

China’s producer prices declined by 2 percent year-on-year in August 2020, after a 2.4 percent decrease in July and matching market estimates. This was the seventh straight month of fall in factory prices but the smallest in five months, as the economy continues to try to recover from the severe damage caused by the COVID-19 outbreak. Means of production cost deflation eased (-3 percent vs -3.5 percent in July) due to extraction (-5.8 percent vs -7.1 percent), raw materials (-6.4 percent vs -6.9 percent) and processing (-1.4 percent vs -1.8 percent). At the same time, consumer goods price inflation slowed to 0.6 percent from 0.7 percent in July, amid a slowdown in cost of food production (3.1 percent vs 3.7 percent), while prices continued to fall for clothing (-1.3 percent vs -1.1 percent), daily use goods (-0.4 percent vs -0.8 percent) and consumer durables (-1.5 percent vs -1.6 percent).

U.S. JOLTs Job Openings

The number of job openings in the US increased by 617,000 from a month earlier to 6.618 million in July of 2020, above market expectations of 6.0 million. Still, vacancies remained below their pre-pandemic level of 7 million. By industry, the largest gains in openings were in retail trade (+172,000), health care and social assistance (+146,000), and construction (+90,000). The number of job openings increased in the South and Midwest regions. Meanwhile, the number of hires slumped by 1,183,000 to 5.8 million, while total separations including quits, layoffs and discharges, and other separations was little changed at 5.0 million.

Economic Calendar

Thursday

Euro Zone Deposit Facility Rate

Thursday

US Initial Jobless Claims

Thursday

US Producer Price Index (PPI) MoM

Friday

US Crude Oil Inventories

Friday

UK Gross Domestic Product (GDP) MoM

Friday

US Core Consumer Price Index (CPI) MoM