Monex Morning Report – Thur 27 Aug 2020

OVERNIGHT HIGHLIGHTS

S&P500 and Nasdaq end at fresh records as Amazon, Netflix and Tesla stocks soar; Global stock rally to extend in Asia

U.S. targets Chinese individuals, companies amid South China Sea dispute; GOP set to propose smaller coronavirus stimulus bill

U.S. targets Chinese individuals, companies amid South China Sea dispute

The United States on Wednesday blacklisted 24 Chinese companies and targeted individuals it said were part of construction and military actions in the South China Sea, its first such sanctions move against Beijing over the disputed strategic waterway. The U.S. Commerce Department said the two dozen companies played a “role in helping the Chinese military construct and militarize the internationally condemned artificial islands in the South China Sea.” Separately, the State Department said it would impose visa restrictions on Chinese individuals “responsible for, or complicit in,” such action and those linked to China’s “use of coercion against Southeast Asian claimants to inhibit their access to offshore resources.”

Originating Source

Fed’s Bowman sees slow, uneven recovery ahead

The U.S. economy has bounced back “noticeably” from the depths of the coronavirus recession, Federal Reserve Governor Michelle Bowman said on Wednesday, but it is still far from back to normal and will take some time to get there. “Progress toward a full recovery in economic activity may well be slow and uneven,” Bowman said in remarks prepared for delivery to the Kansas Bankers Association. “The Federal Reserve will continue to monitor progress and respond promptly and flexibly to support the recovery. ” To help shape her understanding of the outlook, Bowman said she is in the process of speaking individually with every CEO of 650 Fed-supervised community banks across the country.

Originating Source

Meadows Predicts No Stimulus Deal Until End of September

White House Chief of Staff Mark Meadows predicted there will be no stimulus deal with Congress until the end of September, and sought to blame House Speaker Nancy Pelosi for the delay. “If we got back in the room with some of their priorities, we could cut a deal — the president wants to do that. But I’m not optimistic,” Meadows said in an interview with Politico on Wednesday. Pelosi spokesman Drew Hammill said by email that the speaker’s position remains that to restart talks the White House “must meet us halfway” between the top-line numbers on the package.

Originating Source

GOP set to propose smaller coronavirus stimulus bill

Republicans are working on a more narrow coronavirus stimulus bill that they could release to members of Congress as soon as this week, two senior administration officials and three people briefed on the matter told CNBC. The GOP is mulling a roughly $500 billion proposal that addresses only areas of bipartisan support: expanded unemployment insurance, a new authorization of small business loans, and money for schools and Covid-19 testing, treatment and vaccines. The plan would not include another direct payment to Americans.

Originating Source

Oil prices edge off highs as Gulf refineries shut down

Oil prices came off five-month highs ahead of the storm, while gasoline futures also edged lower to $1.3863 by 6:30 AM ET (1030). According to Petroleum Argus, some 2.6 million barrels a day of U.S. refining capacity has been temporarily shut in, with Chevron’s 100,000 b/d Pasadena refinery joining a lengthening list of installations to close on Wednesday. That’s more than 13% of total U.S. refining capacity that won’t be buying any crude for at least a couple of days. The Bureau of Safety and Environmental Enforcement estimated on Tuesday that around 84% of crude production in the Gulf of Mexico – equivalent to 1.6 million barrels a day – has been shut in.

Originating Source

Germany Earmarks $12 Billion More to Extend Crisis Job Support

Germany extended a program that has kept millions of people from losing their jobs, allocating around 10 billion euros ($11.8 billion) more to help Europe’s biggest economy recover from the coronavirus crisis. At a meeting in Berlin that ended late Tuesday, Chancellor Angela Merkel’s coalition agreed to provide job-preserving subsidies until the end of 2021. The subsidies, known in German as “Kurzarbeit” and originally intended for 12 months, pay the bulk of paychecks and allow companies to hold on to workers during an economic shock. Finance Minister Olaf Scholz said the money for the extension will come out of next year’s federal budget, adding to the 1.2 trillion euros Germany has made available to prop up the economy during the pandemic.

Originating Source

Fed Seen Holding Rates at Zero for Five-Years Plus in New Policy

The Federal Reserve looks likely to keep short-term interest rates near zero for five years or possibly more after it adopts a new strategy for carrying out monetary policy. The new approach, which could be unveiled as soon as next month, is likely to result in policy makers taking a more relaxed view toward inflation, even to the point of welcoming a modest, temporary rise above their 2% target to make up for past shortfalls. Fed Chairman Jerome Powell is slated to provide an update on the Fed’s 1-1/2-year-old framework review of its policies and practices when he speaks on Thursday to the central bank’s Jackson Hole conference, being held virtually this year because of the coronavirus pandemic.

Originating Source

China Fires Missiles Into Disputed Waterway; U.S. Adds Sanctions

“U.S.-China tensions over the South China Sea escalated on Wednesday with Beijing firing four missiles into the disputed waterway and the Trump administration strengthening action against companies that helped set up outposts in the region. China launched four medium-range ballistic missiles into the South China Sea on Wednesday amid broader military exercises by the People’s Liberation Army, according to a U.S. defense official who asked not to be identified. The missiles landed in the sea in an area between Hainan Island and the Paracel Islands, the official said. The move came a day after Beijing protested a flyover by a U.S. spy plane. Separately on Wednesday, the U.S. announced trade and visa restrictions on 24 companies for their efforts to help China “reclaim and militarize disputed outposts” in the contested maritime area, according to a statement from the U.S. Department of Commerce. ”

Originating Source

Top Trump News

U.S. airline layoffs

President Donald Trump is weighing executive action to avoid massive layoffs at U.S. airlines if Congress fails to agree a fresh coronavirus stimulus package, White House Chief of Staff Mark Meadows said on Wednesday. His remarks came a day after American Airlines (O:AAL) said its workforce will shrink by 40,000, including 19,000 involuntary cuts, in October without an extension of government aid as the pandemic continues to devastate travel demand. “If Congress is not going to work, this president is going to get to work and solve some problems. So hopefully, we can help out the airlines and keep some of those employees from being furloughed,” Meadows said in an interview with Politico.

Originating Source

Wisconsin protests

President Trump on Wednesday said he would send federal officers to Kenosha, Wis., as the city grapples with unrest after the police shooting of Jacob Blake. White House officials and Wisconsin Gov. Tony Evers (D) spoke by phone, according to Trump, and the governor accepted federal assistance with responding to the increasingly volatile demonstrations in response to Blake’s shooting. “We will NOT stand for looting, arson, violence, and lawlessness on American streets,” Trump tweeted. “TODAY, I will be sending federal law enforcement and the National Guard to Kenosha, WI to restore LAW and ORDER!” he added.

Originating Source

Melania Trump

Melania Trump’s speech at the Republican National Convention Tuesday night was a moment of redemption after her disastrous remarks at the 2016 convention, where she was accused of plagiarizing former first lady Michelle Obama. This time, her speech was “every word her own,” said her chief of staff, Stephanie Grisham, who helped craft the address.She needed to reach out to American women who voted for Trump in 2016 but who could abandon him this fall over race relations and the pandemic.

Originating Source

Economic Indicators

United States Durable Goods Orders

New orders for US manufactured durable goods rose by 11.2 percent in July 2020, recovering further from sharp falls seen in March and April during the lockdown and easily beating market expectations of 4.3 percent. Demand for transport equipment jumped 35.6 percent (vs 19.7 percent in June), due to increases in orders for motor vehicles and parts (21.9 percent vs 85.6 percent) and defense aircraft and parts (77.1 percent vs -29.2 percent). Orders were also higher for electrical equipment, appliances, and components (4.1 percent vs 2.0 percent), computers and electronic products (2.2 percent vs -0.1 percent), machinery (2.0 percent vs 3.7 percent), fabricated metal products (2.0 percent vs 5.7 percent).

United States Crude Oil Stocks Change

US crude oil stocks fell by 4.689 million barrels in the week ended August 21st, 2020, the fifth consecutive period of decrease and compared to market expectations of a 3.694 million drop, according to the EIA Petroleum Status Report. Meantime, gasoline inventories were down by 4.584 million barrels, while markets had forecast a smaller 1.533 million decline.

France Consumer Confidence Aug

The consumer confidence index in France stood at 94 in August of 2020, remaining well below pre-pandemic levels and in line with market forecasts. The expected saving capacity (5 vs 9) and future saving intentions (24 vs 23) increased although the share of households considering it will be a good time to make major purchases has decreased (-19 vs -15). The assessment of the future financial situation was unchanged (-8) and unemployment expectations improved a bit (70 vs 76). Inflation expectations also eased (-25 vs -22).

U.S. Crude Oil Inventories

US crude oil stocks fell by 4.689 million barrels in the week ended August 21st, 2020, the fifth consecutive period of decrease and compared to market expectations of a 3.694 million drop, according to the EIA Petroleum Status Report. Meantime, gasoline inventories were down by 4.584 million barrels, while markets had forecast a smaller 1.533 million decline.

Economic Calendar

Thursday

US GDP (QoQ) (Q2)  

Thursday

US Initial Jobless Claims

Thursday

US Fed Chair Powell Speaks  

Friday

US Pending Home Sales (MoM) (Jul)

Friday

UK BoE Gov Bailey Speaks