Monex Morning Report – Thur 5 Nov 2020

OVERNIGHT HIGHLIGHTS

S&P 500, Nasdaq book best postelection day gains in history, with key states in Trump-Biden race still too close to call; Asian stocks looked set for gains after U.S. equities and bonds climbed

Biden wins Wisconsin, presidency still hangs in balance; Trump sues in Pennsylvania, Michigan, asks for Wis. Recount

Biden wins Wisconsin, presidency still hangs in balance

On a day of electoral uncertainty and legal action, Joe Biden won Wisconsin on Wednesday, reclaiming a key part of the “blue wall” that slipped away from Democrats four years ago and narrowing President Donald Trump’s pathway to reelection. A full day after Election Day, neither candidate had cleared the 270 Electoral College votes needed to win the White House. Margins remained tight in several fiercely contested states including the Great Lakes battlegrounds of Michigan and Pennsylvania. But Biden’s victory in Wisconsin loomed as an important step to the presidency. Speaking at an afternoon news conference, Biden, joined by his running mate Kamala Harris, said he now expected to win the presidency, though he stopped short of outright declaring victory. “I will govern as an American president,” Biden said. ”There will be no red states and blue states when we win. Just the United States of America.” It was a stark contrast to Trump, who early Wednesday morning falsely proclaimed that he had won the election, even though millions of votes remained uncounted and the race was far from over.

Originating Source

Trump sues in Pennsylvania, Michigan; asks for Wis. Recount

The Trump campaign said it filed lawsuits Wednesday in Pennsylvania and Michigan, laying the groundwork for contesting the outcome in undecided battleground states that could determine whether President Donald Trump gets another four years in the White House. Suits in both states are demanding better access for campaign observers to locations where ballots are being processed and counted, the campaign said. The campaign also is seeking to intervene in a Pennsylvania case at the Supreme Court that deals with whether ballots received up to three days after the election can be counted, deputy campaign manager Justin Clark said. The campaign said it is calling for a temporary halt in the counting in both states until it is given “meaningful” access in numerous locations and allowed to review ballots that already have been opened and processed. Trump is running slightly behind Democratic nominee Joe Biden in Michigan. The president is ahead in Pennsylvania but his margin is shrinking as more mailed ballots are counted. There have been no reports of fraud or any type of ballot concerns out of Pennsylvania. The state had 3.1 million mail-in ballots that take time to count and an order allows them to be counted up until Friday if they are postmarked by Nov. 3.

Originating Source

McConnell says reaching an economic stimulus deal is ‘job one’ when Senate returns

Senate Majority Leader Mitch McConnell on Wednesday said his top priority remains passing a new economic stimulus bill before the end of the year. McConnell, who Tuesday evening won his reelection bid for a seventh six-year Senate term, said from a news conference in Kentucky that another relief package would be the chamber’s chief focus when it reconvenes next week. He also said that state and local aid, a consistent Democratic demand in relief discussions with the White House, could be included in a new bill. “As I’ve said repeatedly in the last few months, we need another rescue package,” McConnell, R-Ky., said Wednesday morning. “Hopefully, the partisan passions that prevented us from doing another rescue package will subside with the election. And I think we need to do it and I think we need to do it before the end of the year.” “I think that’s job one when we get back,” McConnell said. “Hopefully we get a more cooperative situation than we’ve had.”

Originating Source

Kudlow says unclear if COVID-19 aid would be part of government funding bill

White House economic adviser Larry Kudlow on Wednesday said the Trump administration planned to push ahead with its agenda this year even as the election results remained unknown, including a continuing resolution to fund the government and a possible COVID-19 stimulus bill. Kudlow, in an interview on CNBC, said he would “be meeting with the president regarding an agenda. We have a lame-duck Congress, but we have a lot of work to do.” He added that he would also meet with U.S. Treasury Secretary Steve Mnuchin later on Wednesday, adding that it was unclear if the coronavirus relief would be tied to the funding measure.

Originating Source

EU’s Barnier says ‘very serious’ gaps still in Brexit trade talks

The European Union’s Brexit negotiator said on Wednesday “very serious divergences” remained in trade talks with Britain and suggested the bloc would rather accept disruptions in commerce in eight weeks’ time than yield on its key demands. Britain left the EU in January and talks on salvaging a trillion dollars worth of annual free trade between the estranged allies are now in their final stretch before London’s transition out of the bloc completes on Dec. 31. “Despite EU efforts to find solutions, very serious divergences remain in level playing field, governance & fisheries. These are essential conditions for any economic partnership,” Michel Barnier wrote on Twitter. “The EU is prepared for all scenarios.” His UK counterpart, David Frost, agreed that “wide divergences remain on some core issues”. “We continue to work to find solutions that fully respect UK sovereignty,” he said on Twitter.

Originating Source

BOE set for $130 billion QE boost as U.K. enters new lockdown

The Bank of England is poised to announce a new round of monetary stimulus on Thursday with an early morning decision as the U.K. starts another pandemic lockdown. Economists expect the BOE to increase its bond-buying target by 100 billion pounds ($130 billion) to 845 billion pounds, with a chance of even more. The decision was moved forward to 7 a.m. in London, from midday, to give room for Chancellor of the Exchequer Rishi Sunak to address Parliament on the government’s support for businesses and households. In common with other European nations, the U.K. is stepping up its stimulus efforts as the resurgent coronavirus forces the closure of bars, restaurants, and non-essential shops. The government has already stepped up its economic support, extending the 80% wage-support program for employees and self-employed workers and offering homeowners longer mortgage holidays. The job aid had been due to end on Oct. 31 and be replaced by less generous assistance.

Originating Source

UK says excellent U.S. trade deal to be done, whoever wins presidency

There is an excellent UK-U.S. trade deal to be done and good progress has been made in reaching one, Britain’s foreign minister Dominic Raab said on Wednesday, adding that the relationship would be strong whoever won the U.S. presidency. “I’m confident that the relationship will be in good shape, and I’m confident there’s an excellent free trade there to be done, there’s been a lot of progress so far,” Raab told Sky News, adding he had the faith in U.S. election process. “Let’s wait and see what the outcome is. There’s obviously a significant amount of uncertainty. It’s much closer than I think many had expected. But this is for the American people to decide, and we’re confident in the American institutions that will produce a result.”

Originating Source

Kuroda says BOJ will help keep FX moves stable, watching U.S. election fallout

Bank of Japan Governor Haruhiko Kuroda said the central bank will work closely with financial authorities to help keep currency moves stable, adding he was closely watching how the outcome of the U.S. presidential election could affect markets. Kuroda said exchange rate moves have been relatively stable recently, helping lift Japanese exports and overseas investment. “It’s extremely important to keep exchange-rate moves stable,” Kuroda told an online meeting with business leaders in Nagoya, central Japan, on Wednesday. “As a central bank, we won’t act directly to stabilise markets. But we of course will work closely with financial authorities and overseas central banks to help keep currency moves stable,” he said. The U.S. dollar jumped and risk-sensitive currencies weakened on Wednesday as early results in the U.S. presidential election showed a very tight race, prompting a wind-back of bets on a victory by Democratic challenger Joe Biden.

Originating Source

Top Trump News

Biden declines to declare victory

With the election still too close to call, former Vice President Joe Biden on Wednesday declined to declare victory but said “we believe we will be the winners.” “My fellow Americans, yesterday once again proved democracy is the heartbeat of this nation,” said Biden, who currently has an advantage in the Electoral College but is still short of the 270 votes there to win the presidency. “I’m not here to declare that we’ve won, but I am here to report, when the count is finished, we believe we will be the winners.” Biden also made an appeal to unity, saying that to “make progress we have to stop treating our opponents as enemies. We are not enemies. What brings us together as Americans is so much stronger than anything that can tear us apart. So let me be clear: I am campaigning as a Democrat, but I will govern as an American president.” “My friends, I’m confident we’ll emerge victorious, but this will not be my victory alone or our victory alone.” Biden’s speech was a far cry from President Trump’s election night speech, in which he prematurely declared victory and called for “all voting to stop.”

Originating Source

U.S. Senate

Republicans appeared poised to retain control of the U.S. Senate on Wednesday, after Senator Susan Collins defied political odds to win re-election in Maine and other Republican incumbents led Democrats in a handful of undecided races. Democrats, who had been favored to win the Senate majority heading into Tuesday’s election, had a net gain of only one seat to show by Wednesday afternoon as their options for further increases dwindled, despite a huge Democratic money advantage going into the final weeks of the campaign. Republicans currently hold a 53-47 seat Senate majority. To win control, Democrats would need to net three Republican-held seats if Democrat Joe Biden wins the White House and Senator Kamala Harris becomes vice president with the tie-breaking Senate vote. If Biden loses to Republican President Donald Trump, Democrats would need four seats. Of five Senate races still undecided, Republican incumbents led in Alaska, Georgia and North Carolina, while Democratic Senator Gary Peters led Republican John James by a slight margin in Michigan.

Originating Source

U.S. Supreme Court

While President Donald Trump has promised to ask the U.S. Supreme Court to weigh in on a presidential race that is still too close to call, the nation’s top judicial body may not be the final arbiter in this election, legal experts said. Election law experts said it is doubtful that courts would entertain a bid by Trump to stop the counting of ballots that were received before or on Election Day, or that any dispute a court might handle would change the trajectory of the race in closely fought states like Michigan and Pennsylvania. With vote-counting still underway in many states in the early hours of Wednesday morning, Trump made an appearance at the White House and declared victory against Democratic challenger Joe Biden. “This is a major fraud on our nation. We want the law to be used in a proper manner. So we’ll be going to the U.S. Supreme Court. We want all voting to stop,” he said. The Republican president did not provide any evidence to back up his claim of fraud or detail what litigation he would pursue at the Supreme Court. As of Wednesday afternoon, the election still hung in the balance. A handful of closely contested states could decide the outcome in the coming hours or days, as a large number of mail-in ballots cast amid the coronavirus pandemic appears to have drawn out the process.

Originating Source

Economic Indicators

U.S. ADP Nonfarm Employment Change

Private businesses in the US hired 365K workers in October of 2020, well below an upwardly revised 753K in September and market forecasts of 650K. It is the second-lowest reading in six months after a record loss of 19.4 million payrolls in April due to the coronavirus pandemic. The service-providing sector added 348K jobs led by leisure and hospitality (125K); education and health (79K); professional and business (60K); trade, transportation & utilities (53K); other services (23K); and financial activities (6K) while the information sector added none. The goods-producing sector created 17K jobs, due to manufacturing (7K), construction (7K) and natural resources and mining (3K). Private payrolls in midsized companies were up 135K, large companies added 116K and small firms 114K.

U.S. ISM Non-Manufacturing Purchasing Managers Index (PMI)

The ISM Non-Manufacturing PMI fell to 56.6 in October of 2020 from 57.8 in September and lower than market forecasts of 57.5. The reading pointed to the fifth straight month of expansion in the services sector but the lowest growth since May. A slowdown was seen in production (61.2 vs 63), new orders (58.8 vs 61.5), employment (50.1 vs 51.8) and supplier deliveries (56.2 vs 54.9). In contrast, inventories rebounded (53.1 vs 48.8), new export orders increased faster (53.7 vs 52.6) and price pressures intensified (63.9 vs 59). “Respondents’ comments are cautiously optimistic about business conditions and the economy. There is a degree of uncertainty due to the pandemic, capacity constraints, logistics and the elections,” Anthony Nieves, Chair of the ISM Services Business Survey Committee said.

U.S. Trade Balance

The trade deficit in the US fell to $63.9 billion in September of 2020 from $67 billion in August, in line with market forecasts of $63.8 billion. Exports jumped 2.6 percent to $176.4 billion, boosted by sales of soybeans, telecommunications equipment, industrial engines, computer accessories, and transport, travel and financial services. Still, exports remain below $209.7 billion in February, before the coronavirus pandemic. Imports edged up 0.5 percent to $240.2 billion, close to $246.7 billion in February, boosted by purchases of passenger cars, capital goods, and travel and transport services. The deficit with China decreased $2.1 billion to $24.3 billion. Exports increased $0.8 billion to $12.0 billion and imports decreased $1.3 billion to $36.4 billion. The gap also narrowed with Mexico and the EU.

U.S. Markit Composite Purchasing Managers Index (PMI)

The IHS Markit US Composite PMI was revised higher to 56.3 in October of 2020 from a preliminary reading of 55.5 and 54.3 in the previous month. The reading pointed to the fourth successive expansion in private sector activity and the sharpest since May of 2018, driven by the strongest increase in service sector business activity since April 2015 (PMI at 56.9 from 54.6) alongside a more modest acceleration of manufacturing growth to an 11-month high (PMI at 53.4 from 53.2 in September). Contributing to output growth was the fastest rise in new business since February 2019. The improvement was driven by domestic demand, as new export orders almost stalled. Amid emerging reports of spare capacity, private sector firms indicated a slower rise in employment. Meanwhile, rates of input price and output charges inflation eased. Finally, companies were more upbeat regarding the outlook for output over the coming 12 months, with optimism surging by a survey record extent in October.

U.S. Services Purchasing Managers Index (PMI)

The IHS Markit US Services PMI was revised higher to 56.9 in October 2020 from a preliminary estimate of 56 and compared to September’s final reading of 54.6. The latest reading pointed to the third consecutive expansion in the services sector and the sharpest in since April 2015. The quicker rate of growth was largely linked to more robust demand conditions, despite a slower upturn in new export business. Firms continued to work through backlogs accumulated during lockdown, but pressure on capacity eased and employment consequently rose at the softest pace for three months. Optimism about business levels in one year’s time improved to the strongest since April 2018 principally amid hopes of an end to the coronavirus disease 2019 crisis and additional stimulus during the pandemic.

U.S. Crude Oil Inventories

US crude oil inventories fell by 7.998 million barrels in the week ended October 30th 2020, following a 4.32 million rise in the previous period and compared to market expectations of a 0.89 million increase, according to the EIA Petroleum Status Report. That was the steepest decline in crude stocks since the week ended August 28th. Meantime, gasoline inventories were up by 1.541 million barrels, while markets had forecast a decline of 0.871 million.

Australia Retail Sales MoM

Retail sales in Australia dropped by 1.1 percent month-over-month in September 2020, compared to an initial estimate of a 1.5 percent fall and following a 4.0 percent decline in August. Decreases were led by household goods retailing (-3.6 percent vs -6 percent in August), food retailing (-1.5 percent vs -0.2 percent), clothing, footwear, and personal accessories retailing (-1.1 percent vs -10.5 percent), and other retailing (-0.7 percent vs -5.2 percent). In contrast, sales grew both at department stores (1 percent vs -8.9 percent), and at cafes, restaurants and take away food services (3.5 percent vs -6.6 percent)

The IHS Markit/CIPS UK Composite PMI was revised lower to 52.1 in October of 2020 from a preliminary of 52.9, pointing to the smallest expansion in private sector activity in 4 months. Services (51.4 vs 56.1) slowed faster than manufacturing (53.7 vs 54.1). Meanwhile, business optimism dipped slightly amid divergent trends among manufacturing and service sector companies. Expectations strengthened to the highest since January 2018 in the manufacturing sector, but service providers indicated the weakest optimism since May.

U.K. Services Purchasing Managers Index (PMI)

The IHS Markit/CIPS UK Services PMI was revised lower to 51.4 in October of 2020 from a preliminary of 52.3 but still pointing to the 4th straight month of growth in the services sector although at a slower pace. Growth was often linked to a continued recovery in business operations after the national lockdown and the restart of work on delayed projects. Some firms cited a boost from higher housing market transactions and a rebound in demand from clients in the construction sector. In contrast, there were signs of a sharp reversal in demand conditions, with new work falling for the first time since June amid tightening restrictions on trade due to the coronavirus pandemic. Also, employment dropped again for the eighth consecutive month, primarily linked to redundancies in response to shrinking revenues during the pandemic. Meanwhile, the degree of confidence slipped to its lowest since May.

Economic Calendar

Friday

U.S. Initial Jobless Claims

Friday

U.S. Nonfarm Productivity QoQ

Friday

Fed Interest Rate Decision