Monex Morning Report – Tue 10 Nov 2020

OVERNIGHT HIGHLIGHTS

Dow jumps over 800 points, its best daily gain in 5 months, as Nasdaq ends lower on coronavirus vaccine report; Asian stocks looked poised for gains Tuesday

Pfizer, BioNTech initial vaccine results impress, but scientists remain cautious; EU to impose tariffs on up to $4 billion of U.S. products

Pfizer, BioNTech initial vaccine results impress, but scientists remain cautious

Scientists on Monday said initial trial results for Pfizer Inc and BioNTech’s coronavirus vaccine far outpaced their expectations for protection against a completely new disease, but that many questions remain unanswered. The drugmakers said their vaccine was more than 90 percent effective at preventing COVID-19, based on data from the first 94 people in the trial to become infected with the coronavirus. The efficacy rate means that the overwhelming majority of infections occurred among people who received a placebo rather than the vaccine. The 44,000-volunteer study was initially designed for a first interim analysis of whether the vaccine was working after 32 participants developed COVID-19. Dr. William Gruber, Pfizer’s senior vice president of vaccine clinical research and development, said in an interview the companies changed the study plan after discussions with U.S. regulators and ultimately ended up with data on 94 people. Others cautioned that many questions remain, including whether the vaccine can prevent severe disease or complications, how long it will protect against infection and how well it will work in the elderly.

Originating Source

U.S. still faces possible default wave, asset declines due to pandemic: Fed

The United States may still face a wave of debt defaults and “significant declines” in asset prices because of the coronavirus pandemic and recession, the Federal Reserve warned on Monday, in a stark reminder the economy is far from out of the woods. “As many households continue to struggle, loan defaults may rise, leading to material losses” for lenders, the Fed said in its latest biannual Financial Stability Report. Business debt “has risen sharply as businesses increased borrowing to weather the period of weak earnings. The general decline in revenues associated with the severe reduction in economic activity has weakened the ability of businesses to services these obligations.” Asset prices “remain vulnerable to significant declines should investor risk sentiment fall or the economic recovery weaken.” The comments were issued on a day when U.S. stock markets surged on news that a coronavirus vaccine may be on the horizon — a possible boon to businesses and households globally.

Originating Source

EU to impose tariffs on up to $4 billion of U.S. products

he European Union will slap tariffs on up to $4 billion worth of U.S. products Monday, after what it described as a “lack of progress” from America on resolving a long-standing dispute over aircraft subsidies. The EU and the U.S. have been at odds over the issue since 2006. The World Trade Organization agreed last year that the EU did not follow best trade practices when granting aid to Airbus. In light of that decision, the U.S. imposed duties on $7.5 billion of imported goods from Europe. Last month, the WTO also ruled that the United States did not comply with international rules when providing subsidies to Boeing. As a result, the EU has said it is now going ahead with up to $4 billion in tariffs.

Originating Source

UK’s Sunak says no longer waiting for EU on post-Brexit finance rules

Britain set out on Monday how it would let European Union financial services firms operate in Britain after a post-Brexit transition period ends on Dec. 31, saying it was no longer waiting for Brussels to decide access to its markets in return. Finance minister Rishi Sunak said it was clear that there were “many areas” where the EU was not prepared to assess Britain’s requests. “Of course we will always want a constructive and engaged relationship with the European Union,” Sunak told parliament. “But after four years. I think it is time for us to move forward as a country and do what’s right for the UK to provide certainty and stability to industry and deliver our goal of open, well-regulated markets.” London and Brussels are still locked in talks about a broad trade deal less than two months before the scheduled end to the transition period.

Originating Source

Orr readies New RBNZ stimulus tool as step toward negative rates

New Zealand central bank governor Adrian Orr is set to unveil a new monetary stimulus tool aimed at driving borrowing costs to fresh historic lows to spur economic growth. Orr is expected to lay out plans on Nov. 11 to provide cheap loans to banks, giving them scope to further reduce lending rates. The Funding for Lending Program, which could begin within weeks, is seen as a key step toward the Reserve Bank cutting the official cash rate into negative territory next year.

Originating Source

China expects less volatility but tough relations under Joe Biden

Beijing expects less volatile relations with Washington under Joe Biden but does not believe the new administration will veer significantly from the hardline approach taken by Donald Trump, according to Chinese government advisers and analysts. President Xi Jinping had not publicly commented on Mr Biden’s victory over Mr Trump in the US presidential election as of Monday afternoon. The foreign ministry also declined to comment, saying only that Beijing was confident “the election results will be confirmed in accordance with US laws and procedures”. Chinese state media has instead focused on how divided the US appeared to be and Mr Trump’s unwillingness to officially concede.

Originating Source

BoE right to leave climate issues aside in COVID response: Bailey

The Bank of England was right to ignore climate change risks in its emergency response to the initial impact of COVID-19 on the economy, and instead seek to tackle them through longer-term regulatory changes, Governor Andrew Bailey said on Monday. Environmental groups have criticised the BoE for including debt issued by energy companies and other businesses with significant greenhouse gas emissions in asset purchase programmes designed to support the economy. “These short-term interventions did not discriminate on the basis of climate change. I believe that was the right response,” Bailey told an environment conference in London.

Originating Source

McConnell calls for Smaller stimulus after Pfizer vaccine data

Senate Majority Leader Mitch McConnell said Monday that Congress should pass a limited stimulus bill before the end of 2020, in the wake of encouraging data on a Covid-19 vaccine and a slide in unemployment. His comments showcased continued Senate Republican opposition to the larger-scale aid Democrats want, risking a stalemate into next year. Senate Democratic leader Chuck Schumer said Republicans “have proposed totally inadequate solutions” on Covid-19 relief.” “It turns out the news is a whole lot better” lately, McConnell said on the Senate floor. “I hope our Democratic colleagues will finally put aside their all-or-nothing obstruction and let the targeted pandemic relief — targeted pandemic relief is what we need — let it move forward.”

Originating Source

Top Trump News

Defense secretary

U.S. President Donald Trump said on Monday that he had “terminated” Defense Secretary Mark Esper, appearing to use his final months in office after his election defeat to settle scores within his administration. Trump split with Esper over a range of issues and was particularly angered by Esper’s public opposition to Trump’s threats to use active duty military forces this summer to suppress street protests over racial injustice after police killed George Floyd in Minneapolis. Democrats reacted with alarm, saying Trump’s move sent a dangerous message to America’s adversaries and dimmed hopes for an orderly transition as President-elect Joe Biden prepares to take office. “The abrupt firing of Secretary Esper is disturbing evidence that President Trump is intent on using his final days in office to sow chaos in our American Democracy and around the world,” said House of Representatives Speaker Nancy Pelosi.

Originating Source

Trump to lose twitter privileges

The social media giant confirmed to The Verge on Saturday that on January 20th” the scheduled day of President-elect Joe Biden’s inauguration” Trump’s personal Twitter account will lose its status as a “world leader” account. On Twitter, “world leaders” are treated differently. Tweets that would ordinarily be removed or result in sanctions are instead placed behind information cards, informing users that although they break Twitter’s rules, the platform has allowed the tweets to stay up.

Originating Source

Biden lauds COVID-19 vaccine progress

President-elect Joe Biden hailed Pfizer Inc’s progress toward a COVID-19 vaccine on Monday but urged Americans to wear masks because it may not be widely available for many months, as President Donald Trump’s administration tried to claim credit. Pfizer said its experimental COVID-19 vaccine was more than 90% effective here as it disclosed the first successful interim data from a large-scale clinical test. That was major progress in the quest for a vaccine to combat a pandemic that has killed more than 237,000 Americans, thrown millions more out of work and contributed to Trump’s defeat in last Tuesday’s election. The drugmaker developed its vaccine outside of the White House’s Operation Warp Speed program, although the U.S. government placed an initial order in July for 100 million Pfizer COVID-19 vaccine doses for $1.95 billion and can acquire up to 500 million additional doses. Operation Warp Speed pumped billions of dollars into six other pharmaceutical companies intended to accelerate development of a COVID-19 vaccine. Vice President Mike Pence on Twitter credited a “public-private partnership” forged by Trump for Pfizer’s vaccine development progress. Biden, who said his advisers had been told of the breakthrough on Sunday night, in a statement called Pfizer’s announcement “great news” but said it would be “many more months” before widespread vaccination is available in the United States.

Originating Source

Economic Indicators

Australia Dwelling Approvals

The number of dwellings approved in Australia jumped 15.4 percent month-over-month in September 2020, following a 2.3 percent fall in the previous month and beating market consensus of a 1.3 percent rise. Private sector dwellings excluding houses rebounded (23.4 percent vs -12.1 percent in August), and private sector houses dwelling rose at a faster pace (9.7 percent vs 4.4 percent).

Germany Balance of Trade

Germany’s trade surplus narrowed slightly to EUR 20.8 billion in September of 2020 from EUR 21.1 billion a year earlier. Exports were down 3.8 percent year-on-year to EUR 109.8 billion and imports declined 4.3 percent to EUR 89 billion. Exports to the Euro Area went down 4.5 percent and those to the UK sank 12.4 percent. Sales to the United States, which have been hit particularly hard by the coronavirus pandemic, dropped 5.8 percent while sales to China increased 10.6 percent. Imports to the Euro Area decreased 4.4 percent and those from the UK were down 14.7 percent. In contrast, purchases rose from China (up 3 percent) and the US (3 percent). Adjusted for calendar and seasonal effects, exports were down 7.7 percent and imports 5.7 percent compared with February of 2020, the month before restrictions were imposed due to the coronavirus pandemic.

Economic Calendar

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