Monex Morning Report – Tue 15 Sep 2020

OVERNIGHT HIGHLIGHTS

Dow ends 327 points higher as stocks rebound amid vaccine hopes, IPO rush and corporate deal-making; Asian stocks looked poised to drift Tuesday after snapping two weeks of declines Monday

OPEC cuts 2020 oil demand forecast, trims 2021 outlook on pandemic fallout; Yoshihide Suga to be Japan’s prime minister after winning party vote

Top Market News

‘Now is not the time to worry’ about the fiscal deficit or the Fed’s balance sheet, Mnuchin says

Treasury Secretary Steven Mnuchin told CNBC on Monday that lawmakers should not allow fears over the size of the nation’s deficit or the Federal Reserve’s balance sheet to delay additional Covid-19 relief. Mnuchin, who with White House chief of staff Mark Meadows has led the administration’s Covid-19 relief negotiations, said the economic crisis warrants extraordinary stimulus from Congress and the Fed. “Now is not the time to worry about shrinking the deficit or shrinking the Fed balance sheet,” Mnuchin told CNBC’s “Squawk Box” from the White House. “There was a time when the Fed was shrinking the balance sheet and coming back to normal. The good news is that gave them a lot of room to increase the balance sheet, which they did.” “And I think both the monetary policy working with fiscal policy and what we were able to get done in an unprecedented way with Congress is the reason the economy is doing better,” he added.

Originating Source

Yoshihide Suga to be Japan’s prime minister after winning party vote

Yoshihide Suga is poised to become Japan’s prime minister after he was comfortably elected to lead the ruling party following the resignation of Shinzo Abe. Liberal Democratic party (LDP) MPs from both houses of parliament and representatives from prefectural party chapters voted overwhelmingly for Suga, with the Abe loyalist emerging from the poll on Monday with 377 of the 534 votes, well ahead of Fumio Kishida, a former foreign minister, with 89 votes, and Shigeru Ishiba, a former defence minister, with 68. Suga, who has been the public face of the Abe administration during almost eight years as the government’s top spokesman, will officially become prime minister after the LDP-controlled lower and upper houses vote on his appointment on Wednesday.

Originating Source

OPEC cuts 2020 oil demand forecast, trims 2021 outlook on pandemic fallout

OPEC has cut its forecast for oil demand growth this year, citing a weaker-than-expected recovery in India and other Asian countries, and warned risks remain “elevated and skewed to the downside” for the first half of next year. In a closely-watched monthly report published Monday, the group of oil-producing nations downwardly revised its outlook for global oil demand to an average of 90.2 million barrels per day in 2020. That’s down 400,000 bpd from the previous month’s estimate and reflects a contraction of 9.5 million bpd year-on-year. The report comes as energy market participants become increasingly concerned about a faltering economic recovery and stumbling fuel demand in the wake of the coronavirus pandemic.

Originating Source

Pfizer coronavirus vaccine could be given to Americans before end of the year, CEO says

Pfizer’s coronavirus vaccine could be distributed to Americans before the end of the year if found to be safe and effective, CEO Albert Bourla said Sunday. The drugmaker should have key data from its late-stage trial for the Food and Drug Administration by the end of October, Bourla said during an interview on CBS’ “Face the Nation.” If the FDA approves the vaccine, the company is prepared to distribute “hundreds of thousands of doses,” he said. Because of the pandemic, U.S. health officials and drugmakers have been accelerating the development of vaccine candidates by investing in multiple stages of research even though doing so could be for naught if the vaccine ends up not being effective or safe.

Originating Source

TikTok rejects Microsoft bid to buy US arm of business, clearing way for Oracle to partner with Chinese-owned app

Under pressure to find a US partner so it can continue operating in the American market, video-sharing app TikTok has rejected a bid from Microsoft. The move today clears the way for software company Oracle, which remains in the race to become the app’s tech partner. Microsoft announced its bid to acquire TikTok’s US operations was rejected, removing the tech giant from the running, a week before US President Donald Trump has promised to follow through with a plan to ban the Chinese-owned app in the US over spying concerns. Microsoft said in a statement ByteDance “let us know today they would not be selling TikTok’s US operations to Microsoft”. Microsoft added it was “confident our proposal would have been good for TikTok’s users, while protecting national security interests”. The US Government has threatened to ban TikTok by September 20 and ordered ByteDance to sell its US business, citing national security risks due to its Chinese ownership.

Originating Source

Immunomedics soars 106% after Gilead agrees to acquire the cancer-drug company for $21 billion

Gilead’s proposed $US21 billion acquisition of Immunomedics sent shares of the cancer-drug company soaring as much as 106% on Monday. Immunomedics developed Trodelvy, an antibody-drug conjugate used to treat triple-negative breast cancer. Trodelvy received FDA approval in April and recorded $US20 million in sales in its first two months on the market. The drug is expected to generate blockbuster sales over its lifetime and is being evaluated as a treatment for a number of other cancer and solid tumour indications. Gilead expects the deal to immediately bolster its revenue growth, and for it to be neutral to accretive to adjusted earnings per share in 2023, as well as “significantly accretive thereafter,” Gilead said. Gilead will fund the acquisition through $US15 billion in cash on hand, as well as $US6 billion in newly issued debt.

Originating Source

ECB’s Makhlouf sees continued fall in prices during pandemic

European Central Bank governing council member Gabriel Makhlouf said he expects demand factors will continue to dominate how the COVID-19 pandemic impacts inflation and will lead to a fall in prices. “Predicting how demand and supply shocks will interact over the medium to long term is not straightforward… As both demand and supply side factors will continue to impact on inflation, I believe that demand factors will dominate and lead to a fall in prices,” Makhlouf told an online conference. “Fear of infection, weak labour markets, heightened uncertainty and higher precautionary savings will lead to lower demand for goods and services which implies that the real natural rate of interest is likely to remain at low levels,” said Makhlouf, who is the head of Ireland’s Central Bank.

Originating Source

Tear down your barriers, EU says after summit with China’s Xi

European Union leaders told Chinese President Xi Jinping on Monday to open up markets, respect minorities and step back from a crackdown in Hong Kong, also asserting that Europe would no longer be taken advantage of in trade. Anxious to show that the EU will not take sides in a global standoff between China and the United States, German Chancellor Angela Merkel joined the bloc’s chief executive and chairman to deliver a tough-talking message to Beijing. “Europe is a player, not a playing field,” European Council President Charles Michel, who chaired the video summit, told reporters in reference to a growing sense in Europe that China has not met its promises to engage in fair and free trade.

Originating Source

Top Trump News

Western U.S. wildfires

Democratic presidential nominee Joe Biden on Monday called President Donald Trump a “climate arsonist” for failing to acknowledge the role of global warming in the Western U.S. wildfires, while Trump said forest management was the key to controlling the blazes. Wildfires across Oregon, California and Washington state have destroyed thousands of homes and a half-dozen small towns since August, scorching more than 4 million acres (1.6 million hectares) and killing 35 people in the three states. Biden, slammed by Republicans for not visiting disaster areas, spoke from his home state of Delaware on the threat of extreme weather that climate scientists have said is supercharging fires. Trump, who trails Biden in national polls ahead of the Nov. 3 election, met with firefighters and officials in California after Democrats blasted the Republican president for remaining mostly silent about the largest wildfires in state history.

Originating Source

Immigrants

A U.S. appeals court on Monday sided with President Donald Trump over his administration’s decision to end humanitarian protections for hundreds of thousands of immigrants, many of whom have lived in the United States for decades. In a 2-1 ruling, a panel of three judges in the California-based 9th U.S. Circuit Court of Appeals reversed a lower court decision that had blocked Trump’s move to phase out so-called Temporary Protected Status (TPS) for people from El Salvador, Haiti, Nicaragua and Sudan. The ruling is also expected to affect the status of people from Honduras and Nepal, who filed a separate lawsuit that was suspended last year pending the outcome of the broader case. The appeals court ruling means that those immigrants will be required to find another way to remain in the United States legally or depart after a wind-down period at least until early March and longer in the case of El Salvador.

Originating Source

Potential money crunch

President Donald Trump will embark on a heavier fundraising schedule in coming weeks as his re-election campaign faces a possible cash crunch that has forced it to pull back television advertising in some crucial states. Trump’s campaign started the year with more than 10 times as much money as Democratic rival Joe Biden. But to the alarm of some Republican donors, the former vice president closed the gap as Democratic donors consolidated behind him and the Trump campaign burned through its cash more quickly. Biden, who leads Trump in most national and battleground state polling ahead of the Nov. 3 election, had about $99 million in the bank to Trump’s $121 million by the end of July, according to disclosures by each side’s campaign. Including money raised by the candidates’ national parties, Biden outraised Trump nearly $365 million to $210 million in August.

Originating Source

Economic Indicators

Japan Industrial Production MoM

Industrial production in Japan rose by a record 8.7 percent month-over-month in July 2020, compared to an initial estimate of an 8 percent growth and following a 1.9 percent gain in June. Motor vehicle output was the largest contributor to the increase (38.4 percent vs 28.6 percent in June), followed by other manufacturing (9 percent vs -1.4 percent), and iron, steel, and non-ferrous metals (11.3 percent vs -1 percent). On a yearly basis, industrial output shrank by 15.5 percent in July, after a 18.2 percent plunge in June.

Euro Area Industrial Production

Eurozone’s industrial production fell by 7.7 percent from a year earlier in July 2020, following a 12 percent slump in the previous month and compared to market expectations of an 8.2 percent decrease, as the bloc’s economy was hit hard by the COVID-19 crisis.

Economic Calendar

Tuesday

“China Industrial Production (YoY) (Aug) ”

Tuesday

German ZEW Current Conditions (Sep)

Wednesday

UK CPI (YoY) (Aug)

Wednesday

“U.S. Retail Sales (MoM) (Aug) ”

Thursday

U.S. Crude Oil Inventories

Thursday

“U.S. Fed Interest Rate Decision ”

Thursday

New Zealand Gross Domestic Product

Thursday

Bank of Japan Monetary Policy Statement

Friday

U.K. Retail Sales MoM