Monex Morning Report – Tue 22 Dec 2020

OVERNIGHT HIGHLIGHTS

U.S. stocks end off lows as investors weigh virus aid package against COVID anxieties; Asian stocks to drop on virus angst

U.S. congress agrees to $900 billion Covid stimulus deal after months of failed negotiations; Britain faces isolation as world tightens borders to keep out new coronavirus strain

Top Market News

Congress Strikes Deal on $900 Billion Pandemic Relief Plan

Congressional leaders reached a deal on roughly $900 billion spending package to bolster the U.S. economy amid the continued spread of the coronavirus, giving lawmakers a short timetable to review and pass what would be one of the biggest economic-rescue measures in the nation’s history. Senate Majority Leader Mitch McConnell, House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer announced the accord Sunday. The legislative text was still being written, but the House was expected to vote on it Monday followed by the Senate.

Originating Source

U.S. House begins debate on $900 billion coronavirus package as funding deadline looms

The U.S. House of Representatives on Monday began debate on a $900 billion coronavirus aid package meant to stimulate a pandemic-hit economy, which the leaders of both chambers of Congress aimed to pass in a marathon session. The White House-backed bill includes $600 payments to most Americans as well as additional payments to the millions of people thrown out of work during the COVID-19 pandemic, just as a larger round of benefits is due to expire on Saturday. The House of Representatives is expected to vote sometime Monday evening. Senate Majority Leader Mitch McConnell told reporters at the Capitol that passage of the legislation in the Senate will “probably be late but we’re going to finish tonight.”

Originating Source

Britain faces isolation as world tightens borders to keep out new coronavirus strain

Countries across the globe shut their borders to Britain on Monday due to fears about a highly infectious new coronavirus strain, causing travel chaos and raising the prospect of food shortages days before Britain is set to leave the European Union. India, Pakistan, Poland, Spain, Switzerland, Sweden, Russia, Jordan and Hong Kong suspended travel for Britons after Prime Minister Boris Johnson said a mutated variant of the virus had been identified in the country. Saudi Arabia, Kuwait and Oman closed their borders completely. Several other nations blocked travel from Britain over the weekend, including France, Germany, Italy, the Netherlands, Austria, Ireland, Belgium and Canada – although experts said the strain may already be circulating in countries with less advanced detection methods than the United Kingdom. France shut its border to arrivals of people and trucks from Britain, closing off one of the most important trade arteries with mainland Europe.

Originating Source

UK PM Johnson says on Brexit: still problems, we’ll thrive without a deal

Prime Minister Boris Johnson said on Monday that there were still problems in Brexit trade talks and that Britain would thrive without a deal. “The position is unchanged: there are problems,” Johnson told reporters when asked if there would be a trade deal. “Its vital that everybody understands that the UK has got to be able to control its own laws completely and also that we’ve got to be able to control our own fisheries.” “WTO terms would be more than satisfactory for the UK. And we can certainly cope with any difficulties that are thrown our way. Not that we don’t want a deal but that WTO terms would be entirely satisfactory,” he said. Unless Johnson can strike a trade deal with the EU in the next 10 days, the United Kingdom will leave the bloc’s informal membership on Dec. 31 at 2300 London time without one.

Originating Source

European Medicines Agency authorizes Pfizer vaccine for use in the EU

Europe’s medicines regulator on Monday authorized Pfizer and BioNTech’s coronavirus vaccine for conditional use, opening the door to an inoculation program across the European Union. The news comes less than two weeks after the American and German-developed vaccine was approved for use in the U.S. Europe is on track to start vaccinations within a week, regulators said, and authorities in several EU countries including France, Italy, Austria and Germany have said they aim to begin inoculations on Dec. 27. The vaccine needs to be endorsed by the European Commission before it can be distributed, and a decision is expected shortly. The European Medicines Agency said in a statement Monday that it had recommended granting conditional marketing authorization for the vaccine in people ages 16 years and over.

Originating Source

Japan’s record $1 trillion budget highlights COVID-19 challenge to growth, debt

Japan’s cabinet approved on Monday a record $1.03 trillion budget draft for the next fiscal year starting in April 2021, the Ministry of Finance said, as the coronavirus and stimulus spending puts pressure on already dire public finances. The 106.6 trillion yen ($1.03 trillion) annual budget also got a boost from record military and welfare outlays. It marked a 4% rise from this year’s initial level, rising for nine years in a row, with new debt making up more than a third of revenue. From Europe to America, policymakers globally have unleashed a torrent of monetary and fiscal stimulus to prevent a deep and prolonged recession as the pandemic shut international borders and sent many out of work.

Originating Source

China leaves lending benchmark LPR unchanged but rate hike expectations grow

China kept its benchmark lending rate for corporate and household loans unchanged at its December fixing on Monday, as expected, although improving economic fundamentals have raised speculation about a rate hike next year. The one-year loan prime rate (LPR) was kept at 3.85%, while the five-year LPR remained at 4.65%. The rates have been unchanged for eight straight months. For the year, the one-year LPR was down a total 30 basis points of rate cuts, and the five-year rate was cut by 15 bps of two cuts in 2020. Most new and outstanding loans are based on the LPR, while the five-year rate influences the pricing of mortgages. All 34 traders and analysts in a snap Reuters poll conducted last week predicted no change in either one-year or five-year LPRs. The rate decision reflected continued economic recovery from coronavirus shocks in the world’s second-largest economy, and comes after the central bank made its biggest ever injection of medium-term funds last week to shore up liquidity.

Originating Source

WTO confirms launch of Australia-China trade dispute over barley

Australia has requested dispute consultations with China concerning duties imposed by China on Australian barley imports, the World Trade Organization confirmed on its website on Monday. Australia said last week it had launched a formal appeal over China’s action, starting a formal 60-day period for discussions between the two countries before an adjudicating panel is formed. The request was officially circulated to WTO members on Monday and published by the Geneva-based body.

Originating Source

Top Trump News

Biden gets coronavirus vaccine as U.S. inoculation effort mounts

U.S. President-elect Joe Biden received his first injected dose of the COVID-19 vaccine live on television on Monday in an effort to boost confidence in its safety ahead of its wide distribution next year. Biden has said he would make the fight against the coronavirus, which has killed more than 315,000 Americans and infected more than 17.5 million, his top priority when he takes office on Jan. 20. At age 78, he is in the high-risk group for the highly contagious respiratory disease. A Democrat, Biden will inherit the logistical challenges of distributing the vaccine to hundreds of millions of Americans, as well as the task of persuading people who worry its development was rushed for political reasons to take it. His black long-sleeved shirt rolled up, Biden received the injection from Tabe Mase, nurse practitioner and head of Employee Health Services at Christiana Hospital in Newark, Delaware, in front of reporters. Images were carried live on television.

Originating Source

U.S. Treasury confirms SolarWinds hack as more officials blame Russia

The U.S. secretary of the Treasury on Monday publicly confirmed that his department had been breached – more than a week after Reuters first reported the hack. Speaking to CNBC, Steve Mnuchin acknowledged that the hackers had penetrated Treasury’s unclassified network but downplayed the severity of the intrusion. “We do not see any break in into our classified systems,” he said. “Our unclassified systems did have some access. I will say that the good news is there has been no damage, nor have we seen any large amounts of information displaced.”

Originating Source

U.S. publishes list of Chinese and Russian firms with military ties

The Trump administration on Monday published a list of Chinese and Russian companies with alleged military ties that restrict them from buying a wide range of U.S. goods and technology. The final list does not include Commercial Aircraft Corporation of China (COMAC), or the Hong Kong subsidiaries of Colorado’s Arrow Electronics and Texas-based TTI Inc, a Berkshire Hathaway electronics distributor. Those companies were on the draft list seen by Reuters. The final list names 103 entities, 14 fewer than on the draft list seen by Reuters in November. Fifty-eight are designated under China, down from 89, and 45 entities are tied to Russia, up from 28. Commerce Secretary Wilbur Ross said on Monday the action establishes a new process “to assist exporters in screening their customers for military end users.” The final list was published on the Commerce Department website here on Monday and is scheduled to be posted for public inspection in the Federal Register on Tuesday.

Originating Source

Economic Indicators

China Loan Prime Rate

The People’s Bank of China (PBoC) left its benchmark interest rates for corporate and household loans steady for the eighth straight month at its December fixing, in line with market consensus, as the economy continues to recover from the downturn caused by the COVID-19 pandemic. The one-year loan prime rate (LPR) was left unchanged at 3.85%, while the five-year remained at 4.65%. The decision came after the central bank made its largest-ever injection of medium-term funds last week to shore up liquidity. For the year, the one-year LPR was down a total of 30 bps of rate cuts, and the five-year rate was slashed by 15 bps of two cuts. Xinhua news agency reported that China will maintain policy support for its economic recovery, avoiding a sudden shift in policy, to help keep economic growth within a reasonable range in 2021. 

Euro Area Consumer Confidence

The consumer confidence indicator in the Euro Area rose 3.7 points to -13.9 in December 2020, from the previous month’s six-month low and compared with market expectations of -16.8, a flash estimate showed. Sentiment was supported by positive COVID-19 vaccine developments last month. Considering the European Union as a whole, consumer sentiment increased 3.4 points to -15.3. Both indicators remained well below their long-term averages of -11.2 (Euro Area) and -10.7 (EU). 

Economic Calendar

Tuesday

AU Retail Sales MoM

Wednesday

UK Gross Domestic Product (GDP) QoQ

Thursday

UK Gross Domestic Product (GDP) QoQ

Thursday

US Existing Home Sales

Thursday

US Initial Jobless Claims

Thursday

US New Home Sales (Nov)

Thursday

US Crude Oil Inventories

Friday

US Christmas Day