Monex Morning Report – Tue 24 Nov 2020

OVERNIGHT HIGHLIGHTS

Dow ends 327 point higher after Janet Yellen reported as Biden’s Treasury Secretary pick; Asian stocks set for gains

AstraZeneca says COVID-19 ‘vaccine for the world’ can be 90% effective; Biden to pick Janet Yellen for Treasury secretary

Blinken is president-elect’s pick as U.S. secretary of state – Biden ally

Joe Biden will pick Antony Blinken as U.S. secretary of state, a person close to the president-elect’s transition said on Sunday, elevating one of his most seasoned and trusted aides as he prepares to undo President Donald Trump’s foreign policy. Blinken is a long time Biden confidant who served as No. 2 at the State Department and as deputy national security adviser in President Barack Obama’s administration, in which Biden served as vice president. A second Biden ally said that Blinken was Biden’s first choice. An announcement is likely on Tuesday.

Originating Source

Biden to pick Janet Yellen for Treasury secretary

President-elect Joe Biden will choose Janet Yellen, former chair of the Federal Reserve, as his secretary of the Treasury, according to a source with knowledge of the pick. Yellen, who will be the first woman to hold the job should she be confirmed by the Senate, will be tasked to lead Biden’s economic response to the coronavirus pandemic, which has wreaked havoc on the economy and led millions of Americans to lose their jobs. She will also be asked to make good on the former vice president’s campaign promise to narrow the economic divide between rich and poor in the United States.

Originating Source

AstraZeneca says COVID-19 ‘vaccine for the world’ can be 90% effective

AstraZeneca said on Monday its COVID-19 vaccine was 70% effective in pivotal trials and could be up to 90% effective, giving the world’s fight against the global pandemic a third new weapon that can be cheaper to make, easier to distribute and faster to scale-up than rivals. The British drug maker said it will have as many as 200 million doses by the end of 2020, around four times as many as U.S. competitor Pfizer Inc. Seven hundred million doses could be ready globally as soon as the end of the first quarter of 2021. “This means we have a vaccine for the world,” said Andrew Pollard, director of the Oxford University vaccine group that developed the drug.

Originating Source

In latest China jab, U.S. drafts list of 89 firms with military ties

The Trump administration is close to declaring that 89 Chinese aerospace and other companies have military ties, restricting them from buying a range of U.S. goods and technology, according to a draft copy of the list seen by Reuters. The list, if published, could further escalate trade tensions with Beijing and hurt U.S. companies that sell civil aviation parts and components to China, among other industries. A spokesman for the U.S. Department of Commerce, which produced the list, declined to comment. Speaking in Beijing, Chinese Foreign Ministry spokesman Zhao Lijian said China “firmly opposes the unprovoked suppression of Chinese companies by the United States.”

Originating Source

UK aims to roll out COVID vaccines next month

Britain will seek to start administering a COVID-19 vaccine before Christmas with the bulk of the rollout at the start of the new year, with life getting back to normal after Easter, health minister Matt Hancock said on Monday. “We hope to be able to start vaccinating next month,” Hancock told BBC TV after AstraZeneca announced its vaccine could be up to 90% effective. “The bulk of the vaccine rollout programme will be in January, February, March. And we hope that sometime after Easter things will be able to start to get back to normal.”

Originating Source

Fed’s Evans sees no rate hikes until late 2023, maybe 2024

Chicago Federal Reserve Bank President Charles Evans said Monday there is still “quite a long ways to go” for the U.S. recovery from the coronavirus crisis, adding that he expects the Fed to keep interest rates at their current near-zero level until perhaps into 2024. “If the economy picks up next year and we get on top of the virus and the vaccines are very effective and they are deployed quickly and throughout, then we are going to be in a much better situation,” Evans told the Iowa Bankers Association. But that won’t mean the Fed will take its foot off the monetary gas pedal. Under a new policy strategy adopted just months ago, the Fed has vowed to keep interest rates near zero until the economy reaches full employment and inflation not only hits the Fed’s 2% goal but is set to move above that. With inflation in his view unlikely to reach 2% until late 2022 or even 2023, “we are not expecting the funds rate to be raised before 2023 – probably late, maybe even 2024 in my opinion,” he said.

Originating Source

Fed’s Barkin: Next few months could be challenging until vaccine available

A vaccine to prevent the coronavirus may not be widely available until next summer, and households could struggle over the next several months without more government aid, Richmond Federal Reserve Bank President Thomas Barkin said on Monday. While development of an effective vaccine could boost growth by making people more comfortable with in-person activities, such a vaccine may not be widely available “until this summer at best,” Barkin said during an event organized by Greater Winston-Salem, Inc. “So the next few months could be challenging.”

Originating Source

No-deal Brexit would have a more lasting effect on UK than COVID: BoE’s Bailey

Bank of England Governor Andrew Bailey said on Monday a no-deal Brexit would cause longer-term damage to Britain’s economy than the COVID-19 pandemic, and the impact of the change might be felt for decades. “Well, I think the long-term effects … would be larger than the long-term effects of COVID,” Bailey said when asked by a lawmaker about the consequences for the economy if Britain and the European Union fail to strike a post-Brexit trade deal. London and Brussels remain locked in negotiations ahead of the Dec. 31 expiry of Britain’s Brexit transition period. Bailey said he was “at the rather more optimistic end” about the impact of COVID, beyond its short-term shock which the BoE thinks will cause a record 11% contraction of Britain’s economy this year. “It takes a much longer period of time for what I call the real side of the economy to adjust to the change in openness and adjust to the change in the profile of trade,” he told parliament’s Treasury Committee. He recalled how officials working in 1997 on tests for whether Britain should adopt the euro estimated it would take 30 to 40 years for the economy to adapt to a shift to the single currency. “It’s hard to put a multiple on it as you say, but I think you’re basically right to say that in that scenario you would expect a longer-term effect from the exit trade agreement,” Bailey said.

Originating Source

Top Trump News

Michigan’s state board certifies Biden’s win

The Michigan State Board of Canvassers voted Monday to certify the state’s election results, formally granting President-elect Joe Biden the state’s 16 electoral votes. The certification all but erases President Donald Trump’s pathway to try to overturn the election results through legal challenges that have been dismissed in key states. One of the two Republican members of the Michigan state canvassing board, Aaron Van Langevelde, joined the two Democrats to vote to certify the election results, after it was unclear how he would vote prior to the meeting.

Originating Source

Pennsylvania

U.S. President Donald Trump’s campaign on Monday told a federal appeals court it would seek to halt the “effect” of Pennsylvania’s likely certification of the Nov. 3 election results, after a lower court paved the way to certify President-elect Joe Biden as the winner. “This action is of nationwide importance because of the consequences of flawed election processes in the election for the President of the United States in the Commonwealth, which could turn the election in favor of either candidate,” lawyers for the campaign wrote in a court filing to the 3rd Circuit U.S. Court of Appeals. Pennsylvania was expected to send its county results to its top election official for certification on Monday. Under Pennsylvania law, the candidate who wins the popular vote is awarded all of the state’s electoral college votes. Biden received 51% of the vote in Pennsylvania and 81,000 more votes than Trump. The campaign is appealing part of a decision from the U.S. District Court for the Middle District of Pennsylvania. The lawsuit filed by Trump’s campaign in the Pennsylvania district court alleged inconsistent treatment by county election officials of mail-in ballots.

Originating Source

Russian President Vladimir Putin

Russian President Vladimir Putin said he’s ready to work with any U.S. leader, but still isn’t ready to recognize the election victory of Joe Biden. “We will work with anyone who has the confidence of the American people,” Putin said on Russian state TV Sunday. “But that confidence can only be given to a candidate whose victory has been recognized by the opposing party, or after the results are confirmed in a legitimate, legal way.” The comments are some of the most detailed since the election from Putin, one of a dwindling number of leaders who haven’t recognized Biden as the next U.S. head of state. Russia, accused by U.S. intelligence agencies of intervening in 2016 to help get Trump elected, has been wary of Biden, fearing an increase in sanctions pressure and clashes over human rights.

Originating Source

Economic Indicators

Germany Manufacturing Purchasing Managers Index (PMI)

The IHS Markit Germany Manufacturing PMI fell to 57.9 in November of 2020 from 58.2 in October, but above market forecasts of 56.5, flash estimates showed. The reading still pointed to a strong growth in factory activity, with the output index remaining levanted at 62.7, albeit down from October’s peak of 65.1, its first correction for seven months. Also, order books extended their recent recovery, helped by rising exports sales, albeit with the data highlighting some loss of momentum in the rate of growth. Job losses slowed and factory gate charges increased to the greatest extent since May 2019 amid a solid and accelerated uptick in goods producers’ purchase prices. Finally, manufacturers remained generally upbeat about the outlook amid progress in the development of COVID-19 vaccines.

Eurozone Manufacturing Purchasing Managers Index (PMI)

The IHS Markit Eurozone Manufacturing PMI fell to 53.6 in November 2020, from 54.8 in the previous month but remained above market consensus of 53.1 as a renewal of lockdowns in many European countries so far have not had a significant effect on the factory activity. Manufacturing production continued to rise markedly, while inflows of new orders increased at the slowest rate recorded over the past five months. At the same time, employment declined at a softer rate and work-in-hand was up for a fourth successive month. On the price front, input cost inflation hit a near two-year high, while selling prices increased only slightly. Looking ahead, business confidence was the strongest since March 2018, due to encouraging news of vaccine developments in recent weeks.

U.K. Manufacturing Purchasing Managers Index (PMI)

The IHS Markit/CIPS UK Manufacturing PMI jumped to 55.2 in November of 2020 from 53.7 in October, beating market forecasts of 50.5, preliminary estimates showed. The reading pointed to a strong growth in factory activity amid a sustained recovery in production volumes after stoppages at the start of the pandemic. Survey respondents also commented on rising demand from export markets, especially in China and the EU. The latter was often linked to pre-purchasing due to Brexit uncertainty as European customers sought delivery of orders before the end of the transition period. Employment declined at a slower pace and supplier delivery times lengthened sharply amid severe delays at UK ports, alongside a robust degree of stock building as manufacturers sought to accumulate critical inputs before the end of the Brexit transition period on 31st December 2020. Finally, manufacturers remained optimistic amid hopes of an end to COVID-19 restrictions and positive vaccine news.

U.S. Manufacturing Purchasing Managers Index (PMI)

The IHS/Markit US Manufacturing PMI jumped to 56.7 in November of 2020 from 53.4 in October, beating market forecasts of 53, flash estimates showed. The reading pointed to the strongest expansion in factory activity since September of 2014, amid a marked rise in output, largely driven by a notable uptick in new business as demand conditions improved. Moreover, the rise in production was the fastest since March 2015 and new export orders also rebounded but job creation slowed despite the strongest rise in backlogs of work since August of 2014. The rate of input price inflation picked up to the fastest since October of 2018, as demand for inputs increased once again and amid a record-breaking deterioration in vendor performance. Higher supplier prices were passed on to clients in part, however, through the sharpest rise in charges for over two years. Finally, business confidence soared to the strongest since February of 2015.

Economic Calendar

Monday

DE Manufacturing PMI (Nov)  

Monday

UK Composite PMI 

Tuesday

DE GDP (QoQ) (Q3)

Tuesday

DE Ifo Business Climate Index (Nov)

Wednesday

US CB Consumer Confidence (Nov)

Wednesday

UK Autumn Budget  

Thursday

US Initial Jobless Claims

Thursday

US GDP (QoQ) (Q3)

Thursday

US Crude Oil Inventories

Friday

UK Nationwide HPI (MoM)