Monex Morning Report – Tue 29 Sep 2020

OVERNIGHT HIGHLIGHTS

Dow ends 410 points higher, stocks rally ahead of presidential debate and Friday’s jobs report; Asian stocks to extend global rally

Lagarde says ECB will act if needed as pandemic burdens economy; Pelosi says White House has to offer more on stimulus

Top Market News

Lagarde says ECB will act if needed as pandemic burdens economy

The European Central Bank is ready to deploy more monetary stimulus to aid the recovery if needed as the pandemic damps prospects for the economy, according to President Christine Lagarde. Addressing European lawmakers on Monday, Lagarde called the recovery across the 19-nation euro zone uncertain and incomplete, with consumers cautious to spend and companies reluctant to invest. “The public health crisis will continue to weigh on economic activity and poses downside risks to the economic outlook,” Lagarde said in a video conference with members of the European Parliament’s Economic and Monetary Affairs Committee. The Governing Council “continues to stand ready to adjust all of its instruments, as appropriate.”

Originating Source

The U.S. is ‘not in a good place’ as daily coronavirus cases grow beyond 40,000, Fauci says

The United States is “not in a good place” as colder months loom and the number of newly reported coronavirus cases continues to swell beyond 40,000 people every day, White House coronavirus advisor Dr. Anthony Fauci said Monday. Covid-19 cases were growing by 5% or more, based on a weekly average to smooth out daily reporting, in 26 states as of Sunday, according to a CNBC analysis of data. Cases grew by nearly 9% nationwide compared with a week ago, moving just above 44,300 new cases on average as of Sunday, according to Johns Hopkins data. Fauci, director of the National Institute of Allergy and Infectious Diseases, has said for weeks that the U.S. is reporting an “unacceptably high” number of new coronavirus cases every day. The country should aim for daily new cases below 10,000, not around 40,000 as it currently stands, he said. “There are states that are starting to show an uptick in cases and even some increase in hospitalizations in some states,” Fauci said.

Originating Source

Fed’s Mester says U.S. must do more to promote economic equality

The U.S. economy can’t reach its potential unless the country addresses gaps in economic opportunity, said Federal Reserve Bank of Cleveland President Loretta Mester. “Unfortunately, today, the U.S. economy does not offer the same opportunities to all,” Mester said in a speech Monday at an online event hosted by the African American Chamber of Commerce of Western Pennsylvania. The adverse impacts of the coronavirus pandemic is disproportionately affecting vulnerable communities including low-income, and Black and Hispanic workers, Mester said. “Unless actions are taken to promote an inclusive economy — one in which people have the chance to move themselves and their families out of poverty, one in which systemic racism does not limit opportunities and one in which all people can fully participate — the U.S. economy will not be able to live up to its full potential and the country will suffer,” she said.

Originating Source

Pelosi says White House has to offer more on stimulus

House Speaker Nancy Pelosi said the White House will have to agree to “much more” spending for a fresh round of stimulus if there is any hope of striking a deal before the election. Pelosi said she talked with Treasury Secretary Steven Mnuchin on Sept. 27 and plans to discuss the stimulus with him again on Sept. 28. She held out hopes that they still can find a way to bridge the roughly $1 trillion gap between them on a plan to bolster the economy. “We can get this done,” Pelosi said Sept. 28 on MSNBC, while emphasizing that more money is needed to combat the pandemic, safely open schools and businesses and help Americans hurt by recession. “When he’s ready to come back to the table we’re ready to have that conversation,” Pelosi said. “But he has to come back with much more money to get the job done.” The sides have been at an impasse since August, and time is running out for a deal before the Nov. 3 election. Pelosi has been insisting that the White House agree to at least $2.2 trillion in new aid, including funds for cash-strapped state and local governments and $600 per week in supplemental unemployment benefits. But the Democratic demands have since grown to $2.4 trillion.

Originating Source

Australia’s Westpac revises RBA rate call; now expects cut in November

Economists at Australia’s Westpac Banking Group pushed back their forecasts for a rate cut by the country’s central bank to November from October, saying it would allow the government “clear air” to sell its budget. Westpac economist Bill Evans expects the Reserve Bank of Australia (RBA) to cut the cash rate by 15 basis points to 0.1% and commit to buying bonds in the 5-10 year maturities at its Nov. 3 board meeting. Just last Wednesday, Evans had predicted a move in October on the same day as the delayed federal budget.

Originating Source

Australia needs a bigger budget deficit for faster recovery from pandemic: Deloitte

Australia’s conservative government will need to embark on a more aggressive spending plan to power the country’s virus-stricken economy and boost employment when it unveils its budget next week, Deloitte Access Economics said on Monday. Deloitte forecast a budget deficit of A$198.5 billion for the current financial year-ending June 2021, A$14 billion higher than the Treasury forecast in July, assuming no new fiscal policies are announced on Oct.6. That would be the highest since records began post-World War Two. Other economists, including AMP, expect 2020/21 budget deficit to surpass A$200 billion, from an estimated A$85.3 billion last year. “Australia’s defence against the virus has been world class so far. But challenges are mounting,” Deloitte Access Economics wrote in a note.

Originating Source

U.S. appeals at WTO to place Canada lumber case in legal void

The United States is appealing at the World Trade Organization against a ruling that largely favoured Canada in a long-running dispute over lumber, putting the case into a legal void. A three-person WTO panel determined in August that U.S. duties, designed to counter Canadian subsidies on softwood lumber, breached global trading rules. The United States notified the WTO on Monday that it had decided to appeal. However, Washington has blocked appointment to the WTO’s Appellate Body, leaving it with too few members to hear such appeals. The Canada case will consequently sit in a legal limbo. The United States said the panel ruling was deeply flawed, adding it was open to discussions with Canada to resolve the dispute.

Originating Source

China calls WTO ruling on Trump’s tariffs ‘objective and fair’

China’s ambassador to the World Trade Organization said on Monday that a panel ruling by the global trade body this month which found that Washington had breached rules through its multi-billion dollar China tariffs was “objective and fair”. The ruling on September 15 said that tariffs imposed by President Donald Trump’s administration on more than $200 billion in Chinese goods broke trade rules because they were above maximum rates and applied only to China. “We think that the panel made an objective and fair decision,” Zhang Xiangchen said at a virtual trade conference in which his U.S. counterpart Dennis Shea also participated. “We hope that it will facilitate the prompt resolution of the dispute between China and the U.S.,” he added. Shea did not comment on the case at the event although the U.S. Trade Representative previously criticised the ruling.

Originating Source

Top Trump News

TikTok and WeChat

The Trump administration failed to prove Chinese-owned TikTok and WeChat pose enough of a national security threat to justify an American ban, two federal judges have ruled this month. U.S. District Judge Carl Nichols in Washington said in a court filing Monday that he blocked a ban on new downloads of TikTok because the government likely overstepped its authority under the emergency-powers law it invoked to justify the prohibition. Earlier, U.S. Magistrate Judge Laurel Beeler in San Francisco blocked a similar ban on WeChat. The decisions show that, while judges may agree with the notion that China poses a threat, the administration hasn’t yet shown that the apps themselves are a problem.

Originating Source

New Sanctions on Iran

The Trump administration is considering fresh sanctions to sever Iran’s economy from the outside world by targeting more than a dozen banks and labeling the entire financial sector off-limits, three people familiar with the matter said. The move would effectively leave Iran — which has seen its economy crushed by the loss of oil sales and most other trade thanks to existing American restrictions — isolated from the global financial system, slashing the few remaining legal linkages it has and making it more dependent on informal or illicit trade. The proposed sanctions would have two objectives, according to the people, who asked not to be identified: close one of the few remaining financial loopholes allowing Iran’s government to earn revenue, and stymie Democrat Joe Biden’s promise to re-enter a 2015 nuclear deal if he wins the presidency. The proposal is still under review and hasn’t been sent to the U.S. president.

Originating Source

National security’ issue

Nancy Pelosi, Speaker of the House of Representatives, asked whether Mr Trump owed money to foreign interests, following an article on his financial records by the New York Times. It alleges Mr Trump paid only $750 (£580) in federal income tax in both 2016 and 2017. Mr Trump called the report “fake news”. Ms Pelosi said the report showed that “this president appears to have over $400m in debt”. “To whom? Different countries? What is the leverage they have?” she asked, adding: “So for me, this is a national security question.”

Originating Source

Economic Indicators

Japan Tokyo CPI

Tokyo Cpi in Japan remained unchanged at 102.10 points in August from 102.10 points in July of 2020.

Economic Calendar

Wednesday

CNY Manufacturing PMI (Sep)

Wednesday

UK GDP (QoQ) (Q2)

Wednesday

US GDP (QoQ) (Q2)

Thursday

US Pending Home Sales (MoM) (Aug)

Thursday

US Crude Oil Inventories

Thursday

EUR German Manufacturing PMI (Sep)

Thursday

US Initial Jobless Claims

Friday

“US ISM Manufacturing PMI (Sep) ”

Friday

“US Nonfarm Payrolls (Sep) ”