Monex Morning Report – Tue 8 Dec 2020

OVERNIGHT HIGHLIGHTS

Nasdaq books record but Dow ends lower as investors await pandemic aid, government-shutdown updates; Asian stocks set for muted open on U.S. retreat

Congress aims to fund government for a week to buy time for spending, covid relief deals; Japan set to unveil $706 billion stimulus package

Congress aims to fund government for a week to buy time for spending, covid relief deals

The House plans to vote Wednesday on the short-term measure to keep the government running through Dec. 18, according to Majority Leader Steny Hoyer, D-Md. Senate Majority Leader Mitch McConnell, R-Ky., later reiterated the plan. Funding will lapse on Saturday if Congress cannot approve a spending bill. Politico first reported plans for a one-week extension. The decision to buy more time comes as lawmakers rush to reach agreement both on a broad appropriations plan and a package to boost the health-care system and economy as a sustained Covid-19 infection surge stresses hospitals across the country. Congressional leaders previously signalled they wanted to tie aid provisions to a funding proposal. But familiar sticking points have emerged as a bipartisan group tries to put the finishing touches on legislation they hope will serve as the template for a year-end rescue package. Failure to act before the end of the year would send millions of Americans spiralling into deeper financial peril.

Originating Source

U.S. Senate Democratic leader sees progress on bipartisan COVID relief bill

U.S. Senate Democratic leader Chuck Schumer on Monday accused Senate Republican leader Mitch McConnell of refusing to compromise on coronavirus relief legislation, but he said there were signs of progress in talks on a bipartisan bill.

Originating Source

UK, EU leaders to meet face-to-face to try to seal Brexit trade deal

British and EU leaders will meet face-to-face to try to seal a post-Brexit trade deal after failing again to narrow their differences on Monday, increasing the chance of a disorderly parting of ways at the end of the month. With just over three weeks before Britain completes its journey out of the bloc, a senior UK government source said there was “every chance we are not going to get there” and EU officials said, if anything, negotiations had gone backwards. Since Britain left the European Union in January, the two sides have been stuck over three issues, raising the prospect of what many businesses say is their nightmare scenario – no agreement to govern around $1 trillion in annual trade. Prime Minister Boris Johnson will travel to Brussels to meet European Commission President Ursula von der Leyen, the timing of which has yet to be confirmed, in what some say will be a last roll of the dice to secure a trade deal. But he is not expected to time his trip to coincide with an EU summit on Thursday and Friday.

Originating Source

Japan set to unveil $706 billion stimulus package

“Yoshihide Suga is set to unveil his first stimulus package as Japan’s prime minister on Tuesday amid an increase in virus cases and a dip in support for his cabinet that are an early test of his leadership. The measures put together by Suga’s government will have an overall value of 73.6 trillion yen ($707 billion), according to a final draft of the package obtained by Bloomberg. The package will include around 40 trillion yen in fiscal measures, such as loans, investment and direct expenditure. The spending will be partly financed by 19.2 trillion yen from a third extra budget. While revised growth figures out Tuesday morning are likely to confirm that the economy surged back in the third quarter at the fastest pace in 50 years, record infection numbers in recent weeks are likely to cool the consumer spending that helped drive the recovery in the summer. If voluntary restrictions on movement and activity continue to re-emerge in Japanese cities, the effect on spending could deepen. ”

Originating Source

G7 finance officials back need to regulate digital currencies: Treasury

Finance ministers and central bankers from the Group of Seven (G7) advanced economies strongly supported the need to regulate digital currencies, the U.S. Treasury Department said in a statement on Monday after a virtual meeting of the officials. German Finance Minister Olaf Scholz issued a sharply worded statement after the meeting, underscoring his concerns about authorizing the launch of Facebook (NASDAQ:FB)’s Libra cryptocurrency – newly renamed Diem – in Germany and Europe. “A wolf in sheep’s clothing is still a wolf,” he said. “It is clear to me that Germany and Europe cannot and will not accept its entry into the market while the regulatory risks are not adequately addressed.” He added: “We must do everything possible to make sure the currency monopoly remains in the hands of states.”

Originating Source

China suspends beef imports from sixth Australian beef supplier

China said on Monday it had suspended imports of beef from Australia’s Meramist Pty Ltd, the sixth supplier to face such a move in a country that is one of China’s main meat suppliers. China, which did not say why it took the latest decision, has already banned imports from five other Australian beef suppliers this year, citing reasons that have included issues with labelling and health certificates. Australia’s ties with top trade partner China, already strained, significantly deteriorated after Canberra called for an enquiry into the origins of the coronavirus. China stopped receiving applications and registration for beef exports from the Meramist plant from Dec. 7, China’s General Administration of Customs said in a notice on its website, without giving a reason.

Originating Source

White House advisor Kudlow says ‘we’re all talking to each other right now’

White House economic adviser Larry Kudlow on Monday said talks on another round of stimulus funding to deal with the deadly coronavirus pandemic are moving in the right direction and President Donald Trump’s administration and Congress are getting closer to agreement. Kudlow, who said during an online Washington Post interview he believes there are threats to the V-shaped recovery he frequently describes in the U.S. economy, reiterated that Senate Majority Leader Mitch McConnell is the lead negotiator for Trump and other Republicans on a major aid package.

Originating Source

NZ central bank to seek views on plans to resume LVR restrictions

The Reserve Bank of New Zealand (RBNZ) said on Tuesday it would seek views on its plan to resume loan-to-value ratio (LVR) restrictions on mortgage lending from March next year. RBNZ said it was concerned that increases in highly-leveraged borrowing, if continued, could lead to emerging risks to financial stability. “We are proposing to reinstate the LVR restrictions at the same level as prior to the onset of COVID-19,” it said. RBNZ will accept submissions until Jan. 22, 2021 and the decision will be issued in February.

Originating Source

Top Trump News

New China Sanctions

The U.S. is preparing to sanction at least a dozen more Chinese officials over their role in the recent disqualification of Hong Kong legislators, Reuters reported. The latest round of sanctions over Hong Kong could come as early as Monday, Reuters said, citing three people including an American official familiar with the matter. The U.S. move comes as President Donald Trump continues to pile pressure on China’s ruling Communist Party in his final weeks in office.

Originating Source

Biden names key players to COVID-19 response

President-elect Joe Biden picked California Attorney General Xavier Becerra for secretary of health and human services as he prepares his administration’s response to the raging coronavirus pandemic and said he would name more Cabinet nominees later this week. Biden, who takes office on Jan. 20, also chose Dr. Rochelle Walensky, chief of infectious diseases at Massachusetts General Hospital in Boston, to run the U.S. Centers for Disease Control and Prevention (CDC). Biden formally tapped Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, as his chief medical adviser on the virus. Biden, who has already announced top nominees for his national security and economic teams, told reporters he expected to name his defense secretary on Friday and his nominee for attorney general sometime this week.

Originating Source

Highest weekly COVID-19 deaths since April

The United States lost 15,000 people to COVID-19 last week, the deadliest seven days since April, and health officials warned that the worst is yet to come. The number of new coronavirus cases rose 19% to 1.4 million in the week ended Dec. 6, after falling the previous week as many testing centers were closed for the Thanksgiving holiday, according to a Reuters analysis of state and county reports. Rhode Island and Indiana had the highest number of cases per capita, with more than 700 people diagnosed for every 100,000 residents. Government and health officials have warned that cases and deaths will rise further in the coming weeks and months due to people traveling and gathering with family — against the advice of health experts.

Originating Source

Economic Indicators

Australia Performance Services Index

Services PMI in Australia increased to 52.90 points in November from 51.40 points in October of 2020. 

China Balance of Trade

China’s trade surplus widened to USD 75.42 billion in November 2020 from USD 37.18 billion in the same month the previous year, and far above market expectations of USD 53.5 billion. This was the largest trade surplus since at least 1981, as exports jumped to an all-time high amid improving global demand. The country’s trade surplus with the US widened to USD 37.42 billion in November from USD 31.37 billion in October. Considering the first eleven months of the year, the trade surplus was USD 459.92 billion, as exports rose 2.5 percent and imports fell 1.6 percent.

Germany Industrial Production MoM

German industrial production grew by 3.2 percent from a month earlier in October 2020, the biggest increase for four months and easily beating market expectations of 1.6 percent. Still, output remained 4.9 percent below February’s level, the month before restrictions were imposed to curb the spread of the pandemic. Within industry, production was up for both intermediate (4.0 percent) and capital goods (5.2 percent), but declined for consumer goods (-2.4 percent). In addition, energy output rose by 4.0 percent and construction activity advanced by 1.6 percent.

Economic Calendar

Tuesday

DE ZEW Economic Sentiment (Dec)

Wednesday

US Nonfarm Productivity

Thursday

US JOLTs Job Openings (Oct)

Thursday

US Crude Oil Inventories

Thursday

UK GDP

Thursday

UK Manufacturing Production (MoM) (Oct)

Thursday

EU ECB Interest Rate Decision (Dec)

Friday

US Core CPI (MoM) (Nov)

Friday

US Initial Jobless Claims