Monex Morning Report – Wed 2 Dec 2020

OVERNIGHT HIGHLIGHTS

S&P 500, Nasdaq clinch record closes on renewed hopes for fiscal aid package; Asia stocks set for gains as U.S. hits fresh high

U.S. Senate leader McConnell urges new COVID-19 aid in broad funding bill; Mnuchin, Powell hone in on need to aid U.S. small businesses

McConnell shoots down bipartisan $900 billion coronavirus stimulus plan as stalemate drags on

“Senate Majority Leader Mitch McConnell rejected a proposed bipartisan coronavirus stimulus package Tuesday amid months of congressional inaction on curbing the economic damage from the outbreak. The Kentucky Republican, who has supported about $500 billion in new aid spending, said he wants to pass what he called a “targeted relief bill” this year. McConnell said he spoke to White House officials about what President Donald Trump would sign into law. He plans to offer potential solutions to GOP senators and get their feedback. “We just don’t have time to waste time,” he told reporters in response to the roughly $908 billion plan put together by bipartisan members of the GOP-controlled Senate and Democratic-held House. McConnell said a must-pass spending bill and pandemic relief provisions will “all likely come in one package.” Congress needs to approve funding legislation by Dec. 11 to avoid a government shutdown. ”

Originating Source

U.S. Senate leader McConnell urges new COVID-19 aid in broad funding bill

The U.S. Congress should include a fresh wave of coronavirus stimulus in a must-pass $1.4 trillion spending bill aimed at heading off a government shutdown in the midst of a pandemic, top Senate Republican Mitch McConnell said on Tuesday. After a monthslong standoff between Republicans and Democrats that persisted as COVID-19 infections and deaths soared, lawmakers put forth a flurry of proposals in an attempt to pass something this month. Both McConnell and President-elect Joe Biden separately spoke of passing a coronavirus aid bill quickly and debating an additional bill early next year to address the worst U.S. health crisis in living memory. But difficult talks over details remained with little time to spare, as Congress rushes to pass a $1.4 trillion bill by Dec. 11 to keep government agencies funded. Without action, a range of government programs would be interrupted and many federal workers would be furloughed.

Originating Source

Mnuchin, Powell hone in on need to aid U.S. small businesses

Top U.S. economic officials on Tuesday urged Congress to provide more help for small businesses amid a surging coronavirus pandemic and concern that relief from a vaccine may not arrive in time to keep them from failing. “These businesses cannot wait two or three months,” Treasury Secretary Steven Mnuchin said during a hearing before the Senate Banking Committee, urging lawmakers to put as much as $300 billion into grants for struggling businesses. His comments came amid some renewed momentum for a pandemic aid package, with Republicans and Democrats acknowledging the next few weeks will be critical in determining whether the country’s better-than-expected recovery can be coaxed along until the impact of the pending vaccine is felt — or will weaken as benefits to families expire and the coronavirus continues spreading.

Originating Source

Fed’s Kaplan says bracing for difficult months ahead

Dallas Federal Reserve Bank President Robert Kaplan on Monday said he expects strong economic growth in the second half of next year once newly developed COVID-19 vaccines get rolled out widely, but with cases surging now he sees a “very difficult” next three to six months. “If we can see the resurgence moderate, I think you’ll continue to see growth in the fourth quarter, and you might even see growth in the first quarter of next year, but right now, the trends at least in the virus don’t look like they are moderating,” Kaplan told Reuters in an interview. “So we’re bracing ourselves here.” Fed policymakers are gearing up for their next policy-setting meeting, in mid-December, as hospitalizations set records and some communities are re-imposing restrictions to bring rampant COVID-19 spread under control. Meanwhile, Congress has made little progress on passing a fiscal aid package in the waning weeks of the Trump administration, even as households deplete savings from aid distributed early on in the crisis.

Originating Source

Fed’s Evans says economy ‘screams out’ for more fiscal help

The U.S. central bank is already doing “quite a lot” to boost the economy and has little scope to do much more, Chicago Federal Reserve Bank President Charles Evans said on Tuesday, calling again for more fiscal help from the U.S. Congress. “This is a real economic downturn, it’s a public health safety crisis, and so that screams out for remedies other than monetary policy,” Evans said in an interview aired Tuesday on CNN International. “There are very useful arguments that much of the country could stand to have additional relief during the current increased virus spread and the risks that the economy faces.”

Originating Source

No-trade deal Brexit is still possible, UK minister says

A senior British minister said on Tuesday there was still a chance of a turbulent Brexit without a trade deal as talks with the European Union had snagged on fishing, governance rules and dispute resolution. Just 30 days before Britain leaves the EU’s orbit following a standstill transition period since it formally quit the bloc, the sides are trying to agree a trade deal to avoid a rupture that could snarl almost $1 trillion in annual trade. With each side urging the other to compromise, a French official said Britain must clarify its positions and “really negotiate”, and cautioned that the EU would not accept a “substandard deal”. Michael Gove, Chancellor of the Duchy of Lancaster, the cabinet minister who oversees the Brexit talks for London, said a deal was close but that to get it over the line the EU would have to live up to its responsibilities. Asked if a “no deal” scenario was closer than anyone would admit, he told ITV (LON:ITV): “It’s certainly the case that there is a chance that we may not get a negotiated outcome.”

Originating Source

Euro zone economy suffering even as infections ease – ECB’s Lagarde

A second wave of coronavirus cases may be slowing down in Europe but the economy is still bearing the brunt of the containment measures taken to address it, European Central Bank President Christine Lagarde said on Tuesday. “The second wave is underway and by the way in Europe (it) is beginning to slow down and reduce in intensity because of the new containment measures that have been taken but which indeed are affecting the economy as we speak,” Lagarde said. “All the the latest deveopments that we’re seeing are showing the economy is still suffering.”

Originating Source

Australia c.bank holds rates as housing market booms

Australia’s central bank held rates at near-zero in a widely expected move on Tuesday as easy monetary and fiscal policies propped up the coronavirus-hit economy, fuelling demand for homes and boosting construction activity. At its last policy meeting of the year, the Reserve Bank of Australia (RBA) left its cash rate and the three-year government bond yield target at 0.1% while maintaining its A$100 billion quantitative easing programme. In a short post-meeting statement, Governor Philip Lowe sounded optimistic about a recovery as the country has confidently reopened with almost zero new coronavirus cases. “The economic recovery is under way and recent data have generally been better than expected,” Lowe said. “This is good news, but the recovery is still expected to be uneven and drawn out and it remains dependent on significant policy support.”

Originating Source

Top Trump News

Trump Sues to Reverse Wisconsin Election Certification

President Donald Trump and his re-election campaign asked the Wisconsin Supreme Court to reverse the certification of President-elect Joe Biden’s victory in the state, claiming more than 200,000 mail-in ballots were illegally counted. The Tuesday filing is Trump’s latest effort to overturn the result of the Nov. 3 election and comes a day after Wisconsin certified its election results and, with them, the state’s 10 electoral votes. Biden won the state by around 20,000 votes. According to the lawsuit naming Wisconsin Governor Tony Evers and other state officials, election boards in Democratic-leaning Milwaukee and Dane counties failed to follow proper procedure for issuing mail-in ballots and also accepted tens of thousands that should have been rejected based on various errors. “This case seeks to disenfranchise over 200,000 Wisconsinites,” Attorney General Josh Kaul, a Democrat, said in a statement. “It doesn’t claim that a single one of those voters was ineligible to vote in Wisconsin. Instead, it seeks to establish a two-tiered system for votes cast in the presidential election, with citizens from two of our counties subject to disenfranchisement under much stricter rules than citizens in the rest of the state.”

Originating Source

Biden, U.N. chief discuss ‘strengthened partnership’ on COVID-19, climate

U.S. President-elect Joe Biden spoke with U.N. Secretary-General Antonio Guterres on Monday, Biden’s transition team said, discussing the need for a “strengthened partnership” to combat COVID-19 pandemic and climate change – two areas where President Donald Trump shunned a multilateral approach. Trump has referred to climate change as a “hoax” and in 2017 pulled the United States out of a global accord to tackle climate change – a decision which took effect on Nov. 4. Biden has pledged to rejoin the deal, which was agreed in 2015.

Originating Source

Biden names top economic advisers as

U.S. President-elect Joe Biden named several women to his top economic policy team on Monday, including former Federal Reserve Chair Janet Yellen as Treasury secretary nominee, setting the stage for diversity and a focus on recovery from the pandemic. Arizona and Wisconsin on Monday certified Biden as the winner in each state, further undermining President Donald Trump’s attempts to dispute his loss to Biden in the Nov. 3 election by making unsubstantiated claims of fraud. The confirmation of vote counts is usually a mere formality but has taken on added significance this year in the face of Trump’s baseless allegations that the election was “rigged” in Biden’s favor.

Originating Source

Economic Indicators

China Caixin Manufacturing PMI

The Caixin China General Manufacturing PMI rose to 54.9 in November 2020 from 53.6 in October and beating market estimates of 53.5. This was the seventh straight month of growth in factory activity and the strongest since November 2010, as the post epidemic economic recovery continued to pick up speed. Both output and new orders rose at the fastest rate in a decade, employment grew the most since May 2011 and new orders rose further. Also, buying levels increased at the steepest pace since the start of 2011, with stocks of purchases rising the most since February 2010. At the same time, capacity pressures persisted, with the rate of backlog accumulation being the quickest since April. Meanwhile, the active market led to longer delivery times from suppliers. On the price front, the gauges for input and output prices rose further into expansionary territory. Looking ahead, sentiment remained strongly positive, despite easing slightly since October.

Germany Manufacturing PMI

The IHS Markit/BME Germany Manufacturing PMI was revised slightly down to 57.8 in November of 2020 from a preliminary of 57.9 and below 58.2 in October which was the highest in near 3 years. There was a slight loss of momentum in the pace of factory growth, with both output and new orders rising more slowly amid a second wave of coronavirus cases and new lockdown measures at home and abroad. Export orders slowed but remained strong overall amid rising sales to mainland Europe and Asia, especially China. Also, the rate of decline in factory employment was the slowest since June 2019 and business confidence was the second-highest on record, supported by growing hopes of an end to the pandemic and an improvement in demand.

Germany Unemployment Rate

Germany’s seasonally adjusted harmonized unemployment stood at 4.5 percent in October 2020, the same as in each of the previous 3 months and remaining at the highest level since December 2015. The number of unemployed people fell by 0.5 percent from the previous month to 1.97 million while employment was almost unchanged at 42.17 million. Youth unemployment rate, measuring job-seekers under 25 years old, inched down 0.1 percentage points to 6.0 percent in October.

Euro Area Manufacturing PMI

The IHS Markit Eurozone Manufacturing PMI was revised higher to 53.8 in November of 2020 from a preliminary of 53.6, but remained below 54.8 in October which was the highest in over 2 years. Still, the reading pointed to a strong growth in factory activity and above the long-run average. The goods sectors continued to expand at marked monthly rates but consumer goods producers registered a modest deterioration in operating conditions for the first time in six months. Except for the Netherlands and Ireland, all countries recorded a weakening of their respective PMIs during the latest survey period. Germany remained the best-performing country. Finally, business confidence improved to its highest for over two-and-a-half years. Dutch, Italian and German companies were the most confident manufacturers in November.

Euro Area CPI

Consumer prices in the Euro Area went down 0.3 percent year-on-year in November of 2020, the same as in each of the previous two months and worse than market forecasts of a 0.2 percent decline, a flash estimate showed. It is the fourth straight month of deflation as energy cost declined 8.4 percent and non-energy industrial goods were down 0.3 percent. In contrast, the main upward pressure came from prices of food, alcohol and tobacco (1.9 percent) and services (0.6 percent). Core inflation which excludes energy, food, alcohol and tobacco was steady at 0.2 percent. On a monthly basis, consumer prices also declined by 0.3 percent.

Canada GDP Growth Rate

The Canadian economy expanded at a record 8.9% on quarter in Q3 2020, following a record 11.3% drop in the previous period, reflecting reopening of the economy, with substantial upturns in housing investment, household spending on durable goods, and exports. These upturns were influenced by favourable mortgage rates, governments’ continued support to households and businesses affected by the pandemic, and growth in major trading partners’ economies in the third quarter. On an annualized basis, the economy surged 40.5%. Household spending rebounded 13%, due to purchases of new trucks, vans, sport utility, used motor vehicles and new passenger cars and food and beverages services. Housing investment rose at a record 30.2%, and exports surged 14.5%, notably to the US, the UK, Germany, Italy and France. However, the GDP was still 5.2% lower than in the same quarter last year.

United States Manufacturing PMI

The IHS Markit US Manufacturing PMI was confirmed at 56.7 in November of 2020, the same as in the preliminary estimate and pointing to the strongest factory growth since September of 2014. Overall growth was supported by faster upturns in output and new orders amid stronger domestic and foreign client demand. Employment rose only marginally, however, and pressure on capacity was exacerbated by near-survey record supply chain delays and input shortages. Despite short-term uncertainty reflected in slower hiring, firms were the most confident regarding the outlook for output over the coming year in almost six years. On the price front, input prices increased markedly and output charges rose at the fastest pace for over two years as firms sought to pass these higher costs on to customers.

The ISM Manufacturing PMI for the US fell to 57.5 in November of 2020 from a two year high of 59.3 reached in October. The PMI came slightly lower than market forecasts of 58, but still pointed to expansion in the overall economy for the seventh month in a row. A slowdown was seen in production (60.8 vs 63), new orders (65.1 vs 67.9) and inventories (51.2 vs 51.9) while employment contracted (48.4 vs 53.2). On the other hand, new export orders increased faster (57.8 vs 55.7). “The manufacturing economy continued its recovery in November. Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are causing strains that will likely limit future manufacturing growth potential. Panel sentiment, however, is optimistic”, said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

Economic Calendar

Tuesday

DE German Manufacturing PMI (Nov)

Tuesday

AU RBA Interest Rate Decision

Wednesday

AU GDP (QoQ) (Q3)

Wednesday

US ISM Manufacturing PMI (Nov)

Thursday

US ADP Nonfarm Employment Change (Nov)

Thursday

US Crude Oil Inventories

Friday

US Initial Jobless Claims

Friday

US ISM Non-Manufacturing PMI (Nov)