Monex Morning Report – Wed 25 Nov 2020

OVERNIGHT HIGHLIGHTS

Dow ends above 30,000 for first time on progress toward a coronavirus vaccine and a Biden administration; Asian stocks rally to build in Asia after U.S. records

Trump gives GSA official go-ahead to start transition to Biden administration; Williams, Bullard say Fed’s bond-buying program Is working well

Mnuchin to put $455 billion in funds out of Yellen’s easy reach

Treasury Secretary Steven Mnuchin will put $455 billion in unspent Cares Act funding into an account that his presumed successor, former Federal Reserve Chair Janet Yellen, will need authorization from Congress to use. Mnuchin plans to place the money into the agency’s General Fund, a Treasury Department spokesperson said Tuesday. That fund can only be tapped with “authority based on congressionally issued legislation,” according to the Treasury’s website. The money includes $429 billion that Mnuchin is clawing back from the Federal Reserve — which backed some of the central bank’s emergency lending facilities — and $26 billion that Treasury received for direct loans to companies. Both initiatives were created under the sweeping Cares Act that was passed earlier this year as the coronavirus pandemic inflicted economic pain on the U.S. The move will leave Yellen — selected by president-elect Joe Biden as his nominee for Treasury secretary — with just under $80 billion available in the Treasury’s Exchange Stabilization Fund, a pot of money that can be used with some discretion by the Treasury chief. Mnuchin sent a letter to Powell last week asking for the return of money provided to the Fed by the Treasury as a backstop that allowed the central bank to lend to certain markets in times of stress. The Fed publicly objected to the move, but agreed to return the funds.

Originating Source

U.S. agency tells Biden he can formally begin transition

The U.S. federal agency that must sign off on the presidential transition told President-elect Joe Biden on Monday that he can formally begin the hand-over process. “I take this role seriously and, because of recent developments involving legal challenges and certifications of election results, am transmitting this letter today to make those resources and services available to you,” General Services Administration chief Emily Murphy wrote in a letter to Biden. U.S. President Donald Trump wrote on Twitter that he was recommending that Murphy and her team “do what needs to be done with regard to initial protocols, and have told my team to do the same.”

Originating Source

Australia cenbank says bond buying working to restrain A$

The Reserve Bank of Australia’s (RBA) latest policy easing has succeeded in holding down the local currency, a top central banker said on Tuesday, while also cautioning against removing stimulus too soon. Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle said cuts in official interest rates and the purchase of government bonds had lowered borrowing costs across the economy and boosted incomes for most households. Historically low rates also made it easier for government to fund its massive fiscal stimulus, said Debelle, adding that the level of debt was “absolutely sustainable”.

Originating Source

BOJ’s Kuroda rebuffs view Japan heading towards deflation

Bank of Japan Governor Haruhiko Kuroda said on Tuesday he did not see Japan heading towards deflation, but added he would watch service-sector consumption and capital expenditure closely. “We expect capital expenditure to rebound, as the hit from COVID-19 eases and helps lift corporate profits,” Kuroda told a semi-annual testimony to parliament.

Originating Source

Williams, Bullard say Fed’s bond-buying program Is working well

The Federal Reserve’s bond-buying program is serving its purpose well at the moment, though the central bank could adjust the parameters if needed, New York Fed President John Williams said. “Going forward, as we watch how the economy is evolving, how the outlook is evolving, we can think about any adjustments we want to make on those purchases,” Williams said Tuesday during a live interview broadcast online by the Wall Street Journal. “I think they’re serving their purposes really well right now.” Speaking elsewhere Tuesday, St. Louis Fed President James Bullard offered similar comments on the central bank’s asset purchases.

Originating Source

France’s Macron announces three-step reopening amid ‘glimmer of hope’

France will start easing its COVID-19 lockdown this weekend so that by Christmas, shops, theatres and cinemas will reopen and people will be able to spend the holiday with their families, President Emmanuel Macron said on Tuesday. In a televised address to the nation, Macron said the worst of the second wave of the coronavirus pandemic in France was over, but that restaurants, cafes and bars would have to stay shut until Jan. 20 to avoid triggering a third wave.

Originating Source

White house weighs new action against Beijing

Senior Trump administration officials say they are pushing for new hard-line measures against Beijing, even as President Trump winds down his final two months in office. The most ambitious effort would create an informal alliance of Western nations to jointly retaliate when China uses its trading power to coerce countries, administration officials say. They say the plan was sparked by Chinese economic pressure on Australia after that country called for an investigation into the origins of the Covid-19 pandemic.

Originating Source

China economic activity can return to reasonable range in 2021: Premier Li

China’s premier Li Keqiang said on Tuesday he expects economic activity in the country can return to a reasonable range next year, after the impact of the coronavirus pandemic on GDP growth in 2020. “China’s economy this year can achieve positive growth, and we expect next year (economic) operations can recover to a reasonable range,” Li told a news conference with leaders of six major international economic and financial organisations, including the World Bank and International Monetary Fund. China’s economy, the world’s second-largest, grew 0.7% in the first nine months of 2020 from a year earlier, while third-quarter GDP was up 4.9% year-on-year. “We will continue to expand opening up, and we will absolutely not pursue a trade surplus,” Li added, insisting China would put equal emphasis on imports and exports and wanted to achieve a balance of trade. Beijing will allow consumption to play a “guiding role,” while investment will play an “effective role,” he added.

Originating Source

Top Trump News

Trump gives GSA official go-ahead to start transition to Biden administration

President Donald Trump on Monday said he had given Emily Murphy, the head of the General Services Administration, the go-ahead to proceed with a transition for President-elect Joe Biden’s administration despite plans to continue with legal challenges. “Our case STRONGLY continues, we will keep up the good … fight, and I believe we will prevail! Nevertheless, in the best interest of our Country, I am recommending that Emily and her team do what needs to be done with regard to initial protocols, and have told my team to do the same.”

Originating Source

Georgia sets timeline for Trump-requested vote recount

Georgia will begin recounting votes from the Nov. 3 election again on Tuesday at 9 a.m. EST (1400 GMT), in response to a request from President Donald Trump’s campaign, a state official said. The new recount, which is not expected to alter certified results that show President-elect Joe Biden won the election, will end at midnight on Dec. 2, according to Gabriel Sterling, the Georgia official who oversees voting systems. The recount will be conducted by electronic scanners.

Originating Source

Biden’s victory

Republican U.S. Senator Shelley Moore Capito on Monday said while some irregularities in the Nov. 3 presidential election have been found, there is no indication they were widespread enough to call into question President-elect Joe Biden’s victory. In a statement, the West Virginia senator said Biden and Vice President-elect Kamala Harris should begin receiving “all appropriate” briefings related to national security and COVID-19 and that “if states certify the results as they currently stand, Vice President Joe Biden will be our next president.”

Originating Source

Economic Indicators

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.

Germany Gross Domestic Product (GDP) QoQ

Germany’s gross domestic product grew by a record 8.5 percent in the three months to September 2020, compared to a preliminary estimate of an 8.2 percent expansion and after the historic slump of 9.8 percent in the second quarter. The expansion was supported by a rebound in household consumption (10.8 percent vs -11.1 percent in Q2), and strong fixed investment in machinery and equipment (16 percent vs -15.1 percent). In addition, net exports added positively to the growth as exports increased by 18.1 percent (vs -20.5 percent in Q2) while imports rose at a softer 9.1 percent (vs -15.9 percent in Q2). Year-on-year, the economy shrank by 4 percent in the September quarter, following a record contraction of 11.3 percent in the second quarter.

U.S. CB Consumer Confidence

Consumer Confidence in the United States fell to 96.1 from previous value of 101.4, below the forecasted value of 98

United States API Crude Oil Stock Change

Stocks of crude oil in the United States increased by 3.5 million barrels in the week ended November 20th of 2020, following a 4.2 million rise in the previous week, and marking the second straight weekly gain, data from the American Petroleum Institute showed.

United States S&P Case-Shiller Home Price Index

The S&P CoreLogic Case-Shiller 20-city home price index in the US rose 6.6% from a year earlier in September of 2020, following a 5.3% increase in the previous month and well above market expectations of a 5.1% gain. It is the biggest jump in house prices since April of 2018. Phoenix (11.4%), Seattle (10.1%) and San Diego (9.5%) continued to report the highest year-over-year gains among the 19 cities. Meanwhile, the national index, covering all nine US census divisions, advanced 7%, higher than 5.8% in the previous month, the most since May of 2014. “This month’s increase may reflect a catch-up of COVID-depressed demand from earlier this year; it might also presage future strength, as COVID encourages potential buyers to move from urban apartments to suburban homes. The next several months’ reports should help to shed light on this question”, says Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices.

Economic Calendar

Wednesday

UK Autumn Budget  

Thursday

US Initial Jobless Claims

Thursday

US GDP (QoQ) (Q3)

Thursday

US Crude Oil Inventories

Friday

UK Nationwide HPI (MoM)