Monex Morning Report – Wed 28 Oct 2020

OVERNIGHT HIGHLIGHTS

Dow books back-to-back loss as Wall Street struggles to rebound from Monday selloff; Asian stock futures signal drop

Trump says stimulus deal will happen after election; Australian reserve Bank indicates recession is over

Top Market News

U.K. and France report most deaths since first Covid-19 wave

The U.K. and France reported the most coronavirus deaths since May and April respectively and Italy and Greece posted record numbers of new cases as the pandemic showed no signs of abating across Europe. “We continue to see the trend in deaths rising, and it is likely this will continue for some time,” Yvonne Doyle, medical director of Public Health England, said in an emailed statement Tuesday after the U.K. posted 367 new deaths. She urged regular hand-washing, wearing face coverings and socially distancing to slow the virus’s spread. France reported 523 deaths from the disease on Tuesday, the most since April 22. President Emmanuel Macron will speak in a televised address Wednesday evening to announce additional measures to tackle the virus’s resurgence. Covid-19 patients now occupy 57.5% of France’s intensive care beds, almost 3 percentage points more than on Monday and up from 42.9% a week ago. Italy, France and other European countries have instituted curfews in some major cities as governments try to build a firewall against the virus without returning to the full-blown lockdowns that brought Europe’s economies to their knees earlier this year.

Originating Source

Trump says stimulus deal will happen after election

President Trump acknowledged Tuesday that an agreement on a coronavirus relief stimulus package would not materialize until after Election Day, but predicted that a deal would be reached. Speaking to reporters at the White House, Trump insisted his administration would still be willing to negotiate with House Speaker Nancy Pelosi (D-Calif.) following the election on Nov. 3. At the same time, Trump targeted Pelosi, claiming the top Democrat was seeking “bailouts” for states and cities run by Democrats and predicting boldly that the failed negotiations would cost Democrats the House majority. “Nancy Pelosi is only interested in bailing out badly-run, crime-ridden Democrat cities and states. That’s all she is interested in,” Trump said. “She is not interested in helping the people.” “After the election, we will get the best stimulus package you have ever seen,” Trump continued. “I think we are going to take back the House because of her.” It is highly unlikely that Republicans will take back the House, which has been under Democratic control since the 2018 midterm elections. The Cook Political Report predicts that Democrats will expand their majority in 2020. Pelosi called Trump “delusional” after he made the same prediction last week during the final presidential debate.

Originating Source

Bank of England set to return to the stimulus pump

Britain’s darkening economic outlook looks set to push the Bank of England into ramping up its huge bond-buying stimulus programme next week for the third time since the onset of the coronavirus pandemic. The central bank is expected to increase the size of its asset purchase programme by a further 100 billion pounds on Nov. 5, according to a Reuters poll of economists. That would take it to 845 billion pounds ($1.10 trillion), almost double the level before the pandemic, making the BoE’s response to the coronavirus crisis one of the most aggressive among the world’s central banks. But Governor Andrew Bailey and his colleagues are unlikely to take a big step closer to cutting interest rates below zero for the first time, something investors do not see as a possibility until well into 2021.

Originating Source

EU’s Barnier resumes Brexit trade talks in London

European Union chief negotiator Michel Barnier resumed talks in London with his British counterpart on Tuesday as the two sides try to strike a last-minute trade agreement less than 10 weeks before the United Kingdom leaves the bloc’s orbit. The United Kingdom left the EU in January but the two sides are trying to clinch a deal that would govern nearly a trillion dollars in annual trade before informal membership – known as the transition period – ends on Dec. 31. There is very little time left to bridge significant gaps between Britain and the EU on sticking points in talks about a post-Brexit trade deal, Prime Minister Boris Johnson’s spokesman said on Monday. “There is also much work to be done if we’re going to bridge what are the significant gaps that remain between our positions in the most difficult areas and time is very short,” the spokesman said.

Originating Source

Australian reserve Bank indicates recession is over

The Reserve Bank of Australia says its “best guess” is Australia’s economy will grow in the September quarter, ending the recession. At senate estimates on Tuesday, RBA deputy governor Guy Debelle said Victoria’s 12-week lockdown would not hinder the nation’s recovery from its first economic recession in over three decades. “Our best guess is it looks like the September quarter for the country recorded positive growth rather than slightly negative,” Dr Debelle said. “As best as we can tell, the growth elsewhere in the country was more than the drag from Victoria, and possibly the drag from Victoria was a little less than what we guessed back in August.” The RBA is expecting gross domestic product (GDP) for the September quarter will track positive, following its steep fall in the previous quarter by 7 per cent. A technical recession is two consecutive quarters of negative GDP growth.

Originating Source

Senate confirms Amy Coney Barrett, delivering for Trump and reshaping the U.S. top court

Judge Amy Coney Barrett, a conservative appeals court judge and protegee of the late Justice Antonin Scalia, was confirmed on Monday to the Supreme Court, capping a lightning-fast Senate approval that handed President Donald Trump a victory before the election and promised to tip the court to the right for years to come. Inside a Capitol mostly emptied by the resurgent coronavirus pandemic and an election eight days away, Republicans overcame unanimous Democratic opposition to make Barrett the 115th justice of the Supreme Court and the fifth woman. The vote was 52-48, with all but one Republican, Susan Collins of Maine, who is battling for reelection, supporting her. It was the first time in 151 years that a justice was confirmed without a single vote from the minority party, a sign of how bitter Washington’s war over judicial nominations has become. The vote concluded a brazen drive by Republicans to fill the vacancy created by the death of Justice Ruth Bader Ginsburg just six weeks before the election. They shredded their own past pronouncements and bypassed rules in the process, even as they stared down the potential loss of the White House and the Senate.

Originating Source

Trump signs proclamation formally exempting Canadian aluminum from tariffs, for now

Donald Trump has officially let Canadian aluminum producers out of the national-security doghouse — for now. The U.S. president formally signed a proclamation today exempting Canadian aluminum exports from punitive Section 232 tariffs. But the proclamation reserves the right to reimpose the 10 per cent levies, ostensibly on national security grounds, if aluminum exports spike again before the end of the year. The move makes official a commitment the Trump administration made last month, just hours before Canada was to impose retaliatory measures on U.S. products. The tariffs, first imposed in 2018, were reinstated briefly in August in response to what the U.S. trade representative’s office said was an unauthorized increase in Canadian exports. Producers in Canada disputed the claim, arguing that they were forced to retool their product lines as a result of a pandemic-related drop in demand for specialized components. “I have determined that imports of aluminum from Canada will no longer threaten to impair the national security,” the proclamation reads. “I may reimpose the tariff — in the event that the volume of imports of these articles from Canada in the remaining months of 2020 exceeds the quantities that the United States expects.”

Originating Source

Jack Ma’s ant set to raise $35 billion in biggest-ever IPO

Jack Ma’s Ant Group Co. is set to raise about $34.5 billion through initial public offerings in Shanghai and Hong Kong, a blockbuster listing that will rank as the biggest IPO ever and make it one of the most valuable finance firms on the planet. Demand has been so high the company plans to stop taking investor orders for the Hong Kong leg a day earlier than scheduled as the share sale has already been heavily subscribed, according to people familiar with the matter. The fintech giant will have a market value of about $315 billion based on filings Monday, bigger than JPMorgan Chase & Co. and four times larger than Goldman Sachs Group Inc. The sale vaults Ma’s fortune to $71.6 billion, topping the Walmart Inc. heirs. The IPO is attracting interest from some of the world’s biggest money managers, and sparking a frenzy among individual investors in China clamoring for a piece of the sale. In the preliminary price consultation of its Shanghai IPO, institutional investors subscribed for over 76 billion shares, more than 284 times the initial offline offering tranche, according to Ant’s Shanghai offering announcement.

Originating Source

Top Trump News

Trump Campaign

President Donald Trump’s campaign has slashed its advertising budget in Florida, relying on the Republican National Committee to carry the message there as it moves resources to the industrial northern states that carried him to victory in 2016. Since Labor Day, Trump has cut $24 million from his national ad budget, while former Vice President Joe Biden has added $197 million. Biden has outspent Trump three-to-one over that time nationally. The president’s campaign still has $350,275 budgeted to spend on ads in Florida through Election Day, but has canceled $5.5 million in the final two weeks of the campaign, according to data compiled from ad-tracking firm Advertising Analytics. The RNC is picking up some of that slack, buying $4 million in ads beginning last week. It’s now airing an ad in Florida attacking Biden on Medicare, falsely claiming that the Biden health care plan would eliminate private health insurance.

Originating Source

Michigan and North Carolina

Democratic presidential candidate Joe Biden’s lead over President Donald Trump in Michigan is looking increasingly comfortable but the two remain neck and neck in North Carolina, Reuters/Ipsos opinion polls showed on Tuesday. Reuters/Ipsos is polling likely voters in six states – Wisconsin, Pennsylvania, Michigan, North Carolina, Florida and Arizona – that will play critical roles in deciding whether Trump wins a second term in office or if Biden ousts him. A week before the Nov. 3 election, Biden leads Trump nationally by 10 percentage points, according to the Reuters/Ipsos poll. The national online survey, conducted Oct. 23 to 27, found that 52% of likely voters said they were backing Biden, while 42% were voting for Trump. Five percent said they were considering a third-party candidate and only 2% said they did not know yet how they would vote. Nearly one-third of American adults said they had already voted. Biden led by 8 points in the previous national poll conducted Oct. 20 to 22.

Originating Source

Billion-dollar golf course

For Donald Trump, his golf courses are jewels in his self-branded business empire, from the swaying palm trees of Trump National Doral in south Florida to the panoramic sea views of Trump Turnberry on the windswept west coast of Scotland. When running for U.S. president in 2016, Trump pointed not only to the prestige of his golf course portfolio, but also to the strategy the resorts represented. Facing skepticism at the time about his track record as a businessman, Trump told Reuters that those who focused on the operating losses at his courses were missing the point. The “big play” was developing real estate at the properties, he said. “My golf holdings are really investments in thousands, many thousands of housing units and hotels,” Trump said in the 2016 interview, adding that the courses were in prime locations such as near Manhattan. The strategy, he said, involved building homes on and around fairways purchased at a relative bargain. The formula, he added, would make his portfolio of courses “worth many times what I invested.” Today, as he campaigns for a second presidential term ahead of a Nov. 3 election, his business, the Trump Organization, appears to have made little progress in turning that vision into reality.

Originating Source

Economic Indicators

United States Durable Goods Orders

New orders for US manufactured durable goods surged 1.9% month-over-month in September of 2020, well above a 0.4% rise in August and market expectations of 0.5%. Orders rose for the 5th straight month, led by transport equipment, as the economy recovers from big plunges in March and April due to the coronavirus pandemic. Orders rebounded for transportation equipment (4.1% vs -0.9%), namely motor vehicles (1.5% vs -4.1%); and fabricated metal products (1.2% vs -0.1%); and continued to rise for capital goods (4.7% vs 5.3%) and computers and electronics (0.6% vs 1.2%). On the other hand, orders fell for machinery (-0.3% vs 1.9%); and electrical equipment, appliances and components (-2% vs 0.4%). Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, increased 1%, following an upwardly revised 2.1% rise in August.

United States House Price Index MoM Change

The average prices of single-family houses with mortgages guaranteed by Fannie Mae and Freddie Mac in the United States jumped 1.5 percent from a month earlier in August 2020, following an upwardly revised 1.1 percent rise in July. It was the largest monthly gain since comparable records began in 1991, signaling a further recovery in the housing market amid record low interest rates and higher demand from people moving away from big cities due to the coronavirus crisis. For the nine census divisions, seasonally adjusted monthly house price changes ranged from +0.9 percent in the East South Central division to +1.9 percent in the West South Central division. Year-on-year, house prices rose 8.0 percent.

United States Richmond Fed Manufacturing Index

The Manufacturing Activity Index in the US fifth district including the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia rose to +29 in October of 2020 from +21 in the previous month. It was the highest reading on record, buoyed by increases in the shipments (30 vs 13 in September) and new orders (32 vs 27) indexes, while the employment index was unchanged at 23. Firms reported improving business conditions and growing backlogs of orders, overall. Manufacturers were optimistic that conditions would continue to improve in the coming months.

United States API Crude Oil Stock Change

Stocks of crude oil in the United States jumped by 4.6 million barrels in the week ended October 23rd of 2020, following a 0.6 million gain in the previous week and marking the second straight weekly gain, data from the American Petroleum Institute showed.

Economic Calendar

Wednesday

Australia Consumer Price Index (CPI) QoQ

Thursday

U.S. Crude Oil Inventories

Thursday

Japan Retail Sales YoY

Thursday

Japan Interest Rate Decision

Thursday

Eurozone Interest Rate Decision

Friday

Germany Consumer Price Index (CPI) MoM

Friday

U.S. Pending Home Sales MoM

Friday

Germany Gross Domestic Product (GDP) QoQ