Monex Morning Report – Wed 9 Sep 2020

OVERNIGHT HIGHLIGHTS

Dow closes down 632 points, as tech rout leaves Nasdaq in correction territor; stock selloff to reignite in Asia after U.S. slide

Mitch McConnell says U.S. Senate will vote on coronavirus stimulus plan as soon as this week; Trump threatens ‘massive tariffs’ on China if re-elected

Top Market News

Fed Wants Banks to Say What They’re Doing to Promote Diversity

The Federal Reserve wants the banks it oversees to provide more information on what they’re doing to promote racial and gender diversity, a senior central bank official said. “In the last two years, regulated entities slightly increased their submissions of assessments of their diversity policies and practices,” Sheila Clark, program director of the Fed’s Office of Diversity and Inclusion, said in congressional testimony published ahead of a hearing Tuesday. “However, we are not satisfied with the level of responsiveness.” She said the Fed is continuing to explore ways to promote greater participation by the banks, including by working with other financial regulators.

Originating Source

White House Pushes Scaled-Down Stimulus as ‘Foundation’ for Aid

White House Chief of Staff Mark Meadows said the Trump administration is working intensively with Senate Republicans to speed approval of a scaled-down stimulus that could form a “foundation” for aid to the economy. Meadows also said he saw a “groundswell of support among rank-and-file Democrats and Republicans” to suggest there’s some type of compromise possible over coronavirus relief. Democrats have pressed for a comprehensive package of about $2.2 trillion, scaled down from an earlier $3.4 trillion, while Senate Republicans are working on a $500 billion bill. “I know as late as 9 o’clock last night I was on the phone with a couple of senators as well as Senate leadership to make sure that we put forth a bill coming out of the Senate that at least provides a foundation for getting an agreement,” Meadows said in an interview with Fox Business News Tuesday.

Originating Source

Mitch McConnell says Senate will vote on coronavirus stimulus plan as soon as this week

The Senate will vote on a coronavirus stimulus bill as early as this week, Majority Leader Mitch McConnell said Tuesday. In a statement, the Kentucky Republican said the chamber aims to take up what he called a “targeted proposal, focused on some of the very most urgent healthcare, education, and economic issues.” The package would allow states to restart enhanced unemployment insurance at $300 per week through late December, authorize a second round of Paycheck Protection Program loans for hard-hit small businesses and create broad liability protections for companies, NBC News reported. It would put $105 billion toward schools, $16 billion into Covid-19 testing, $31 billion toward the development of vaccines and beefing up the strategic national stockpile, and $15 billion into childcare grants, according to NBC. It would not include another round of direct payments to individuals or more money for state and local governments.

Originating Source

Boris Johnson’s Move to Break International Law Sparks Outrage

Boris Johnson’s threat to break international law over Brexit was slammed by members of his own party, who warned it will damage the U.K.’s global standing and invite mistrust in other countries. A series of long-standing Conservative lawmakers spoke out against the government’s plan to re-write parts of the Brexit divorce deal it agreed with the European Union only last year. Northern Ireland Secretary Brandon Lewis said it would be a breach in a “limited and specific way.” That admission caused astonishment and anger among the influential rank-and-file Tories who believe the abandonment of a legally-binding treaty would hurt future attempts to secure international agreements.

Originating Source

Japan wants to reach broad agreement on trade talks with UK this week: Japan government official

Japan wants to reach broad agreement with the United Kingdom on trade talks this week, to ensure it can seal a pact under Foreign Minister Toshimitsu Motegi, a Japanese government official said, signalling Tokyo’s desire for progress in the talks before a looming change in government. Japan’s ruling party will choose a new leader next week to take over from Prime Minister Shinzo Abe, who has decided to step down for health reasons. His successor will become the next premier and form a new cabinet. The political changes, which could lead to a new foreign minister succeeding incumbent Toshimitsu Motegi, heighten the need for the two countries to speed up trade talks, the official said.

Originating Source

US to block imports from China’s Xinjiang

The United States government will move to block imports of cotton and tomato products from western China’s Xinjiang region over allegations that they are produced with forced labour, officials with US Customs and Border Protection say. The actions, which hit two of China’s major commodity exports, will be announced at the White House along with five other import bans involving Xinjiang forced labour abuses in an unprecedented move likely to stoke tensions between the world’s two largest economies. The “Withhold Release Orders” allow the CBP to detain shipments based on suspicion of forced labour involvement under longstanding US laws aimed at combating human trafficking, child labour and other human rights abuses. The US government is ratcheting up pressure on China over its treatment of Xinjiang’s Uighur Muslim population.

Originating Source

Trump threatens ‘massive tariffs’ on China if re-elected

President Donald Trump launched a fresh broadside against China, promising a “decoupling” of the U.S. economy from the Chinese one if he is re-elected in November. “We will…will end our reliance on China once and for all,” Trump said, in a reprise of his 2016 election campaign. He threatened to impose “massive tariffs” on imports from China and to block from federal contracts U.S. companies that outsource jobs to China. Trump has held off from imposing fresh tariffs this year despite China’s clear failure to buy the volumes of U.S. goods it promised in January, apparently unwilling to risk making imports more expensive at a time when 29 million Americans are claiming jobless benefits.

Originating Source

Tesla falls 21%, worst single-day loss in its history

Tesla shares tumbled Tuesday, after Elon Musk’s electric vehicle maker was left out of the S&P500 by the committee that decides on new additions to the index. Tesla shares closed down 21.06%, making it the worst one-day loss on record. Tuesday’s drop brought the company’s market valuation down by roughly $82 billion to $307.7 billion. The stock has been on a tear this year, having risen around 300%, and the company is now worth more than some of the world’s largest automakers, including Toyota and Volkswagen.

Originating Source

Top Trump News

Biden may keep Trump’s China tariffs

“Damaging,” “reckless” and “disastrous” are some of the words Joe Biden has used to describe tariffs imposed by Donald Trump on allies and rivals alike.He may keep some in place anyway if he is elected president of the United States in November. Republicans largely abandoned traditional party goals such as unfettered trade and balanced budgets to embrace Trump’s “America First” agenda. For Democratic-party challenger Biden, with a history of supporting free trade but also attuned to voices calling out for a different approach, the task is not so simple. Biden is backed by labor unions who want job protections and infrastructure spending, and progressives who want action on climate change, lower drug prices and human rights, while facing demands from farmers and U.S. corporations eager for tariff cuts and a less disruptive China trade relationship.

Originating Source

The No. 1 Environmental President

President Trump, who has vowed to exit the Paris Agreement on climate change, loosened restrictions on toxic air pollution, rolled back clean water protections and removed climate change from a list of national security threats, stood in front of supporters in Jupiter, Fla., on Tuesday and declared himself “a great environmentalist.” Mr. Trump was speaking at an official presidential event, where he endorsed a 10-year moratorium on oil and gas drilling off the state’s coastline as well as the Georgia and South Carolina coasts — a feat of political jujitsu, since his administration is the one that proposed lifting the moratorium.

Originating Source

Navalny poisoning

The Republican and Democratic leaders of the U.S. House of Representatives Foreign Affairs Committee called on President Donald Trump’s administration on Tuesday to investigate the suspected poisoning of Russian opposition leader Alexei Navalny, suggesting sanctions might be necessary.

Originating Source

Economic Indicators

Japan Gross Domestic Product (GDP) QoQ

The Japanese economy shrank 7.9% on quarter in Q2 2020, compared with the preliminary reading of a 7.8% decline and market consensus of an 8.1% drop, and after a 0.6% fall in Q1. This was the third straight quarter of contraction and the steepest on record, amid the severe impact of the COVID-19 crisis. Private consumption tumbled, falling for the third straight quarter (-7.9% vs -0.7% in Q1); government spending dropped the most in four years (-0.6% vs flat reading); and capital expenditure slumped (-4.7% vs 1.7% gain in Q1) and worse than estimates of a 3.1% fall. In addition, net external demand subtracted 3.0 percentage points off growth, with exports falling the most since Q1 2009 (-18.5% vs -5.4% in Q1) and imports declining for the third straight quarter (-0.5% vs -4.2%). On an annualized basis, the economy collapsed at a record 28.1% in Q2, compared with forecasts of a 28.6% slump.

Japan Current Account n.s.a.

Japan’s current account surplus narrowed to JPY 1468.3 billion in July 2020 from JPY 2023.3 billion in the same month of the previous year and compared to market expectations of JPY 1868 billion, owing to the coronavirus pandemic. The goods account posted a JPY 137.3 billion surplus from a JPY 82.7 billion shortfall last year, with exports falling 19.6 percent and imports plunging 22.6 percent. In addition, the services account gap widened to a JPY 349.5 billion deficit from a JPY 189.1 billion shortfall a year ago, the primary income surplus dropped to JPY 1782.7 billion from JPY 2380.2 billion, whereas the secondary income gap widened to JPY 102.1 billion from JPY 85.1 billion.

National Australia Bank Business Confidence

National Australia Bank’s index of business confidence rose to -8 in August 2020 from -14 in the previous month, but remained very weak and likely fragile. Confidence was negative in all industries, with mining seeing the weakest. Meantime, business conditions weakened (-6 vs 0 in July), amid the impact of the Melbourne stage 4 restrictions on activity. Employment (-13 vs -2), sales (-2 vs 1) and profits (-3 vs 1) dropped. The weakest conditions were seen for mining, construction, and recreation and personal services, while remained most favorable in retail and wholesale. Forward orders softened and capacity utilization edged lower. “The impact of the Melbourne stage 4 restrictions on activity is evident in Victoria with a decline in conditions – though not as bad as feared,” said Alan Oster, NAB Group chief economist.

Eurozone Gross Domestic Product (GDP) QoQ

The Euro Area economy shrank 11.8 percent on quarter in the three months to June of 2020, slightly less than initial estimates of a 12.1 percent fall. Still, it is the biggest contraction on record, pushing the economy to a recession as the coronavirus restrictions hurt most sectors. Declines were broad-based: household consumption went down 12.4 percent, investment plunged 17 percent, government spending decreased 2.6 percent. Also, exports sank 18.8 percent and imports dropped 18 percent. Among the bloc’s largest economies, Spain posted the biggest decrease in economic activity (-18.5 percent), followed by France (-13.8 percent), Italy (-12.8 percent) and Germany (-9.7 percent).

Economic Calendar

Wednesday

US EIA Short-Term Energy Outlook

Thursday

Canada Interest Rate Decision

Thursday

Euro Zone Deposit Facility Rate

Thursday

US Initial Jobless Claims

Thursday

US Producer Price Index (PPI) MoM

Friday

US Crude Oil Inventories

Friday

UK Gross Domestic Product (GDP) MoM

Friday

US Core Consumer Price Index (CPI) MoM