Category: zerohedge

Though the market was seemingly unshaken by the events of yesterday,a handful of Trump Administration staffers have resigned over Wednesday’s storming of Capitol Hill, blaming President Trump for not doing enough to call off the crowds.

In one particularly public display, Mick Mulvaney, who has been serving in a part-time role (special envoy to Ireland) since departing as acting chief of staff, appeared on CNBC to announce his resignation, saying he had left a message with his boss Secretary of State Mike Pompeo.

During a sometimes rambling interview with CNBC’s Joe Kernan, Mulvaney insisted that he couldn’t stay after what had happened, though he acknowledged that his small role has little impact on the administration. However, he said “it’s what I have got.”

“I called [Secretary of State] Mike Pompeo last night to let him know I was resigning from that. I can’t do it. I can’t stay,” Mick Mulvaney said.

Mulvaney said he had spoken to others who were choosing to stay, and insisted that some “are choosing to stay because they’re worried the president might put someone worse in.”

Continuing on the subject of staffers resigning in protest, Mulvaney suggested (and another source reportedly told CNBC’s Eamon Javers) that National Security Advisor Robert O’Brien was weighing a resignation over the ordeal at the Capitol after siding with VP Pence. O’Brien’s deputy, Matthew Pottinger, has reportedly resigned. Two other high-profile staffers, including Stephanie Grisham, chief of staff for first lady Melania Trump, and Sarah Matthews, White House deputy press secretary, also resigned Wednesday. Commerce Department official John Costello also resigned Thursday morning.

Once one of Trump’s closest aides, Mulvaney said that the president is “not the same” as we was 8 months ago. Over the past year or so, Trump has allowed Rudy Giuliani, Pete Navarro and other extremists (to be fair, Mulvaney has a record of clashing with them during his time in the West Wing) to unduly influence him.

“We didn’t sign up for what you saw last night,” Mulvaney said. “We signed up for making America great again, we signed up for lower taxes and less regulation. The president has a long list of successes that we can be proud of.”

He insisted that Trump had “many successes” during his four years in office, but now “the folks who spent time away from our families, put our careers on the line to go work for Donald Trump, and we did have those successes to look back at, but now it will always be, ‘Oh yeah, you work to the guy who tried to overtake the government.'”

By Bas van Geffen of Rabobank

As my colleague Mike Every noted in yesterday’s Global Daily, it was anyone’s guess what would happen during the Congressional reading and approval of the Electoral College vote, but that related to the political process. I doubt even the writers for House of Cards would have come up with the events that transpired yesterday.

Ahead of what is supposed to be just a formality, President Trump had still Pencelled in a win, claiming that “Our Vice President has several options under the US Constitution. He can decertify the results or send them back to the states for change and certification. He can also decertify the illegal and corrupt results and send them to the House of Representatives for the one vote for one state tabulation.” And even though Pence had already told Trump that he does not support this interpretation of the Vice President’s constitutional powers and duties, the President still insisted that “if Vice President @Mike_Pence comes through for us, we will win the Presidency […]” while also, again, contesting the validity of the election results.

The President didn’t just stick to Twitter: he also addressed an audience at a Save America rally of pro-Trump protesters in Washington D.C., saying that “we will never take back our country with weakness.” Whether it was his intention or not, that speech may have been the spark for what followed: the demonstrations turned ugly later in the day and a group of protesters breached the US Capitol, where Congress was in the process of debating the certification of the election results. What ensued was a lockdown of the Capitol and the deployment of the national guard. Honestly, where does one draw the line between demonstrations and a coup or civil war? Save America, indeed.

By now, peace –or at least interbellum– has returned to the capital and the process of approving the Electoral College votes has restarted. Republicans have distanced themselves from Trump, with some outright accusing him of inciting yesterday’s events. Several US media outlets are speculating that Cabinet may invoke the 25th Amendment to oust President Trump and to avoid further unrest in the final two weeks before President-elect Biden is sworn in. Whether this will actually happen –and whether it would be a wise decision– remains to be seen. After all, such a move could in fact make matters worse, and give Trump’s followers another reason to protest, or worse. Social media aren’t taking the risk, suspending Trump’s accounts and requiring the removal of several violence-inciting posts.

With Washington D.C. in such disarray it must surely have been a risk-off day right? Wrong! Even as the protesters marched to the Capitol building, stock markets stoically marched higher, with the S&P 500 up 0.6% and the Dow 1.4% after hitting a new all-time high(!). The rationalization of these moves is a focus on the longer term: with the Democrats now looking set for majority in both the House and the Senate, President-elect Biden will have the Congressional support to implement a new fiscal stimulus package, including new stimulus checks. But of course, that does require that there is still a country left for him to govern. Biden has his work cut out for him trying to reunite the American people.

Turning to the more mundane world of economics, the minutes of the December FOMC meeting confirmed a consensus in the Committee to maintain a dovish bias to policy setting. The entire Committee agreed to hold the pace of asset purchases unchanged, but some members of the FOMC were open adjustments: “nearly all [participants] favored maintaining the current composition of purchases”, while a couple of participants “indicated that they were open to weighting purchases of Treasury securities toward longer maturities.” However, these deliberations took place before the Georgia run-off elections, which are turning blue. With a Democratic majority –albeit by the slimmest margin possible– and more room for fiscal policy, there may be less immediate pressure on the Federal Reserve to increase their asset purchases or to extend the maturity profile. But, this is conditional upon several other factors as well, and in particular the near-term economic outlook, which has been deteriorating, as Philip Marey writes in his note.

In Europe, the dose of optimism (Eurostoxx +1.4%) came from the EMA’s approval of Moderna’s vaccine, as well as some upbeat data despite the entire continent being in lockdown again.

Strong German retail sales (out on Monday) and unexpectedly strong factory orders for November (order intake up 6.3% y/y after an upwardly revised 2.3% y/y in October), published this morning, show that despite a host of fresh virus containment measures since early November (such as the closure of bars, restaurants and leisure centres), the economy continued to operate on a number of cylinders that were not greatly inhibited by these measures.

To some extent, this surprising strength in activity may reflect forward-looking behaviour on the part of households and businesses, as the government intensified its lockdown measures on 15 December, closing down all but essential shops for example. The rise in factory orders was driven particularly by strong foreign orders from Eurozone member states.

Despite this positive development in activity, which is arguably a driver of euro strength as well, inflation data continued to support the ‘deflationist’ view of the Covid-19 shock. Although headline inflation stayed put at -0.3% y/y, that was largely ‘thanks’ to transport and energy costs which are being pushed higher on the back of oil market developments. Yet food prices and particularly prices of clothing and footwear came in significantly lower. Giving your old jeans a second life seems to be the adage as people work from home. Core inflation fell to just 0.2%, from 0.5% in November, according to Bundesbank preliminary calculations. No need to emphasize that this only increases the pressure on the ECB to keep walking its path of monetary easing.

It was just hours ago we wrote about how Morgan Stanley’s Adam Jonas had chased Tesla’s price higher, resulting in the bank slapping an $810 (pre-split $4050) “base case” price target on the name. Now, it appears RBC has been the latest to capitulate and issue an upgrade – based on what appears to be the fact that Tesla stock simply won’t stop moving higher.

Tesla shares are up 4% (yet again) in pre-market trading on Thursday after RBC also capitulated on the name, abandoning any semblance of analysis via fundamentals and surrendering to the fact that the stock appears to only go up. RBC previously had an “underperform” rating on the name since January 2019. Since then, the stock is up 1215%. 

“There is no graceful way to put this other than to say we got TSLA’s stock completely wrong,” RBC wrote in their note. After capitulating publicly, the bank invoked the “spirit of New Years resolutions” in offering up a $700 price target from its former $339 target.

RBC said it missed how Tesla “can take advantage of stock price to raise capital and fund growth, or even acquisitions” – similar non-vehicle production-related reasoning as Adam’s Jonas’ note from Tuesday of this week. “Even a relatively large deal would be insignificant to Tesla’s market cap,” Bloomberg said, summing up RBC’s note.

RBC also said it is lifting its 2025 delivery estimate to 1.7 million vehicles from 1.3 million vehicles based “on fundamentals”. He said the production increases would be driven by “capacity additions and market share assumptions”.

First, we can’t help but wonder whether RBC is capitulating too late, and whether or not the firm will continue to be the same contrarian indicator for Tesla it has been since 2019. 

And finally, we wonder if the “spirit of New Years resolutions” will finally help the company consistently sell cars profitably without having the sell off EV credits. But we digress – and, after all, some of the best “analysis” of Tesla’s stock price moves yesterday was done on social media:

What is up with these $TSLA call sweeps in the Jan 2022 $1450 and $1475 strike? Huge premium- $7M between two big sweeps.

— Peter Hegedus (@PLHstock) January 6, 2021

LOL https://t.co/GqFdD0K3p1

— Quoth the Raven (@QTRResearch) January 6, 2021

Following ADP’s major disappointment yesterday, and ahead of tomorrow’s headline-making payrolls print, analysts expected a nudge higher in initial jobless claims last week after two weeks of modest improvements. Instead, initial claims modestly improved from a revised 790k the prior week to 787k last week (better than the 800k expected)…

Source: Bloomberg

A massive plunge in Illinois claims appears to the culprit for the improvement

Pandemic Emergency jobless claims fell last week also…

Source: Bloomberg

Overall, around 20 million Americans remain on government jobless benefits…

Source: Bloomberg

As Joe Brusuelas notes, seasonal factors at the turn of the year tend to damp claims & we are certain that this data understates the true number of those out of work.

There are 19.1 million individuals on some form of UI benefit.

Authored by Michael Snyder via TheMostImportantNews.com,

Like most Americans, I was absolutely horrified by the violence that I watched at the U.S. Capitol on Wednesday.  But I had a difficult time trying to understand what I was witnessing.  Trump supporters are almost always extremely peaceful, but many of those that were storming the Capitol were being very violent.  That didn’t make sense to me.  And how in the world did protesters get into the U.S. Capitol in the first place?

Well, it turns out that police actually opened up the barricades that were surrounding the U.S. Capitol and purposely allowed protesters to storm the building.  You can see this on video right here…

Police opened gates and offered them in 😡 pic.twitter.com/cFJmIekwzR

— Still Vigilant Grandma 🇺🇸🗽 (@midlifewomanon1) January 6, 2021

I have never seen anything like that in my entire life.

And once they were inside the building, they were herded toward particular areas.  For example, you can watch one “guard” actually lead protesters up several flights of stairs right here…

Psyop. Look at the photographers while going up the stairs and at the end. The officer is leading them where to go and gives the guy a little nudge and says “they’re here” when at the 2nd floor and officers just walk up and say “leave”. Paid crisis actors to look like agitators pic.twitter.com/U3BJ4REtpz

— Sage+Honey🌱 (@sageandhoney_) January 7, 2021

Either the U.S. Congress has the worst security personnel that any of us have ever seen, or this was allowed to happen on purpose.

And there are multiple reports that Antifa activists were brought in by bus.  In fact, one patriot actually recorded video of the Antifa buses that were brought into the heart of Washington D.C. with an escort…

Pantifa was bussed in. pic.twitter.com/lRL9vKYlRe

— Art TakingBack 🇺🇸 (@ArtValley818_) January 6, 2021

So who arranged for those Antifa buses to have that sort of an escort?

It is almost as if someone was extremely determined to get those Antifa activists to their location so that they could do their job.

Once they got inside the Capitol, the Antifa activists could have done a much better job of disguising themselves.

In fact, one has already been positively identified as a member of Philly Antifa…

If he wanted to pass as a “Trump supporter”, he probably should have covered up the hammer and sickle that are tattooed on the back of his hand…

Perhaps the most famous “protester” from the chaos on Wednesday is “the guy with the Viking horns”.

Well, it turns out that he was photographed at a BLM rally in Arizona wearing the exact same outfit back in June…

AZ BLM rally in June, DC Capital in January pic.twitter.com/YGxIj1DANK

— Cari Kelemen (@KelemenCari) January 6, 2021

And he was also photographed at a “climate activism” event in 2019…

Trump supporters don’t usually attend “climate activism” events. The guy is an actor. Who knows what side he’s on? pic.twitter.com/jE1aXQgH4b

— Cari Kelemen (@KelemenCari) January 6, 2021

Apparently his name is Jake Angeli and he is a “shamanic practitioner”.  But on Wednesday he was posing as a hardcore Trump supporter.

So why can’t the mainstream media put any of these pieces together?

It shouldn’t take too much detective work to identify a lot of these people.

So why won’t they do it?

And did you notice that the police let the vast majority of the “protesters” go without arresting them once it was all over?

The mainstream media is insisting that “they will be arrested later”, but a lot of people aren’t buying that.

All of this just seems very odd to me.

Just as a debate about the evidence of election irregularities was about to begin in the halls of Congress, these riots conveniently broke out.

Members of Congress were quickly evacuated, and the millions of Americans that were watching never got to see an honest debate about the 2020 election.

When proceedings finally resumed, the entire atmosphere had completely changed, and all of a sudden hardly anyone was interested in debating whether the election results were legitimate or not.

So who actually benefitted from the riots?

Also, it is important to note that these riots have dealt a severe blow to any political future that President Trump hoped to have.

So with one stone, activists have neutered the debate over the legitimacy of the election and they have devastated the Trump movement as well.

It appears that someone really was playing “3D chess”, and it wasn’t Trump and his supporters.

And this is just the beginning.  As I keep warning, the radical left will never be satisfied until they accomplish all of their goals.

Electing Joe Biden was just a way to get rid of Trump.  The radical left actually doesn’t like Biden either, and they will fight him bitterly if Biden does not go along with their full agenda.

In the end, what they want is a full-blown “revolution” in this country.  And as we witnessed on Wednesday, they will go to extreme lengths in order to get what they want.

*  *  *

Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.

Summary:

• US reports record COVID deaths
• US tops 21MM
• China locks down city
• Japan imposes state of emergency
• WHO urges more European countries to lock down population
• India reports 20.4K new cases
• South Korea reports 870
• Kansas Rep. tests positive
• Southeast Asia outbreak worsens
• London weeks away from running out of ICU beds

* * *

China’s worst outbreak since June has prompted the CCP to further tighten restrictions in Hebei, with the entirety of the city of Shijiazhuang (the provincial capital, only a 3.5 hour car ride from Beijing) now on lockdown as authorities carry out another mass coronavirus testing campaign. All vehicles, and people, are barred from leaving and entering the city.

Health-care workers have confirmed nearly 200 new cases in the city over the past few days, prompting the lockdown, which is interrupting local officials’ ability to enforce a the veneer of normalcy in Chinese life.

Health authorities in Tokyo confirmed 2.4K+ new cases yesterday as PM Yoshihide Suga finally declared a COVID state of emergency, asking bars and restaurants in Tokyo and three other Tokyo-adjacent prefectures to close early, and residents to stay home at night while workers telecommute. The state of emergency is expected to last for a month.

As a new COVID outbreak flares in China, Australia’s Foreign Minister Marise Payne spoke out Thursday to ask Beijing to cooperate with an independent WHO investigation into the origins of the coronavirus pandemic. Beijing has refused to allow investigators into the Wuhan Institute of Virology and generally stymied the organization’s search.

As the number of confirmed cases worldwide nears 88MM, the tally in the US has topped 21MM. The US reported a record number of new deaths in a single day, with more than 3.7K.

Hospitalizations are worsening across the country…

…but particularly in the South.

As Germany extends its lockdown measures and other European nations plot their own lockdown expansions, the WHO has officially urged the Continent’s leaders to do more. More than 308,000 people in England received a vaccination from the country’s health service in the week ended Jan. 3, which was more than the prior week, another sign that the UK and Germany are leading the push to vaccinate their populations in Europe. France continues to lag, as authorities contend with considerable levels of vaccine skepticism. ,

Here are some other COVID-linked stories from overnight and Thursday morning:

• India reports 20,346 cases in the last 24 hours, up from 18,088 the previous day and breaking a five-day streak of fewer than 20,000 cases, bringing the country’s total COVID-19 infections to nearly 10.4 million. Deaths climbed by 222 to 150,336 (Source: Nikkei).
• South Korea reports 870 new cases, up from 838 a day ago. Total infections have reached 66,686 with 1,046 deaths (Source: Nikkei).
• Rep. Jake LaTurner, a newly elected Republican Congressman from Kansas, has released a statement saying he got the result after he was in the Capitol building in Washington DC on Wednesday (Source: NY Post).
• Ireland is now treating 1,022 Covid-10 hospitalized patients, authorities said, the highest figure since the pandemic began. Some 88 patients are in intensive care. About 94% of intensive care beds were occupied on Wednesday night, though hospitals still have so-called surge capacity in reserve (Source: Bloomberg).
• Rates of infection are rising in Southeast Asia, with Malaysia recording 3,027 positive cases, setting a record for a second straight day. Indonesia also saw its biggest daily rise in cases (Source: Bloomberg).

Finally, in the latest round of warnings about overflowing hospitals, authorities in the UK claimed Thursday that London hospitals could run out of ICU beds for patients within two weeks as the number of COVID-19 cases soars, news service HSJ reported, citing a presentation by NHS England.

Bonds erased early losses and stocks give back opening gains, drifting back within Wednesday’s trading range as traders paused to asses the rollercoaster of the past three days which saw the biggest first day drop of the year since the dot com bubble followed by a surge as Democrats took Congress following Senate wins in Georgia, sparking expectations of massive stimulus.

S&P 500 futures were up 0.4% and most stock benchmarks across Asia and Europe were in the green. Treasury yields held above 1%, while the dollar strengthened against all its major peers. In a sign that traders are still willing to pile on risk, Bitcoin shot above $38,000 to another record high.

At 07:40 a.m., Dow E-minis were up 91 points, or 0.31%, S&P 500 E-minis were up 18.5 points, or 0.49%, and Nasdaq 100 E-minis were up 91.5 points, or 0.8%. Among the notable movers, Bank of America Corp, Citigroup, JPMorgan Chase and Goldman continued to climb in pre-market trading as the benchmark 10-year Treasury yield hovered near 1%. Shares of Twitter Inc. dropped 1.3% in U.S. pre-market trading after the platform suspended Trump’s account. Tesla Inc. added 2.9% as analysts at RBC upgraded the stock, saying they were “completely wrong” with their previously bearish views.

Overnight, Joe Biden was formally recognized by Congress as the next U.S. president early Thursday, a day after demonstrators overpowered police and stormed through the Capitol building in a scene of unprecedented turmoil in Washington. Present Donald Trump released a statement pledging “an orderly transition” after Congress certified the results. Stunning images of the assault on Congress had earlier knocked sentiment, though markets focused on the implications of the Democrat blue wave.

Despite the disruption, markets showed little sign of worry and trading throughout the day was normal. Bullish themes, such as the prospect for more U.S. stimulus spending in a Democrat-controlled Congress and the vaccine rollout, have dominated investor attention.

“The market is confident that there will be an orderly transition of power,” said Christoph Rieger, head of fixed-rate strategy at Commerzbank AG. “What matters more are the near-term prospects of a transition of power and more fiscal stimulus under a Democrat-led Senate.”

After a dour start to the week, financials and industrial stocks powered the Dow and the S&P 500 to all-time highs on Wednesday in hopes that some of President-elect Joe Biden’s policies could speed up a vaccine-driven recovery from the steepest downturn in decades. But the Nasdaq, dominated by FAANG stocks that had led Wall Street’s rally from the pandemic lows, closed lower on fears some of them could face antitrust scrutiny while the coming inflation wave would hit deflationary assets.

“The market is saying the reflation trade is on,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management. “The Democrat sweep means there will be more flexibility and speed to writing a fiscal check so a one-off U.S. fiscal boost as a bridge to a post-vaccine world is definitely on the cards.”

In Europe, the Stoxx 50 was little changed, the DAX outperforming with a 0.4% gain while FTSE 100 lags having outperformed at the open. European sentiment was boosted by an unexpected rise in German factory orders pre-lockdown in November. U.K. grocer J Sainsbury Plc shares rallied 4.1% after seeing its strongest Christmas on record. On the downside, Ryanair Holdings Plc declined 2.8% after the budget airline operator cut its full-year traffic forecast, citing new coronavirus restrictions. U.S.-listed shares of German biotech firm CureVac NV surged 20% after it struck an alliance with drugmaker Bayer to help it seek regulatory approval for its experimental COVID-19 vaccine and distribute doses.

Asian stocks joined the global reflation trade with more stimulus spending likely on the horizon after the Democrats won control of the Senate. The MSCI Asia Pacific Index gained as much as 1.4%, set for another record close. Material and industrial stocks led the gains, followed by financials which were boosted by a steepening yield curve. Environmental and cannabis-related stocks, which are seen to benefit from U.S. President-elect Joe Biden’s agenda, also outperformed. Alibaba Group and Tencent led a selloff in internet stocks as the Trump administration considers barring investments in China’s two most valuable companies. Three major Chinese telecommunications companies also slumped as NYSE reversed again with a plan to delist them. North Asian markets led the charge, with Korea’s benchmark gauge and Japan’s Topix closing 2.1% and 1.7% higher, respectively. Miners Rio Tinto and BHP earlier surged to all-time highs while chipmakers Samsung and SK Hynix drove South Korean stocks to a record high. Malaysia’s benchmark gauge dropped as much as 1.2% before recouping the losses as the country recorded its highest-single day increase in new coronavirus cases on Wednesday.

In rates, Wednesday’s bond sell-off pushed the yield on benchmark 10-year U.S. Treasuries over 1% for the first time since March. It rose as high as 1.0660% on Thursday before slipping back, and was last trading around 1.0524% after earlier weakness during Asia session pushed 10-year to 1.064%, exceeding Wednesday’s high. Euro zone government bonds followed suit, with Germany’s 10-year Bund yield up slightly to -0.55%. Japanese government bonds also slipped.

The Democrat victory also reverberated in currency markets, sending the dollar to a near-three year low against a basket of six major currencies, with traders betting growing U.S. trade and budget deficits would weigh on a greenback already bruised. On Thursday the Dollar index bounced 0.6% to 89.780, on track for its biggest one-day gain since October.  The euro clawed away from an almost three-year high of $1.22, and also languished near recent multi-year troughs against the Aussie, kiwi and Swiss franc. That said, some analysts said rising bond yields may help the dollar’s fortunes. The Polish zloty appreciated as much as 0.6% to trade below 4.50 per euro, a level that’s seen as a possible trigger-point for central bank intervention.

“Higher Treasury yields should benefit the dollar against the euro and the yen,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.“However, the dollar will remain weaker against commodity currencies like the Aussie and emerging market currencies.”  Other risk assets climbed, with safe havens like the Japanese yen losing ground.

In commodities, Copper, a barometer for global growth, gained 0.3% to hover near an 8-year high. Oil prices held around a 10-month high, basking in the afterglow of a production cut promised by Saudi Arabia. Brent crude futures were flat at $54.25 a barrel. Gold was steady at $1,921 an ounce, and bitcoin firm after hitting a fresh record high just over $38,000. The cryptocurrency has soared over a quarter already this month after almost quadrupling last year.

The first weekly initial claims report of 2021 due at 830am ET is expected to show the number of Americans filing for unemployment benefits rose to 800,000 last week, likely due to increased restrictions to keep the spread of coronavirus infections in check. The more comprehensive jobs report for December is expected on Friday.

Market Snapshot

• S&P 500 futures up 0.5% to 3,758.50
• STOXX Europe 600 up 0.1% to 406.92
• MXAP up 0.9% to 204.02
• MXAPJ up 0.6% to 679.16
• Nikkei up 1.6% to 27,490.13
• Topix up 1.7% to 1,826.30
• Hang Seng Index down 0.5% to 27,548.52
• Shanghai Composite up 0.7% to 3,576.21
• Sensex up 0.01% to 48,181.06
• Australia S&P/ASX 200 up 1.6% to 6,711.95
• Kospi up 2.1% to 3,031.68
• German 10Y yield rose 0.2 bps to -0.518%
• Euro down 0.3% to $1.2286
• Italian 10Y yield unchanged at 0.456%
• Spanish 10Y yield rose 1.1 bps to 0.057%
• Brent futures up 0.3% to $54.46/bbl
• Gold spot down 0.2% to $1,915.26
• U.S. Dollar Index up 0.2% to 89.67

Top Overnight News from Bloomberg

• Joe Biden was formally recognized as the next U.S. president early Thursday, ending two months of failed challenges by his predecessor that exploded into violence at the Capitol as lawmakers met to ratify the election result
• Trump, hours after his supporters broke into the Capitol, pledged “an orderly transition”
• The total market value of cryptocurrencies surpassed $1 trillion for the first time amid a frenzied and volatile rally in Bitcoin

A quick look at global markets courtesy of Newsquawk

Asia-Pac bourses traded mostly higher as the region reacted to the Democrats winning control of the Senate which lifted most major indices on Wall St and buoyed cyclicals on anticipation of greater stimulus measures, with US equity futures also underpinned after the earlier siege on Capitol Hill was eventually resolved. Congress was evacuated earlier after pro-Trump protesters stormed buildings and halted the election certification procedure with reports of gunfire and suspected explosive devices in Washington D.C adding to the pandemonium, prompting the activation of the National Guard, although police have since taken back control and Senate has reconvened to certify the Presidential election results with many also blaming President Trump for inciting the insurrection. ASX 200 (+1.6%) and Nikkei 225 (+1.6%) surged with the sectors in Australia mirroring their stateside counterparts whereby cyclicals outperformed and tech suffered, while sentiment in Tokyo stocks also took its cue from global peers which overshadowed weaker wage data and a looming state of emergency decision. Hang Seng (-0.5%) and Shanghai Comp. (+0.7%) were indecisive and swung between gains and losses with heavy pressure in the telecom and tech giants after the NYSE and S&P Dow Jones announced to remove the major Chinese telecom firms and with US reportedly mulling prohibiting Americans from investing in Alibaba and Tencent Holdings. Finally, 10yr JGBs were lower with prices trickling further beneath the 152.00 level amid the gains in stocks, spillover selling from bear steepening in USTs and with the absence of BoJ purchases in the market today.

Top Asian News

• Japan Declares Virus Emergency for Tokyo Amid Record Cases
• Ant Plans Credit Unit Revamp to Avoid Sharp Drop in Loans
• India Approves $4 Billion to Boost Industries in Kashmir
• China Sentences Ex-State Bank Chief to Life on Bribery

European bourses see somewhat of a mixed session thus far (Euro Stoxx 50 Unch), as the Georgia-driven optimism in APAC hours fizzled out in early European trade amid a lack of fresh catalysts ahead of tomorrow’s US jobs data, and today’s IJC and Services PMI releases, while US equity futures post modest gains with the E-mini S&P matching its intraday record high of 3773.25 as European player entered the fray. Sectors in Europe also vary with no clear risk tone portrayed; though, around the cash open the sector breakdown did favour cyclicals, though the magnitudes were more contained than yesterday. Materials and Industrial names lead the gains whilst Healthcare, Travel and IT lag, and Energy alongside Banks take breathers after yesterday’s sizeable gains. Delving deeper into the sectors, Materials track upside in the base metals complex while Travel & Leisure is dented by airliners amid firmer oil prices alongside Ryanair (-2.9%) cutting its FY traffic forecast and significantly dropping its flight schedules from January 21st. As such, sympathy play is seen among peers including easyJet (-3.2%), IAG (-2.9%), Deutsche Lufthansa (-1.5%) and Air France (-1.5%); albeit, for the latter, French press Le Parisie noted that Air France will be provided further state aid this year. In terms of individual movers, Saint Gobain (+7.5%) leads the gains in the CAC after upping its Q4 and H2 2020 forecasts while guiding operating margin at a “record level”. German-heavyweight Bayer (+3.3%) lifts the DAX after CureVac (+12.7%) agreed to an alliance with Bayer to get global support in seeking approval for its experimental COVID-19 vaccine and for distribution. On the other end of the spectrum, Delivery Hero (-1.6%) is softer after it launched a cash capital increase via the issuance of around 9.4mln shares, equating to 4.7% of share capital.

Top European News

• Denmark Charges Two Britons Over $1.6 Billion Cum-Ex Fraud
• Euro- Area Economic Confidence Rises Despite Fresh Virus Curbs
• Goldman Sees BOE Fighting New Recession With More Bond Buying
• Johnson Vows to Slash Business Rules, Asking U.K. Bosses to Help

In FX, the Dollar remains in recovery mode, with the DXY rebounding from sub-89.500 lows, albeit in somewhat quieter and more measured fashion compared to Wednesday’s frantic price action awaiting confirmation of the Georgia run-off results and certification of Electoral College votes that was derailed by the siege on Capitol Hill before resuming to seal victory for President-in-waiting Biden. For the record, FOMC minutes were largely taken in stride, but upcoming IJC, trade and non-manufacturing ISM releases could be more market moving either side of comments from Fed’s Harker and Evans. Meanwhile, after extending losses on the Blue banner of fiscal and deficit excesses among other bearish factors, the Buck seems to have gleaned a degree of traction from the ongoing ramp up in US Treasury yields as 10 year cash inches further above 1% and the index hovers near the top of a 89.949-294 band.

• JPY/CHF/AUD – Not much to chose between the Yen, Franc and Aussie in percentage terms at foot of the major leagues as they all continue to fall prey to the Greenback revival. However, the rebounds in Usd/Jpy and Usd/Chf through 103.65 and 0.8840 respectively alongside Aud/Usd relinquishing 0.7800+ status will be welcomed by the respective monetary authorities, especially as Aussie trade data disappointed overnight. Moreover, the BoJ and MoF have stressed the need for market stability and SNB remains fully committed to intervention as Japan and Switzerland battle against the latest spread of COVID-19.
• EUR/NZD – The next weakest G10 links or least resilient to the Buck bounce, with the Euro topping out around 1.2350 again and not able to rely on underlying support from 1.2300 option expiries today, while the Kiwi has lost grip of the 0.7300 handle, albeit still holding up a bit better than its Antipodean counterpart as the Aud/Nzd cross stays mostly south of 1.0700.
• CAD/GBP – Looming Canadian trade and Ivey PMIs may provide the Loonie with some independent inspiration, but for now Usd/Cad is hovering around 1.2700 and weighing firm crude prices vs relative US Dollar strength, and it’s a similar story for Sterling as Cable pivots 1.3600 assessing pandemic implications for the UK economy, Government finances and BoE policy in addition to external impulses.
• SCANDI/EM – Oil’s exertions over Usd 51/brl in WTI terms and close to Usd 55 for Brent are keeping the Nok in the ascendency comfortably above 10.4000 vs the Eur, though the Sek is still struggling to mount a serious test of 10.0000 in wake of a slowdown in Sweden’s services PMI. Elsewhere, the Try continues its impressive comeback even though the EU has sanctioned Turkey, and in stark contrast to the Zar that has been hit even harder by reports about vaccinations not being effective against SA’s new virus strain

In commodities, WTI and Brent front month futures consolidate and trade off best levels, as the former briefly topped USD 51/bbl and the latter meanders around USD 54.50/bbl with prices underpinned by the OPEC+ meeting earlier this week and positive risk tone amid expectations of greater stimulus following the blue sweep in the Georgia Senate Run-offs. News flow for the complex has been light in European hours, although from a demand standpoint, Ryanair has cut its FY traffic forecast to 26-30mln passengers vs prev. guided below 35mln and will be significantly cutting its flight schedules from 21st January, thus the jet fuel demand aspect is on watch. Elsewhere, spot gold prices declined yesterday and tested USD 1900/oz to the downside as prices tracked real yields in US trade, with the yellow nursing some of its wounds overnight to stabilise around USD 1920/oz in European trade. Similarly, spot silver briefly dipped below USD 27/oz yesterday but replaced the status in overnight trade. Base metal prices further advanced overnight in a continuation of the Georgia run-off hype and reflationary play. LME copper meanwhile continues to extend gains above USD 8,100/t hitting levels last seen in 2013. Finally, Shanghai stainless steel futures extended gains overnight amid higher nickel feedstock costs coupled with tighter supply woes.

US Event Calendar

• 8:30am: Initial Jobless Claims, est. 800,000, prior 787,000; Continuing Claims, est. 5.2m, prior 5.22m
• 8:30am: Trade Balance, est. $67.3b deficit, prior $63.1b deficit
• 9:45am: Bloomberg Consumer Comfort, prior 44.6
• 10am: ISM Services Index, est. 54.5, prior 55.9

DB’s Jim Reid concludes the overnight wrap

Regular readers over the last year will be aware that the soundtrack to my WFH has been “Chill Acoustic” radio. I work better with mellow music on in the background. However after 9 months I’ve become slightly bored of what is a rotation of exactly the same songs on an albeit long loop. As such I’ve imaginatively moved to “Smooth Chill” radio this week and to be honest I now constantly feel like I’ve left an Ibiza nightclub at 5am with the warm sun rising over the horizon rather than the dark, wet and cold Surrey mornings we’ve been having. It’s very ambient! So bear that in mind as you read my output. In fact there is no guarantee I won’t fall back to sleep before I finish this!

Markets certainly woke up for the year yesterday and reacted strongly after the final votes from the Georgia Senate races put the Democrats over the top in both contests, with cyclical assets in particular seeing large outperformance. However remarkable scenes from protestors storming the US Capitol in protest at Trump’s election defeat took the shine off the session (more below).

Nevertheless the Senate results mean that the so-called ‘Blue Wave’ scenario has finally come about, albeit via a tortuous journey, resulting in a slim Democratic majority in both chambers of Congress. The main implication being the prospect of a substantially larger US stimulus package once President-elect Biden comes to office, and giving further support to the reflation trade.

As investors anticipated further stimulus ahead, yesterday saw a substantial selloff in US Treasuries, with 10yr yields up +8.1bps to 1.036%. That takes them above the 1% barrier for the first time since mid-March, back when Treasury yields sunk to all-time lows as the coronavirus pandemic took hold around the world. Alongside this, there was a sizeable steepening in the yield curve, with the 2s10s curve up +6.3bps to 89.5bps, which is the steepest level in 3 years, while the 5s30s hit its steepest in 4 years. Notably, it was rising inflation expectations that drove the bulk of the increase in yields, with 10yr US breakevens up +4.1bps to 2.07%, taking them back to levels not seen since late-2018. This hit a low of 0.55% back in March so inflation expectations on this measure have been totally reappraised.

In more jarring US political news, the election certification process, which is normally fairly straight forward and ceremonial, was first interrupted by objections from Republican lawmakers, but then stopped altogether by protestors breeching the US Capitol Building. This followed a rally by President Trump in the morning, before the crowd started marching through the streets of Washington DC to Congress where the Senate and House were holding the joint session. Congress reconvened later in the evening in order to finish the certification process of the Presidential election which is still continuing as we go to print. The accepted electoral count is currently frozen at 244 to 157 while Pennsylvania is debated. In a sign of how extraordinary times are, Twitter, Facebook and Instagram temporarily blocked President Trump’s accounts overnight.

The protests and occupation of the Capitol moderated some of the initial market moves of the day with the S&P 500 (+0.57%) off the days highs of around +1.5%. Notwithstanding this set back, the Dow Jones (+1.44%) climbed to fresh all-time highs, as the small-cap Russell 2000 surged an even-stronger +3.98%. Cyclical sectors led the advance, with financials (+4.36%) and materials (+4.09%) the strongest-performing S&P 500 industry groups, in a broad-based move that saw over 80% of the index close higher on the day. Tech stocks strongly underperformed however, with the NASDAQ falling -0.61% thanks to the combination of rising bond yields and fears that a Democratic Washington means higher taxes and new regulations for big tech. The equal weight S&P 500 (+2.37%) saw its biggest out-performance of the main parent index since November 9, when the results of the US general election were finally called.

In terms of the ramifications, the Georgia results mean that President-elect Biden will now have united control of government at the start of his term, making another large fiscal stimulus package a likely outcome. It also gives Biden a lot more flexibility in his appointments to senior positions, because the Senate approves an array of posts including the cabinet, ambassadors, judges and the Federal Reserve Board of Governors. Indeed, had the Republicans kept control of the Senate, that would have made Biden the first president since George H. W. Bush in 1989 to not have his party controlling both houses of Congress at the start of his term of office, constraining his room for manoeuvre from the start.

This rotation out of safe havens into risk assets was seen across multiple asset classes yesterday. European equities surged alongside their US counterparts, with the STOXX 600 (+1.36%) hitting a post-pandemic high led by banks (+5.56%), whilst oil prices benefited too, with both Brent Crude (+1.31%) and WTI Oil (+1.40%) reaching their own post-pandemic highs of $54.30/bbl and $50.63/bbl respectively. Peripheral sovereign bonds in Europe were another to benefit from this pattern, with the spread of 10yr Italian debt over bunds (-5.7bps) tightening to a 4-year low of 1.09%, as the 10yr Spanish spread fell -4.6bps to its lowest in over a decade. Yields were still up across the board however, with those on bunds (+5.7bps), gilts (+3.4bps) and OATs (+1.7bps) all moving higher. Meanwhile, the traditionally haven Japanese Yen was the worst-performing among the G10 currencies (-0.31% vs USD), as precious metals including gold (-1.61%) and silver (-0.95%) similarly lost ground. On the other hand Bitcoin rose sharply, gaining +6.35% on the day and is up another +4.96% overnight to over $37,500.

Overnight in Asia markets have moved higher in tow with Wall Street’s moves outside of the Hang Seng (-0.38%) which is down on news that the Trump administration may bar investments in China’s Alibaba Group and Tencent. Investors might have difficulty unwinding their positions in these companies if this indeed happens as at $1.3tn, the combined market value of their primary listings is nearly twice the size of Spain’s stock market, while the firms together account for about 11% of the weighting for MSCI Inc.’s emerging markets benchmark. Sentiment for the Hang Seng was also sapped as the NYSE took a second U-turn this week saying that it now plans to go ahead with delisting China’s three major telecommunication companies after US Treasury Secretary Steven Mnuchin disagreed with its earlier decision to give the firms a reprieve. The Nikkei (+1.38%), Shanghai Comp (+0.18%) and Kospi ( +2.40%) are all up. Futures on the S&P 500 (+0.50%) and Nasdaq (+0.67%) are also trading higher.

In terms of the coronavirus pandemic, the drumbeat of negative news continued as we await the rollout of vaccination programmes. In the UK, another record number of cases were reported yesterday, at over 62k, along with more than a thousand daily deaths for the first time since the original wave back in April. Meanwhile in Ireland, new restrictions were announced, with the cabinet agreeing to keep most students out of school until at least the end of January, while non-essential construction projects will stop from Friday evening. Separately, yesterday saw the Moderna vaccine win approval in the EU, which comes as leaders on the continent have faced strong pressure to speed up the vaccination programme, with the numbers so far lagging well behind the US and the UK.

Fed minutes from the December meeting were released last night and some of the content is already well out of date. Many members referenced the downside risks of ending government support, but Congress has since agreed to fresh fiscal stimulus, with more likely on the way, following the Georgia runoffs. The virus and growing case counts were the other material down-side risk discussed, while upside risks remain pent-up demand and a robust vaccine rollout. The committee remained unconcerned with inflation and stressed that the new guidance is “qualitative” and that there would not be simple numerical targets at this time to trigger changes to monetary policy.

On the data front, the final Euro Area services PMI was revised down from the flash reading to 46.4 (vs. flash 47.3), while the composite number was also revised down to 49.1 (vs. flash 49.8). Nevertheless, despite the downward revisions from the flash prints, they’re still a lot stronger than the market was originally expecting for December. Elsewhere in the US ahead of tomorrow’s December jobs report, the ADP’s employment reading for December showed a -123k reduction in private payrolls (vs +75k expected), which was the first decline in that reading since April. However, US factory orders in November surprised to the upside, rising by +1.0% (vs. +0.7% expected).

To the day ahead now, and data releases include December’s construction PMI from the UK and Germany, German factory orders for November, Italy’s preliminary December CPI reading and Euro Area retail sales for November. Meanwhile from the US, there’s the weekly initial jobless claims, the ISM services index for December, along with the November trade balance. Finally, central bank speakers today include the Fed’s Harker, Barker, Bullard, Evans and Daly.

Submitted by Christopher Dembik of Saxo Bank

The below chart about OECD private sector confidence perfectly summarizes the macro picture at the end of 2020 characterized by a strong divergence between manufacturing confidence and consumer confidence.

As soon as the global lockdown from last Spring was lifted, confidence in the manufacturing sector has strongly rebounded, mostly fueled by China’s economic rebound, improved global trade outlook and supply chain recovery. In November, the index was slightly below the 100 threshold (a figure above 100 indicates optimism for the future) with the year-on-year rate increasing by 0.2%.

Based on more up-to-date manufacturing indicators from the United States and the EU, the recovery in the manufacturing sector is certainly not over yet. In December, the UK manufacturing PMI index was out at 57.5, versus 55.2 in the Eurozone. Meanwhile, in the United States, durable goods orders are almost back to pre-crisis level. We thus expect that the OECD manufacturing sector index will climb above 100 in coming months.

In contrast, the picture for consumer confidence was still gloomy in year-end and there is little sign of improvement in the near term. The recovery has also started when the global lockdown was lifted but, in that precise case, it was short-lived due to unemployment concerns and the re-imposition of restrictions, with the index falling again in November at 98.4.

The year-on-year rate is also negative, with a sharp drop of minus 2.1% in the last print. What we have learned in previous years is that consensus often breaks in the first weeks of new year, and this is likely to be proved right in 2021 again. While many economists expected in their 2021 forecasts a strong rebound in consumer confidence on the back of positive vaccine news, this scenario is unlikely to unfold in the coming months.

With the near term reality of lockdowns back in fashion (strict lockdown in the UK, extension of lockdown in Germany until the end of this month, Canada mostly in lockdown, emergency situation in Tokyo etc.), it is highly probable that consumer confidence will keep falling in the next two to three months and will probably reach levels last seen in Spring 2020. In terms of economic data, it is not certain that investors are ready to very rough Q1 global indicators.

With the sharp drop in mobility data we observe, especially in Spain, the United Kingdom and Italy, we consider that several European economies could fall into recession in the first part of the year. What was once unimaginable is becoming plausible once again.

Millions of Americans will remember Wednesday as the first time in centuries that the US Capitol building was successfully stormed and overrun – though, to be fair, when the British sacked Washington in during the War of 1812, they didn’t stop to take selfies with the Capitol Police.

At any rate, the flashes of the chaotic crowd breaking windows and scuffling with police, accompanied by the news that 4 people died during the chaos (1 woman was shot by a Capitol Police officer, while 3 others died during unspecified “medical emergencies”, according to media reports) was enough to convince half the US that a low-key “coup attempt” had just taken place. Though the fact that lawmakers returned to the floor a few hours later to finish up the certification vote sort of undercuts that notion.

Citing Wednesday’s unrest as justification, GOP lawmakers largely dropped their objections and allowed the Electoral College tally to be certified, cementing his win.

And as several staff members reportedly threatened to quit in protest, President Trump published a statement via spokesman Dan Scavino promising an “orderly transition” on Jan. 20. While Bloomberg described the statement as a “concession”, Trump continued to insist that he still “totally disagrees” with the outcome of the election.

“Even though I totally disagree with the outcome of the election, and the facts bear me out, nevertheless there will be an orderly transition on January 20th,” Trump said. “I have always said we would continue our fight to ensure that only legal votes were counted. While this represents the end of the greatest first term in presidential history, it’s only the beginning of our fight to Make America Great Again!”

Meanwhile, the president’s twitter account remains locked.

Before the vote in the Senate, VP Pence spoke to promise that those who contributed to the chaos will be prosecuted. According to Capitol Police, some 52 people were arrested.

“To those who wreaked havoc in our capitol today, you did not win,” the vice president said. “Violence never wins. Freedom wins. And this is still the people’s House.”

The vote in the Senate was completed early Thursday morning. One senator told reporters that she had backed away from the opposition vote because of the chaos.

“When I arrived in Washington this morning, I fully intended to object to the certification of the electoral votes,” Sen. Kelly Loeffler, who was supposed to take the lead on objecting to results from Georgia, said on the Senate floor Wednesday night. “However, the events that have transpired today have forced me to reconsider, and I cannot now in good conscience object to the certification of these electors.”

By the end of the proceedings, both the House and the Senate had rejected challenges to results in Arizona and Pennsylvania, while no senators signed on to challenges in Georgia and other states.

More suspicious deaths have surfaced in Europe involving patients who recently received their first dose of the coronavirus vaccine. Following reports about a Portuguese nurse dying shortly after receiving her first dose of the vaccine, our attention turns to Norway, where two nursing home residents have passed away under similar circumstances.

According to RT, the departed were among the first in the country to receive the Pfizer-BioNTech vaccine. Medical authorities said they will investigate the circumstances of these deaths to try and figure out if the vaccines had anything to do with it. Norway’s National Institute of Public Health will be leading the charge.

“We have to assess whether the vaccine is the cause of death, or if it is a coincidence that it happened soon after vaccination,” Medical Director Steiner Madsen said in a statement to the press.

To be sure, due to the advanced age of the residents, it’s possible their deaths were unrelated to the vaccine.

Around 400 people die every week in Norwegian nursing homes (on a tangential note, we can’t help but wonder how many deaths in these facilities have been mislabeled as “COVID-19 deaths”).

But a smattering reports about adverse reactions and potentially related deaths have raised eyebrows around the world. In Israel, 100s of people were infected with the virus after receiving their first dose of the vaccine.

As we reported the other day, the rate of “adverse” reactions to the COVID-19 vaccine might already be as much as 50x higher than the flu vaccine.

Vaccinations with the drug began in Norway on Dec. 27. Scientists in the US and elsewhere have criticized European leaders for the slow rollout of vaccinations (with France coming in for particularly intense criticism). The pace is set to quicken, however, now that the EMA has approved Moderna’s mRNA vaccine for emergency use in the EU on Wednesday.