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In the first indication that the Senate is willing to accept a Biden victory, moments ago Senate Majority Leader McConnell – in a notable change in tone – said a new COVID-19 aid bill is still needed by the end of 2020, and it is possible that there is a “possibility” the Senate will concede on the key Democratic demand of help for state and local governments.

Moments prior to this, he said that “claiming you win the election is different from finishing the counting.”

While markets remain too dazed to care, this suggests at two things: i) McConnell will concede to Democratic demands suggesting he won’t back Trump in forcefully challenging the election outcome and ii) rumors of the reflation trade’s death may have been greatly exaggerated.

That said, 10Y yields continued to high session lows, trading just above 0.76% (down from 0.94% overnight), as the unwind of the Blue Wave trade continues.

According to the Associated Press, gig economy companies Uber Technologies Inc., Lyft Inc., and DoorDash Inc. have prevailed in their expensive quest to keep drivers classified as independent contractors. 

California voters approved Proposition 22 Tuesday evening, which would exempt gig-economy companies from a state law requiring them to classify their workers as employees. The ballot measure mandates that these companies’ drivers will receive new benefits, such as hourly earnings of some sort but will not receive the full suite of employment protections that comes with normal jobs. 

Uber and Lyft, along with other gig-economy companies, spent more than $200 million to fund “Yes on 22,” the costliest ballot measure in state history. Uber and Lyft have threatened to leave the state if they lost. 

According to AP, with more than 10.8 million votes counted, Prop. 22 had 58.1% approval. 

Uber shares soared 14% while Lyft rose 15% premarket Wednesday upon the passage of Prop. 22. 

Uber 

Lyft

“The reaction from investors Wednesday reflects not just the stakes in California but also expectations of what will happen elsewhere. Officials in New York, Illinois, and other states have also considered bolstering labor protections in the gig economy,” Bloomberg noted. 

Backers of Prop. 22 included  Uber, Lyft, Instacart, Doordash, other gig-economy companies, the California Chamber of Commerce, the California Police Chiefs Association, and the California NAACP.

Democratic presidential candidate Joe Biden, activist group Gig Workers Rising, California Teachers Association, and Service Employees International Union were among some of Prop. 22’s opposition. 

Passing of Prop 22. means Uber and Lyft will remain California-based companies. As for the gig economy workers, they must continue to operate as independent contractors who are not entirely entitled to all of the standard employment protections. 

Authored by Steve Watson via Summit News,

In a morning interview in Britain, former Sex Pistols frontman John Lydon, aka Johnny Rotten, defended his support of President Trump, and slammed a news anchor for not understanding why Trump is popular with working class people.

“I’m working-class English, it makes complete sense to me to vote for a person who actually talks about my kind of people,” Lydon noted.

“Trump’s not a politician. He’s never claimed to be. How unusually, exceptionally wonderful is that for people like me?” the punk icon added.

“We’re bored of your intellectual left-wing ideas. You talk twaddle. Everything you do, you just miss the point, of who the general public are…” Lydon lectured the anchor, Susanna Reid.

When Reid attempted to interrupt Lydon he yelled “LET ME FINISH!”

When Reid tried to suggest that Trump’s “rudeness” could be a factor in the election result. Lydon roared back

“It does NOTHING for these people. NOTHING.”

Watch:

While Lydon is British, he also has US citizenship, meaning he was eligible to vote in the election.

Last month, Lydon declared that “Joe Biden is, in all practicality, senile, and delinquently senile.”

“My wife has Alzheimer’s — I know the symptoms,” Lydon said in the BBC interview.

Summary:

• Global daily cases decline
• Germany’s “R” rate declines back below “1”
• BoJo set to push through more restrictions
• Hungary minister sickened
• Bulgaria tops 4k COVID cases
• South Korea confirms another 118 cases
• Indonesia reports 3,356

* * *

Once again, the number of new cases reported globally declined in the 24 hours to Tuesday, according to Johns Hopkins and Bloomberg. But while the rate of spread in Germany dropped back below 1 on Wednesday morning, most of its European neighbors, including the UK, Italy, Sweden, Hungary and the Netherlands have all moved to impose new restrictions this week.

On Wednesday, Bloomberg drew attention to hospitalizations in the US, where Florida is in the lead with 16% of beds filled by COVID-19 patients.

Source: Bloomberg

The biggest story on Wednesday morning was the drop in Germany’s “R” rate, which fell below 1 for the first time since Oct. 30 as the country recorded 7,533 new cases in the 24 hours to Wednesday morning, a decline from more than 17k a day earlier.

In the UK, Boris Johnson is set to push fresh coronavirus lockdown rules through Parliament on Wednesday as he faces down rebels in his own party. The new rules will take effect at midnight, enforcing the closing of pubs, gyms and non-essential shops in England, and restricting social contact between households. The prime minister announced the month-long measures on Saturday after data showed the pandemic exceeding the worst-case projections of his scientific advisers.

Yesterday, the FDA warned about inaccuracies tied to rapid antigen tests like the Abbott Labs test approved for emergency use, saying that the test has been shown to produce ‘incorrect’ positive results.

Here’s more news from overnight and Wednesday morning:

India reported 46,253 new cases, in line with a slowdown in daily infections over the past three weeks. The country reached a peak of more than 97,000 daily cases in mid-September, putting it on track to overtake the U.S., but with the slower rate of new Indian cases and resurgent numbers in America, that now looks unlikely for some time. Still, India has just kicked off its festival season — culminating in Diwali on Nov. 14 — and large-scale celebratory events planned across the country could re-ignite the spread of infection (Source: Bloomberg).

New cases in Bulgaria jumped to a record 4,041 with the number of daily deaths rising to 63. The Balkan country’s Prime Minister Boyko Borissov, who is recovering at home from the virus himself, has said that the government isn’t planning a nationwide lockdown for now but vowed to raise the wages of medical workers (Source: Bloomberg).

Australia showed more signs of recovery, with household spending surging by a record 6.5% last quarter, led by cafes and clothing and footwear stores as Covid-19 restrictions in much of the country were unwound. The growth was partly restrained by a 4.2% decline in Victoria state, which only released its capital Melbourne from lockdown last week (Source: Bloomberg).

Hungary’s foreign minister has tested positive for COVID-19 after arriving in Thailand, according to AP. Peter Szijjarto and his delegation had just come from Cambodia, where he met with Prime Minister Hun Sen and other officials on Tuesday. The minister and the Cambodian leader were pictured together maskless. Cambodian officials say the delegation members all tested negative prior to their departure (Source: Nikkei).

Indonesia reports 3,356 new coronavirus infections on Wednesday, taking its total number of cases to 421,731, data from the country’s COVID-19 task force shows. There are 113 more deaths, taking total fatalities to 14,259. As of Wednesday, 353,282 people had recovered from the virus in Indonesia, the data showed (Source: Nikkei).

South Korea confirms 118 new coronavirus cases, up from 75 a day ago. The country’s total infections have reached 26,925, with 474 deaths (Source: Nikkei).

And so the massive tide on the reflation trade begins to turn.

In the first of many reports to hit this morning, Deutsche Bank’s FX strategist became the first currency strategist to throw in the towel on his 2-month call for a weaker dollar which was based on expectations of a Blue Wave, and says that “with the US election outcome extremely uncertain” he is changing his view and turning neutral as he “no longer sees a compelling narrative of dollar weakness into year-end for three reasons.”

He lists his reasons below:

• First, whoever wins the White House, the odds of a structural shift towards easier fiscal policy in the US have dramatically declined. Should the Democrats lose the Senate (the risk of this now appears high) and unified government becomes impossible, this would make agreement on sizeable fiscal expansion more difficult. Wider twin deficits and reflationary steepening in the US yield curve was an important driver behind our negative dollar view and this has been put on hold.

• Second, the risks of a protracted contested election outcome appear significant. The market is likely to be most concerned by genuine uncertainty on the vote margin rather than political uncertainty relating to a refusal to concede. At the time of writing, the margins on numerous key states are very narrow (Georgia, Nevada, Wisconsin) or uncertain (Pennsylvania, Michigan), leading to a risk of protracted recount and litigation battles. This could last well into December.

• Third, and beyond the election, the COVID winter wave has proven quicker and bigger than we thought. Europe is already on “soft” lockdown and the US numbers are likely to get worse. There is a significant risk that protracted election uncertainty leads to a politicization of COVID containment measures accompanied by an inability to provide fiscal support.

In all, the DB strategists sees the risks as “skewed towards a deterioration in COVID outcomes, an absence of fiscal support, persistent institutional uncertainty and broader negative growth surprises in the US in coming weeks.”

Usually, this environment would usually be associated with a weaker currency, however the dollar is unique in its behaviour as a safe haven and a counter-cyclical asset: it has weakened over the last six months as equities have rallied and the yield curve has priced reflation. It follows then, that deflation and risk-aversion, even if originating in the US, could be dollar positive according to the Deutsche Banker.

All in, Saravelos does not see good risk reward in shorting the dollar anymore, “especially against EM FX” adding that the JPY and gold may also be “one of the few” beneficiaries of a highly uncertain environment.

One look at the market shows that while traders agreed with Saravelos in the early hours after the election, the drift lower since then means that the net effect on the dollar from the “uncertainty”, and the collapse of the Blue Wave is, as of this moment… nothing at all.

After some notable volatility overnight, oil prices are higher ahead of this morning’s official inventory data as OPEC+ talks on delaying a January oil-output increase gathered momentum.

This week’s inventory and production data will be heavily influenced by Hurricane Zeta which caused the shut-in of around 85% of Gulf crude production.

API

• Crude -8.01mm (-600k exp)

• Cushing +981k

• Gasoline +2.45mm (-1.1mm exp)

• Distillates -577k (-2.4mm exp)

DOE

• Crude -7.998mm (-600k exp)

• Cushing +936k

• Gasoline +1.541mm (-1.1mm exp)

• Distillates -1.584mm (-2.4mm exp)

After last week’s surprise build and API’s surprise draw, analysts expected a modest draw in official crude stocks, but instead got a 8mm barrel draw (same as API) – the most since August…

Source: Bloomberg

Gasoline supplied (implied demand) seems to be stubbornly stuck around 10% below average, and mobility data is not showing any signs of improvement.

Source: Bloomberg

Bloomberg Intelligence Senior Energy Analyst Vince Piazza:

Storms coming through the Gulf of Mexico — temporarily crimping volume and flows — can offer intermittent aid for balances amid rising concerns about demand weakness and a tenuous economic backdrop. Oil production is recovering to above 11 million barrels a day due to a rebound in completion crews, while a crude-export increase may be temporary and storage levels could actually be rising, with Cushing about 79% full.

Given Hurricane Zeta’s impact, last week’s production data is likely to be fnorked as it dropped 600k b/d…

Source: Bloomberg

WTI was trading around $38.20 ahead of the print…

Notably, China may be helping (taking advantage of low prices), as the communist country raised its monthly American crude purchases 21% to 21.4m bbl in September, keeping its spot as the top buyer for the fifth month,according to U.S. Census Bureau and EIA data compiled by Bloomberg.

As Bloomberg Intelligence’s Energy Analyst Fernando Valle warns, “the return of lockdowns in Europe is a threat to U.S. refiners, as gasoline imports on the East Coast could rise in coming weeks. Several, including PBF Energy and CVR Energy, have announced plans to idle units in the next few months in a bid to ease supply, primarily of diesel. Inventories remain a major concern and there needs to be a demand-led recovery to restore balance to refined-product markets.”

Authored by Michael Every via Rabobank,

Writing a Daily after an election is usually quite clear cut: with sleepy eyes, you describe who won and who lost. In this case, at time of writing, it isn’t so clear. So what can we say?

First, as had been alluded to many times, the polls were hilariously, tragically wrong. As someone on Twitter quipped: “He’s called Nate Silver because his calls always come in second.”

This was not a Biden +7,8,9 or 10 election. Instead it is a nail-biter. Second, we have not seen a Blue Wave – but Democratic turnout was up impressively in some locations and among some demographics. Third, we have not seen a Red Wave – but Republican turnout has been even more impressive, especially in rural areas, and among Hispanic and black voters, at least relative to 2016.

So if we don’t have a Blue Wave or a Red Wave, what do we have? Purple rain. At time of writing Fox News had, controversially, given 800K votes remained on the table, called Arizona for Biden, “flipping” that key state from 2016 and seeing betting odds follow. However, Trump had taken Florida and Ohio and Texas, and sat very well-placed in North Carolina, with Georgia somewhat less certain but still requiring a huge Democratic swing among remaining pockets to flip too.

Both presidential candidates therefore now look to the Rustbelt (and Nevada) for victory – and there Trump has so far outperformed even his 2016 vote totals in rural areas, while inner-city turnout has been mixed, and questions over early voting totals, suggesting there is a clear path to 270 electoral college votes for the incumbent, should that trend continue, as well as for Biden if it is not. (And notably for the pollsters, Wisconsin had a Trump lead with only 25% left to count, when the last major poll had had Biden +17; by contrast, Minnesota looks set to go for Biden). There is also one scenario where we could see an Electoral College draw 269-269.

Yet at this point it appears that several Rustbelt states have decided to stop counting the vote, for various reasons, or that they will not declare a winner imminently. This opens the door to the dreaded uncertainty and delay, to appearances in court, as well as to conspiracy theories about murky electoral shenanigans, which the web is already now full of.

Biden has already spoken, claiming he is confident, sees a way to win, and to “keep the faith”; Trump has tweeted: “We are up BIG, but they are trying to STEAL the election.”

It’s still too early to draw any clear conclusions other than that the real loser of this election has been most of the polling profession. However, we can see that this is a deeply-divided and almost evenly-divided country, just now divided in different ways.

For example, it appears we have indeed seen a major class realignment within the US. Starr County, Texas is 95% Hispanic with a median income of just USD17,000: it went Clinton +60 in 2016, but only Biden +5(!) in 2020; conversely, many suburban ‘red’ districts, and perhaps states, have moved ‘blue’. As noted, red plus blue is purple; and as we also saw a record turnout from both sides, underlining renewed interest in the electoral process, lots and lots of purple.

Meanwhile, it seems the Republicans will likely retain the Senate and the Democrats the House.

The market reaction so far has been clearer. Long US bond yields tumbled (30-year as much as-18bp), reversing the reflationary Blue Wave pre-election move; the USD rallied strongly, but this has since been partially reversed; and, like a young puppy, equities seem to be happy whatever is going on just as long as they are involved. So bonds up, stocks up, and the USD net up: and the whole world looking at the US – seems both sides have combined to make America great again.

Overall, however, it’s looking like a nail-biting day ahead.

Meanwhile, even though this is not an equity-focused Daily, one must mention the dramatic suspension yesterday of what was supposed to be the looming USD35bn Ant Financial IPO in Shanghai and Hong Kong. It seems that politics is something markets need to pay attention to all over, not just in the US.