Tag: finance

With just three weeks left in 2020, the newsflow refuses to let up and as DB’s Jim Reid writes there’s lots of European events this week although a US fiscal deal could steal the limelight with the weak payrolls number on Friday perhaps focusing minds.

On matters European, Brexit talks are reaching a denouement (with concerns that the Brexit deal may unravel later today as noted earlier), the disputes over the EU’s long-term budget and recovery fund continue, a summit of EU leaders is scheduled for Thursday and we’ll see the final ECB meeting of the year on the same day with the central bank expected to recalibrate its policy stance.

Over in the US, the aforementioned stimulus talks, as well as the FDA meeting on Thursday when they’ll discuss an Emergency Use Authorization for the Pfizer/BioNTech vaccine will be the highlights. Elsewhere the U.K. will become the first major economy to roll out a Covid vaccine (Pfizer/BioNTech) from tomorrow. So all eyes on how the logistics of that goes.

Starting with the U.K., Brexit will be back squarely in the global headlines today as negotiations continue in Brussels over a trade deal with the EU, with less than 4 weeks remaining until the end of the transition period. Over the weekend there’ve been a number of developments, with a Saturday call between Prime Minister Johnson and European Commission President von der Leyen acknowledging “significant differences” on the three main outstanding issues, but agreeing to continue talks. Last night there were media reports that there’d been a breakthrough on fish, but on the UK side a government source told journalists that this wasn’t the case, saying that “There’s been no breakthrough on fish. Nothing new has been achieved on this today”. Furthermore, Bloomberg and others are still reporting that it’s the level-playing field that’s the biggest issue, with the EU wanting guarantees that the UK will commit not to undercut EU standards in a range of areas, but the UK seeing that as an unacceptable infringement on its sovereignty. All eyes will be on news reports today, with another call between Johnson and von der Leyen scheduled for this evening. In terms of the market reaction, sterling has moved slightly lower this morning, down -0.16% against the US dollar.

Running parallel to this, today also sees the UK government’s controversial Internal Market Bill arrive back in the House of Commons. As a reminder, this is the bill which sought to break parts of the already-reached Withdrawal Agreement with the EU, with the EU reacting very negatively to its publication. After it passed the House of Commons, the House of Lords amended the bill to take out the controversial sections, but the government have said they intend to reinstate them back in the Commons today. This will not be taken well by the EU so a Brexit deal beforehand would suit everyone. If not the relationship between the two could sour at a very bad time.

On the data front, the highlights will include the US CPI reading for November on Thursday, before we get the University of Michigan’s preliminary consumer sentiment index for December the following day. Elsewhere, we’ll get the UK’s GDP release for October on Thursday.

Below is a day-by-day calendar of key global events, courtesy of Deutsche:

Monday December 7

• Data: Germany October industrial production, US October consumer credit
• Politics: UK Prime Minister Johnson and European Commission President von der Leyen speak, UK House of Commons debates Internal Market Bill

Tuesday December 8

• Data: Germany December ZEW survey, Euro Area final Q3 GDP, US November NFIB small business optimism index, Japan October core machine orders (23:50 UK time)

Wednesday December 9

• Data: China November CPI, PPI, Japan preliminary November machine tool orders, Germany October trade balance, US weekly MBA mortgage applications, final October wholesale inventories, October JOLTS job openings, Japan November PPI (23:50 UK time)
• Central Banks: Monetary policy decisions from the Bank of Canada, and Central Bank of Brazil

Thursday December 10

• Data: UK October GDP, France October industrial production, US November CPI, monthly budget statement, weekly initial jobless claims
• Central Banks: ECB monetary policy decision
• Politics: European Council summit begins
• Other: US FDA discuss Emergency Use Authorization for Prizer/BioNTech vaccine

Friday December 11

• Data: Italy October industrial production, US November PPI, preliminary December University of Michigan consumer sentiment index

Central Banks: Fed Vice Chair Quarles, and ECB’s Holzmann and Centeno

* * *

FInally, focusing only on the US, the key economic data releases this week are the CPI and jobless claims reports, both on Thursday. Vice Chair for Supervision Quarles is speaking at an event on Friday, but otherwise there are no major speaking engagements from Fed officials this week, reflecting the FOMC blackout period. Below is a full summary of Goldman’s expectations for the week’s key events:

Monday, December 7

• There are no major economic data releases scheduled.
• 10:00 AM Pending home sales, October (GS -1.5%, consensus +1.0%, last -2.2%): We estimate that pending home sales declined by 1.5% in November, reflecting a further deceleration in regional home sales data.

Tuesday, December 8

• 08:30 AM Nonfarm productivity, Q3 final (GS +4.9%, consensus +4.9%, last +4.9%); Unit labor costs, Q3 final (GS -8.6%, consensus -8.9%, last -8.9%): We estimate nonfarm productivity was unrevised at +4.9% (qoq ar) in Q3. We estimate growth in Q3 unit labor costs – compensation per hour divided by output per hour – was revised up to by three tenths to -8.6% in Q3.

Wednesday, December 9

• 10:00 AM JOLTS job openings, October (consensus 6,300k, last 6,436k)
• 10:00 AM Wholesale inventories, October final (consensus +0.9%, last 0.9%)

Thursday, December 10

• 08:30 AM CPI (mom), November (GS +0.09%, consensus +0.1%, last flat); Core CPI (mom), November (GS +0.06%, consensus +0.1 %, last flat); CPI (yoy), November (GS +1.04%, consensus +1.1%, last +1.2%); Core CPI (yoy), November (GS +1.47%, consensus +1.6%, last +1.6%): We estimate a 0.06% increase in November core CPI (mom sa), which would lower the year-on-year rate by a tenth to 1.5% on a rounded basis. Our monthly core inflation forecast reflects a virus-driven pullback in airfares, deceleration in shelter inflation, and modest declines in new and used car prices. We also expect another decline in the health insurance component. On the positive side, we estimate a return to positive education inflation—as fall-semester tuition cuts are now reflected in the index, in our view. We estimate a 0.09% increase in headline CPI (mom sa).
• 08:30 AM Initial jobless claims, week ended December 5 (GS 750k, consensus 725k, last 712k); Continuing jobless claims, week ended November 28 (consensus 5,270k, last 5,520k):We estimate initial jobless claims increased to 750k in the week ended December 5.

Friday, December 11

• 08:30 AM PPI final demand, November (GS +0.2%, consensus +0.1%, last +0.3%); PPI ex-food and energy, November (GS +0.2%, consensus +0.2%, last +0.1%); PPI ex-food, energy, and trade, November (GS +0.2%, consensus +0.2%, last +0.2%): We estimate a 0.2% increase in headline PPI in November, reflecting stronger energy prices but weaker food prices. We expect a 0.2% increase in the core measure excluding food and energy, and also a 0.2% increase in the core measure excluding food, energy, and trade.
• 10:00 AM University of Michigan consumer sentiment, December preliminary (GS 77.0, consensus 76.0, last 76.9): We expect the University of Michigan consumer sentiment index to edge up by 0.1pt to 77.0 in the preliminary December reading, given positive news on a vaccine, higher equity prices, and an increase in our Twitter Sentiment Index, but continued deterioration in the national virus situation.
• 12:40 PM Fed Vice Chair for Supervision Quarles speaks: Federal Reserve Board Vice Chair for Supervision Randal Quarles will speak on bank supervision at a virtual event.

Source: Deutsche Bank, Bank of America, Goldman

CNBC’s Andrew Ross Sorkin appears to be doing a bit of damage control, when after a heated Friday debate about lockdowns in which he justified small businesses being shuttered by claiming it was “science” that people were safer at big box stores than at churches and restaurants because of masks, a photo of Sorkin from 6 weeks ago eating “outside” at a restaurant, maskless, surfaced on Twitter.

Just learned an amateur paparazzi took my pic while I was eating OUTDOORS nearly 6 weeks ago (10/27) when COVID positivity rate in Manhattan was 1.07%. (I refused to sit indoors nor in tent behind me. ) It isn’t hypocrisy; it’s consistency. #Science #StayHealthy https://t.co/fkJGkJOuQQ

— Andrew Ross Sorkin (@andrewrsorkin) December 5, 2020

Sorkin claimed on Friday he was offering a “public health and public service announcement” for the audience when he took on fellow anchor Rick Santelli’s claims that there was a negligible difference between going out to establishments like churches, versus going to stores like Wal-Mart. 

Sorkin spent time over the weekend sparring with various Twitter trolls and trying to defend his line of reasoning, but that didn’t seem to be enough. On Monday morning, Sorkin still needed to have his say on the issue. He brought on Dr. Scott Gottlieb to “end the debate” and then, after Gottlieb appeared to agree with him, Sorkin put out a Tweet to tell people to “stay healthy out there” and to quietly suggest that he was right and Santelli was wrong:

Don’t take my word for it. Here is former FDA Commissioner under Trump, @ScottGottliebMD, with a very direct and clear answer about eating indoors vs shopping at a big box store. Please stay healthy out there. https://t.co/oh4STGII5B

— Andrew Ross Sorkin (@andrewrsorkin) December 7, 2020

But it was hardly the KO that Sorkin made it out to be. Even Gottlieb admitted during his own PSA that indoor restaurant settings could be optimized and safe, stating:

 “Could there be indoor restaurant settings that are optimized? Where they have taken steps to reduce the risk? Possibly.”

More like, of course.

Shortly after the exchange, Kevin O’Leary railed against the lockdowns, asking the one key question that seems to be eluding Sorkin: why do the big box retailers get priority over small businesses?

“How is it possible when I’ve spent 60 or 80 thousand dollars on the back of the restaurant and the front of the restaurant to provide seats and heaters – and complied with city ordinances – and was just about to re-open – no tents, this is not tented, this is outside – I’m shut down. And right across the street there’s a big box retailer across the street that has people inside that’s open?” he asked.

O’Leary added:

“There’s no science claim on this… people are making ‘calmative’ science statements… how can ‘outside’ be less safe than ‘inside’…”

and… “All my employees have to be laid off – a third time!”

“I’m not even saying open them inside! I’m only asking ‘How can it be fair?’ and ‘How can it be right’?” O’Leary claims.

Andrew Ross Sorkin eventually chimes in by telling O’Leary:

“I very much agree with you,” before saying “the rules should be applied across the board”. 

But O’Leary wasn’t done:

“There’s something really wrong here. You’re picking winners and losers,” he added.

“It’s total chaos out there.”

Recall, it was Friday morning when Sorkin tangled with Rick Santelli about Covid lockdown rules in a clip that has now gone viral across most of FinTwit. The argument began when Santelli took exception with Democratic leaders who have been found breaking their own lockdown rules while forcing their respective local businesses to bear the brunt of increasingly draconian and complex lockdown rules. 

Rick Santelli is a national treasure pic.twitter.com/imyi3UG8O7

— Quoth the Raven (@QTRResearch) December 7, 2020

Santelli raised the question of why big box retailers were allowed to stay open, but small businesses weren’t:

“Therefore, there is actually and should be an ongoing debate as to why a parking lot for a big-box store like by my house is jam-packed, not one parking spot open. Why are those people any safer than a restaurant with plexiglass? I just don’t get it. I think it’s really sad that when we look at the service sector in all of the discussions we’ve had about job losses that that particular dynamic isn’t studied more, isn’t worked more, we don’t put more people in a room and try to figure out ways so that these service sector employees and employers could all come back in a safer way.”

A clearly galled Sorkin then launched into a patronizing diatribe about the differences between big box retailers, restaurants and churches, and why Santelli was doing viewers a “disservice” by disregarding the science”

“The difference between a big box retailer, and a restaurant – or frankly, a church – are so different it’s unbelievable,” Sorkin insisted.

Santelli shot back: “500 people in a Lowes aren’t any safer than 150 people in a restaurant that holds 600…and I live in an area with a lot of restaurants that have fought back…and they’re open.”

After some more jawing, Santelli concluded: 

“I think our viewers are smart enough to make those decisions on their own! I don’t think I am much smarter than all the viewers… like some people do.”

“I don’ think I am much smarter than all the viewers… like some people do.”

Which was repeated this morning by O’Leary, who exclaimed:

“we are restricting poeple from making their own choices…”

Sorkin continued to insist that he was merely trying to educate viewers about “the science” of COVID-19.

As we said Friday, we’d really enjoy hearing Sorkin explain “the science” of how Big Box stores are “completely different” from restaurants and churches. All three can be found in interchangeable strip malls across the country.

The solution offered by the great and the good statists on CNBC was simple – “we need a policy of masks for all… and that will give people confidence to make a come back in the economy.”

The only problem with that utter falsehood is that most of California has been wearing masks outside for months… as have numerous other states with mask mandates… and it’s not helping!

And at least as far as masks are concerned, research has painted what is in reality a pretty fraught picture, as one recent study out of Denmark showed.

A massive Danish study on mask usage found no statistically significant difference in coronavirus infection rates between mask-wearers and non-mask-wearers. In fact, according to the data, mask usage may actually increase the likelihood of infection. https://t.co/ijUy8hfNTY pic.twitter.com/gYDtA8ac0p

— Sean Davis (@seanmdav) November 18, 2020

The same goes for lockdowns, as the balance between the high cost and time-limited efficacy are still not well understood.

All of which does make one wonder if HumanEvents’ Ash Staub had a point last week when he questioned: if one were to consider the upward transfer of wealth and market share to Big Business since the start of the COVID-19 pandemic, one would think such economic changes were intended. After all, it’s no secret that the interests of politicians and the corporate elite align more often than not.

As we near a year of lockdowns and sheltering in place, the long-term effects of pandemic policy on the economy are becoming clearer. Almost every piece of legislation ostensibly designed to curb the spread of the coronavirus and protect workers has wreaked devastation on small businesses—while benefiting the largest corporations. Roughly 100,000 small businesses have permanently closed due to COVID-19, while big-box retailers, tech giants, and pharmaceutical manufacturers have seen record profits.

America’s small businesses currently face an attack on all fronts.

• First, there are the more visible policies (e.g., lockdowns, mask mandates, and social distancing requirements) that strongly discourage people from patronizing brick-and-mortar retailers and restaurants. These policies impact small businesses more than large chains and corporations. Small retailers, for example, may not have the space to effectively implement social distancing policies, and often lack an online infrastructure to support curbside pickups of retail goods.

• Second, the cost of complying with health and safety guidelines, and the corresponding fines if businesses don’t comply, have forced businesses to incur additional expenses while their revenue declines. According to the Small Business Administration, the cost of compliance disproportionately impacts small businesses, who lack the funds and infrastructure of large corporations to adapt to new regulation. Overhauling a business to accommodate remote work, for example, requires a flexibility and an investment of resources that many small businesses simply do not have. For dine-in restaurants, the vast majority of which are small businesses, switching to outdoor dining is often not even possible given the business’s location.

• Lastly, there are ever-evolving COVID-19 employment regulations that disproportionately expose small businesses to lawsuits and the subsequent legal expenses and damages that may result. The conspicuous absence of liability protection also disadvantages small businesses, as the largest corporations can spare the capital required to fight lawsuits and painlessly pay out any damages. For example, Publix, a large supermarket chain, has so far managed to avoid paying damages to the family of an employee who died of COVID-19 due to the fact that he wasn’t allowed to wear a mask at work.

Despite the fact that these policies are explicitly harmful to small businesses, they can be justified on the basis of “public health” and thereby shielded from criticism. Practically unlimited regulation (that always seems to benefit the corporate elite) can be defended, because such policies are said to be designed to ensure the health and safety of the public. Opposition to these onerous restrictions can therefore be conveniently characterized as “anti-science,” or worse, reckless and/or malicious endangerment of one’s community. As a consequence, policies that explicitly disadvantage small businesses, such as the Families First Coronavirus Response Act (FFCRA), can be passed under the guise of public health and worker protection without raising any alarm bells.

Summary:

• UK COVID vaccinations to begin Tuesday
• US 7-day cases hit new record
• 38 states seeing rising daily case numbers
• Global cases top 67MM
• Biden announces top public health appointees
• India reports less than 33K cases
• Japan sends military nurses to help out in Osaka
• South Korea confirms 615 cases
• Germany should tighten measures in hot spots

* * *

Britain’s big day is almost here. After the first shipments of the Pfizer COVID-19 vaccine doses arrived in the UK on Sunday (stored in their specialty temperature-sealed containers, of course), the country’s health-care system is preparing to start doling out the first jabs on Tuesday.

In an attempt to underscore the importance of this day, Health Secretary Matt Hancock has branded it “V-Day,” a reference to Britain’s triumph in WWII. An NHS pharmacist who was among the first to receive supplies of the vaccine told the AP that the situation was “just amazing”.

“To know that they are here, and we are amongst the first in the country to actually receive the vaccine and therefore the first in the world, is just amazing,” said Louise Coughlan, joint chief pharmacist at Croydon Health Services NHS Trust, just south of London. “I’m so proud,” she added. Vaccinations will be administered starting Tuesday at around 50 hospital hubs in England. Scotland, Wales and Northern Ireland will also begin their vaccination rollouts the same day.

According to the AP, health agencies and governments around the world will be closely monitoring the British vaccination programs, which will take months to finish. They will be closely noting any successes or failures, as the British people essentially become a type of guinea pig for new mRNA vaccines.

Britain is planning to continue researching the efficacy of several alternative COVID vaccines as the WHO on Monday weighs the ethics of proposed “human challenge” trials that involve  deliberately infecting young health patients with the virus to directly test the efficacy of various products, and compare them to one another.

Russia on Saturday began vaccinating thousands of doctors, teachers and others at dozens of centers in Moscow with its Russian-made Sputnik V vaccine, which was approved over the summer after being tested in only a few dozen people.

The excitement in Britain, which has Europe’s highest virus-related death toll at more than 61,000, was palpable.

“Despite the huge complexities, hospitals will kickstart the first phase of the largest scale vaccination campaign in our country’s history from Tuesday,” said Professor Stephen Powis, the national medical director of NHS England.

Meanwhile, in the US, DHHS head Alex Azar said Sunday that the FDA could grant its emergency approval to the Pfizer vaccine as soon as Thursday, allowing the first vaccinations to begin in a matter of hours. Azar added that he believes any American who wants a vaccine should have access to one by the end of Q1. In Germany, which has been slightly more cautious with its approvals, said Monday that it aims to vaccinate 10 million people by the end of the first quarter.

Global confirmed COVID cases topped 67MM on Monday, driven by more record numbers out of the US. In the US, confirmed cases surpassed 14.5MM late Sunday, while confirmed COVID deaths near the 275K mark. The 7-day average for new cases in the US climbed to a new record Sunday as the US reported another 176.8K new cases, breaking below 200K for the first time in five days. Still, the 7-day average climbed to 191K.

Daily deaths topped 2K once again, while hospitalizations hit 101.5K, yet another record.

As temperatures drop in the northeast and frigid midwest and plain states, hospitalizations per capita in the Northeast have outpaced the peak from the worst of the Sun Belt’s outbreak over the summer.

38 states are reporting rising daily case numbers, though badly hit states like ND, SD, IL, WI & IA.

Here’s some more COVID-19 news from overnight and Monday morning:

US President-elect Biden is expected to nominate Massachusetts General Hospital Chief of Infectious Diseases Rochelle Walensky to run the CDC, while he is also to nominate California Attorney General Becerra as HHS Secretary (Source: Newswires).

China’s Sinovac said it secured approximately USD 500mln in funding for COVID-19 vaccine development and expects to be able to manufacture 300mln COVID-19 vaccine doses annually, while it seeks to complete the construction of a 2nd facility by year-end which its targets to double its capacity (Source: Newswires).

India reports 32,981 cases in the last 24 hours, down from 36,011 the previous day, bringing the country total to 9.68 million. Deaths jumped by 391 to 140,573 (Source: Nikkei).

Osaka Gov. Hirofumi Yoshimura tells reporters he has asked the central government to send nurses from the Self Defense Forces to help operate the prefecture’s new COVID-19 treatment facility for seriously ill patients. Chief government spokesman Katsunobu Kato had said Monday morning that Japan was prepared to send SDF nurses to Osaka and Hokkaido (Source: Nikkei).

Two leading coronavirus vaccine developers – Pfizer Inc. and AstraZeneca Plc – have applied for emergency use authorization in India, according to the Press Trust of India (Source: Bloomberg).

South Korea confirms 615 cases, down from 631 a day ago, bringing the country’s total to 38,161 with 549 deaths. The government will tighten social distancing rules in greater Seoul from Tuesday, closing karaoke bars, gyms and indoor sports centers (Source: Nikkei).

Germany should tighten measures in hot spots, Helge Braun, Chancellor Angela Merkel’s chief of staff, said in an online talk with Bild newspaper (Source: Bloomberg).

Attorney General William Barr may quit before the end of the year, according to the New York Times, citing ‘three people familiar with this (not his?) thinking.’

“It was not clear whether the attorney general’s deliberations were influenced by Mr. Trump’s refusal to concede his election loss or his fury over Mr. Barr’s acknowledgment last week that the Justice Department uncovered no widespread voting fraud. In the ensuing days, the president refused to say whether he still had confidence in his attorney general,” reports the Times.

According to one of the three anonymous sources, Barr had been considering an early departure since before last week, and that Trump’s election fraud claims had not influenced his thinking. Another said that Barr felt he’d finished the job he set out to complete at the DOJ.

In addition to avoiding a confrontation with Trump over using the Justice Department to challenge the election results, Barr’s departure would deprive the president of a cabinet officer “who has wielded the power of the Justice Department more deeply in service of a president’s political agenda than any attorney general in a half-century,” writes the Times, seemingly forgetting about Obama ‘wingman’ Eric Holder. Meanwhile, some Trump allies who have criticized Barr over inaction may be pleased by an early departure.

In short, the Times is heavily speculating over Barr’s alleged ‘thinking’ while framing the AG as Trump’s lackey who simply can’t bring himself to participate in this latest act (which the NYT all but calls illegal). They note that the 70-year-old Barr is the “strongest proponent of presidential power to hold the office of attorney general since Watergate,” and that like Trump, he believes that the FBI abused its power while investigating (and setting up) the Trump campaign surrounding the 2016 US election.

The rest of the article suggests that Barr released a ‘distorted and misleading’ summary of the Mueller report, and noted that he’s appointed US attorney John Durham of Connecticut as a special prosecutor to ensure his investigation of the FBI’s conduct in the 2016 election would continue regardless of the outcome of the election.

Barr served as Attorney General under President George Bush, before becoming the general counsel of GTE Corp. which eventually became Verizon – making him a multi-millionaire.

Authored by Tom Ozimek via The Epoch Times,

Attorney Alan Dershowitz said on Sunday that he believes the Supreme Court may get involved in adjudicating on whether state legislators have the power to pick alternate Electoral College electors who would vote for President Donald Trump if legislatures determine there was voter fraud, even after an initial slate of electors has cast its votes on Dec. 14.

Dershowitz made the remarks in an interview with Fox News in which he was first asked about what he thought of claims made by Trump attorney Rudy Giuliani, who said there was a pattern of fraudulent activity that swayed the election in favor of Democrat Joe Biden.

“There certainly is probably cause for investigating and looking further. Giuliani has made very serious accusations. The question is which institution is designed constitutionally to look into it? Is it the state legislature? Is it the courts? Is the clock running in such a way that there won’t be time to look into this?” Dershowitz replied.

His reference to time running out presumably refers to the Electoral College Dec. 14 meeting, at which electors cast their presidential votes.

Congressional clerks handle an Electoral College certificate in the House of Representatives in Washington on Jan. 4, 2013. (Chip Somodevilla/Getty Images)

“The American public wants to know, is Giuliani correct or isn’t he correct. I don’t know whether we’ll find that out in time for the meeting of the Electoral College votes,” Dershowitz said.

Attorney Ken Starr, who also took part in the interview, said that a “bit of a nightmare” scenario has taken place in the form of claims of voter fraud relating to absentee and mail-in ballots and other irregularities.

“So what do we now do about it?” Starr said. “I think, to be honest, we’re running out of time, because the Electoral College meets on Dec. 14, so it’s going to take an extraordinary action by legislatures and so forth. And Rudy has rightly pointed to legislatures because therein lies the ultimate—other than the Supreme Court of the United States—ability to have an effect on the just-concluded election.”

Former independent counsel Ken Starr on May 8, 2014. (Win McNamee/Getty Images)

In the interview, Dershowitz was asked about evidence Giuliani has presented, including surveillance footage and around 1,000 affidavits alleging various election-related irregularities and malfeasance.

“These are retail evidence that have to be determined to be true by cross-examination and witnesses,” Dershowitz replied.

Elections officials in states facing allegations of voter fraud and other election-related legal challenges brought by the Trump legal team and others, have insisted there is no widespread voter fraud. Attorney General William Barr said last week that the Justice Department has, to date, “not seen fraud on a scale that could have effected a different outcome in the election.”

Attorney General William Barr speaks in St. Louis, Mo., on Oct. 15, 2020. (Jeff Roberson/AP Photo)

Dershowitz said that the key question would be whether state legislatures, if they determine that significant voter fraud has indeed taken place, have the power to pick an alternate slate of Electoral College electors even after they have cast their presidential votes.

“The core constitutional question that Ken correctly pointed to is clearly state legislatures have the power before the voters vote to pick the electors.” he said.

“The unanswered constitutional question is do they have the powers—state legislatures—to pick electors after the voters vote if they conclude that the voters’ count has been in some way been fraudulent or wrong?”

“That is a constitutional question we don’t know the answer to, and the Supreme Court may get to decide that question if a state legislature decides to determine who the electors should be and changes the electors from Biden to Trump – that will be the key constitutional question,” Dershowitz said.

Asked if he thinks that, if it decides to take up the case, the U.S. Supreme Court would be likely to rule that it was unconstitutional for Pennsylvania to extend the deadline past Election Day for receiving mail-in ballots, Dershowitz replied, “I think so.”

“I think that there’s a 5-4 vote now in the Supreme Court and Justice Alito seemed to suggest that that would cancel out the votes in Pennsylvania that were received after the close of Election Day,” Dershowitz said. “Whether that’s right or wrong, that’s the way I predict the Supreme Court would decide the case if it decided to take the case.”

Dershowitz also suggested the establishment of a nonpartisan panel that would examine and make recommendations on claims of fraud and other related issues in future elections.

Meanwhile, an election integrity watchdog said the current Electoral College deadlines not only have “zero constitutional basis,” but are preventing states from fulfilling their legal and ethical obligations to ensure free and fair elections.

The Amistad Project of the nonpartisan Thomas More Society released a study (pdf) on Dec. 4, making the case that the only constitutionally set date in the election process is Jan. 20, when the next president of the United States will be sworn in. All other dates, including the “safe harbor” deadline, the Electoral College vote on Dec. 14, and even the congressional vote count on Jan. 6, are dates set by federal law, which the document argues are “arbitrary” and founded on obsolete concerns.

The study also argued that there is “significant flexibility and precedent in U.S. law for changing the date that electors are appointed, changing the date electors convene to vote, and changing the date electors have their vote certified by Congress,” which, if acted upon, could provide more leeway than the current deadlines for Trump to prove his case of election fraud.

European banks were hits on monday, with the Stoxx 600 Bank Index dropping 2% on Monday, the biggest decliner on the European sector leaderboard, dragged by banking giant HSBC whose shares fell 2.1%, the biggest drag on the index, as the UK-based bank was once again swept into Hong Kong’s turmoil after a former pro-democracy lawmaker, who fled into self-imposed exile in Europe, accused the bank of freezing accounts held by his wife and parents.

What is the legal basis for this? I’m sure they are going to be a lot of people closing their accounts at #HSBC in protest at this. https://t.co/X2fRV4EAWH

— Peter Lewis – on the radio in Hong Kong (@MoneyTalkR3) December 6, 2020

Ted Hui is the latest pro-democracy figure to flee Hong Kong and the escalating crackdown on dissent which last week saw Jimmy Lai denied bail, and Joshua Wong, Agnes Chow, and Ivan Lam jailed. On Monday eight people were reportedly arrested by the national security police over a small and peaceful student rally at the Chinese University of Hong Kong last month, including three accused of breaching the national security law.

Hui fled Hong Kong for Denmark last week, before announcing that he and his family would not return. The family are now in the UK where they plan to live in exile.

Over the weekend, Hui alleged that bank accounts belonging to him and his family had been frozen by HSBC, which he labelled “political retaliation through economic oppression.”

Hui told Danish media he faced serious “consequences” including lengthy prison terms if he returned to Hong Kong and was convicted under the national security law. Following an outcry, Hui said his family accounts were partially unfrozen late on Sunday. He said the family were moving funds to other institutions “because of their complete distrust in HSBC”, and he called on regulators to investigate and punish law enforcement officers and banking management who he accused of abusing the law.

According to Reuters and Guardian, HSBC has been contacted with questions, although a spokesman earlier told other media the bank would not comment on individual cases but that the circumstances had been “misrepresented.”

On Monday, after local media reported the accounts were frozen again, under police orders Hui called on HSBC to clarify its comments about misrepresentation, saying his family had made complaints and kept records of dealings with the bank.

“Under the National Security Law, how much are the banks and the business sector willing to sacrifice for the service of the regime?” he said.

Hui earlier said the alleged asset freezings reflected what banks could do “as a result of political pressure”, and this affected the credibility of Hong Kong as an international banking and finance hub. On Monday finance secretary, Paul Chan, rejected the assertion, saying Hong Kong remained “robust”. The Hang Sen Index dropped more than 2% on open on Monday.

Johnny Patterson, policy director at UK-based Hong Kong Watch, said the alleged freezing of Hui’s accounts was “utterly unacceptable” and he accused HSBC of bowing to Beijing’s strategy of economic coercion. “It forms part of the Chinese Communist party’s alarming strategy to eradicate dissent in Hong Kong using every lever available from asset freezes to trumped up lawsuits. The British government should seriously consider applying sanctions in response.”

Late on Sunday Hong Kong police said they were investigating suspected violations of the national security law and money laundering related to a crowdfunding exercise, which Hui denies. The funds were raised for Hui to launch private prosecutions including against the police, but the justice department intervened to stop the prosecutions.

Police also said Hui was also suspected of “foreign collusion”, an accusation levelled against several pro-democracy activists but so far without charge.

Hui is among the dozens of pro-democracy legislators who resigned en masse last month in response to the Beijing-led disqualification of four colleagues. He was facing multiple charges related to the pro-democracy protests and incidents during parliamentary debates. He was on bail when he left Hong Kong and had been granted permission to leave for Denmark.

In response to the news, noted China hawk Kyle Bass slammed HSBC and tweeted “it’s time the United States Flag of United States sanctions HSBC once and for all. HSBC is doing the bidding of the Communist Party of China by freezing accounts of democratic lawmakers in Hong Kong.Account holders will flee in droves now that their deposits are at risk of seizure.”

It’s time the United States 🇺🇸 sanctions HSBC once and for all. HSBC is doing the bidding of the Communist Party of China by freezing accounts of democratic lawmakers in Hong Kong.Account holders will flee in droves now that their deposits are at risk of seizure. #HSBC @SecPompeo https://t.co/aHWHA9X5CH

— 🇺🇸Kyle Bass🇺🇸 (@Jkylebass) December 6, 2020

HSBC is best known perhaps for being the world’s biggest facilitator in global illegal money laundering, agreeing in 2012 to pay a record $1.92 billion in fines to U.S. authorities for allowing itself to be used to launder a river of drug money flowing out of Mexico and other banking lapses. Back then the DOJ found that Mexico’s Sinaloa cartel and Colombia’s Norte del Valle cartel laundered $881 million through HSBC and a Mexican unit.

“We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organization from the one that made those mistakes,” former HSBC Chief Executive Stuart Gulliver said at the time.

The news sent HSBC shares down as much as 3% before rebounding modestly.

Despite this weekend’s political intervention, which saw Boris Johnson hop on the horn with EU Commission bureaucrat-in-chief Ursula von der Leyen to try and soften the two sides’ ‘red lines’, EU chief negotiator Michel Barnier told a group of leading EU27 bureaucrats Monday morning that no progress had been made on Sunday, sending cable tumbling even lower.

Meanwhile, a spokesman for PM Boris Johnson promised the UK won’t continue EU trade talks next year if the two sides fail to secure a deal, while insisting that the Brexit transition period would not be extended beyond Dec. 31, after ‘Brexit Party’ leader Nigel Farage raised questions about the possibility of another extension.

As Barnier dismissed rumors about progress on the issue of fisheries, sentiment soured further after the pound tumbled 1.3% against the dollar, dropping as low as 1.3225 after hitting a high of 1.539 on Friday – the pound’s biggest drop in three months. Gilts are rallying, amid concern that trade negotiations could collapse on Monday when BoJo and von der Leyen hold a ‘check-in’ call in roughly three hours. 

While the British will continue to negotiate for “as long as we believe a deal is still possible”, ruling out a continuation of talks next year could put pressure on the EU’s new reported strategy: wait for the UK to suffer the consequences of a ‘hard’ Brexit, which just might force UK leaders to come crawling back to Brussels.

Heading into what’s expected to be an intense week of negotiations as the US Congress tries to pass a new stimulus plan, Wall Street analysts have added the risk of Brexit talks collapsing to their list of “uncertainties” that could potentially dampen sentiment.

“There are uncertainties that weigh on sentiment – the US sanction on China, the US fiscal plan that’s yet to be endorsed, and a Brexit deal that didn’t happen over the weekend,” said Mohit Kumar, a strategist at Jefferies International. “Any pullback from last week may be shallow though as overall, I think the market remains optimistic that we will get a fiscal deal and a Brexit deal this week.”

According to the FT, Barnier told diplomats that talks are in the ‘final days’, with Wednesday serving as the new de facto deadline. Diplomats on both sides gamely insisted that a deal could still be reached. Other reports claimed talks rested “on a knife’s edge”

“The outcome is still uncertain, it can still go both ways,” said one diplomat following Mr Barnier’s briefings. “The EU is ready to go the extra mile to agree on a fair, sustainable and balanced deal…it is for the UK to choose between such a positive outcome or a no-deal outcome.”

As we wait for today’s call between BoJo and von der Leyen, here’s a quick rundown of the main sticking points, courtesy of the FT.

• On the question of fisheries the UK is resisting EU demands for countries such as France and Belgium to retain their historic fishing rights in the area six to 12 nautical miles off the British coast. 
• The two sides are also still negotiating over the length of a multi-year transition period during which access for EU fishing boats to UK waters would be safeguarded. EU diplomats said that a new complication had arisen because of British demands relating to the ownership of UK-registered fishing vessels.
• Barnier told MEPs that the UK was still resisting Brussels’ demands that European companies be able to challenge the British government before UK courts if London broke its commitments to a “level playing field” for EU and UK companies. 
• The EU is continuing to ask for clear guarantees from Britain that the treaty’s restrictions on the use of state aid can be enforced, including by making sure illegal subsidies are reimbursed. Barnier said this was a problem for sectors such as energy and aviation.
• Brussels also wants the right to take unilateral action to restrict UK access to the EU market in response to level playing field violations. 

Meanwhile, both sides are ramping up preparations for what might happen if the talks fail, as new trade barriers might be joined by onerous restrictions on British financial markets, long seen as the financial epicenter of Europe.

Authored by David Stockman via InternationalMan.com,

The mainstream narrative is so corrupted by greed, sloth, and groupthink that it has become a caricature of itself. In plain English, what is held to be true by the powers-that-be is flat-out unreliable, unhinged, and unsustainable.

For instance, the mainstream media is giddy about the new stock market forecast from Goldman’s chief equity strategist, David Kostin.

According to this overpaid genius, the silver bullet of a COVID vaccine is now assured, owing to the Pfizer announcement, so we will soon be back to normal, and the S&P 500 will soar to 4,300 by the end of 2021.

Back up the trucks!

Then again, it needs to be recalled that, in their wisdom, sell-side analysts now see December 2020 trailing earnings on the S&P 500 coming in at $91.80 per share and then leaping upward by 47% to $135.13 per share by December 2021. Even if the latter hockey stick should come true, the implied PE multiple at Goldman’s new December 2021 price target is 31.8X.

You’ve got to believe that neither Sleepy Joe, Kamala Harris and her progressive-left comrades, COVID, nor a gridlocked Washington will stand in the way of a booming return to economic normalcy, a 47% gain in profits, and a PE multiple more than double the historical average.

But, hey, don’t snicker. That’s the mighty Goldman Sachs reinforcing the mainstream narrative.

Goldman Sachs S&P 500 Price Target

Of course, Goldman doesn’t base its stock price forecast on the kind of earnings that CEOs and CFOs must report honestly to the SEC on penalty of jail time: namely, GAAP net income.

They want you to believe that multiples are reasonable through the use of ex-items earnings, which are always 10%–30% higher than reported earnings. That’s because they eliminate purported one-time gains and losses and non-cash items charged to the P&L in the current period, like goodwill write-downs or restructuring provisions.

But here’s the thing. Anything that hits the income statement was a cash item at some point in either the past (e.g., goodwill) or the future (e.g., restructuring provisions). If it carries a negative sign, it represents a dissipation of corporate resources and value.

Likewise, eliminating one-time gains and losses is not a valid earnings-neutral smoothing procedure because in every quarter in history, one-time losses always exceed one-time gains and usually do so vastly.

So you can take the “reasonable” PE canard with a grain of salt, but even then, the current Goldman stock price forecast embodies the mother of all hockey sticks.

That is, ex-items earnings for the S&P 500 are now forecasted by the street consensus to weigh in at $117.36 per share for the December 2020 LTM period, which will push Goldman projections to rise to $175 per share by December 2021.

So you have to believe that ex-items earnings will soar by 50% in just one year’s time and still be willing to pay 24.5X for the said miracle of escape from a COVID lockdown-shattered economy.

“Unhinged” does aptly characterize the current mainstream narrative. That’s in part because we think the imminence and efficacy of the vaccine silver bullet are way overdone. Also, despite the Fed’s best verbal flim-flam, we do not think the laws of sound money have been repealed and that the Fed can keep monetizing 100% of Uncle Sam’s $2–3 trillion deficits indefinitely.

Yet, if there is no vaccine silver bullet next year, you will have the Virus Patrol reenergized.

Likewise, if the Eccles Building does not keep buying up Uncle Sam’s tsunami of debt, the bond market is a cataclysm waiting to happen.

As to the silver bullet, just consider what Pfizer actually reported. Namely, that from a trial pool of 43,538 participants, they now have results for 94 individuals who tested positive for COVID, of which 86 were in the placebo group and eight among those getting the two-shot vaccinations.

That’s how they get their ballyhooed 90% effectiveness claim. That conclusion is based on only 0.216% of the trial universe, yet the company’s press release—which enabled the CEO to sell 60% of his stock recently at a huge profit—contained zero information on whether the 94 cases were representative of the study population with respect to age, medical condition, and so on, and whether the actual COVID cases among the 94 reported to have tested positive were sniffles, mild, moderate, severe or death-threatening.

The truth is, the company’s press release amounted to nothing more than an (apparently) legal stock touting ad. Mr. Albert Bourla is now $6 million richer, but the most substantive thing contained in the press release not previously known was, well, this bit of soap-selling:

“Today is a great day for science and humanity. The first set of results from our Phase 3 COVID-19 vaccine trial provides the initial evidence of our vaccine’s ability to prevent COVID-19,” said Dr. Albert Bourla, Pfizer Chairman and CEO.

This gets us to the point that the irrepressible Jon Rappaport keeps rising. To wit, why would anyone think that a 0.216% share of the trial universe is meaningful or reliable?

Moreover, why would the FDA go along with this, or especially the entire study protocol, about which the company’s press release conveys the following:

“The trial is continuing to enroll and is expected to continue through the final analysis when a total of 164 confirmed COVID-19 cases have accrued.”

Yes, forget about the 43,538 participants and all the efforts to ensure its representative nature because Pfizer is going to quit when exactly 0.377% (164 participants) of the sample have reported.

A halfway attentive layperson might well wonder what is really going on here.

But having said that, he might, upon modest further investigation, also grasp the entire scam involved in fast-tracking the vaccine.

The reason for shutting down the trial after less than one-half of one percent of the participants have been heard from is that in this day and age, you can’t test a vaccine candidate by deliberately infecting a patient with the virus, most especially the unlucky folks who get the saltwater tablet placebo.

Instead, what you have to do is put your feet up on a stool and wait for participants to contract the disease and become infected in the “wild”—that is, in their homes and on the highways and byways of normal life.

But alas, Tony Fauci and his malpracticing doctors, the wannabe Robespierres they have unleashed among blue-state mayors and governors, and the constant chyrons of death running across the cable TV screens have most of the sheeple, including those enrolled in the Pfizer study, scared to death. So they do not leave home without their mask up and without social distancing on the sidewalks, hallways, and grocery store checkout counters.

So, then, how in the hell are study participants supposed to catch the COVID in the wild?

Under the rules of ethics in these matters, the ones getting the real shot cannot even be told to get frisky and drop their mask every now and then in order to help the corporate folks at Pfizer complete their study and harvest their tens of billions of vaccine sales.

Needless to say, that’s why only 0.216% of participants (94) managed to get the plague, which is allegedly running rampant in America, during the first three months of the trial, and why at that rate, it would take 11 years to get a return from even 10% of the participants.

So there is a reason why it normally takes three to five years to do a vaccine trial: It seems that even the FDA is unwilling to let drug companies deliberately kill placebo-taking patients in order to speed up the process.

And that gets us to an even more insidious aspect of the silver bullet myth.

Namely, because it takes so ungodly long for mask-up trial participants to get infected in the “wild” when the latter is operating effectively under economic martial law, the study protocol assumes that any old case will do – even if it is so mild as to be barely symptomatic and readily cured with bed rest and drinking lots of liquids.

As Jon Rappaport noted regarding the generic case with all of these COVID vaccine trials:

“You see, the vaccine maker starts out with 30,000 HEALTHY volunteers. So, if they waited for 150 of them to come down with severe pneumonia, a serious case of COVID, how long do you think that would take? Five years? Ten years?

The vaccine maker can’t possibly wait that long.

These 150 COVID cases the vaccine maker is looking for would be mild. Just a cough. Or chills and fever. That scenario would only take a few months to develop. And face it, chills, cough, and fever aren’t unique to COVID. Anyone can come down with those symptoms.

THEREFORE, THE WHOLE CLINICAL TRIAL IS DESIGNED, UP FRONT, TO FIND 150 CASES OF MILD AND MEANINGLESS AND SELF-CURING ‘COVID.’

About which, no one cares. No one should care.

But, as we see, Pfizer is trumpeting their clinical trial of the vaccine as a landmark in human history.”

What Rappoport is saying is that by the very nature of COVID, the only point of a vaccine is to protect the small minority who develop severe cases owing to age, comorbidities, or otherwise weakened immune systems, and especially those who suffer a life-threatening course of the disease.

But as of the present, the CDC estimates that about 88 million Americans have been infected—the overwhelming bulk of whom were unaware that they were infected because they were asymptomatic or experienced mild courses of the disease and were cured at home.

In fact, according to recent CDC data, only 500,000 of these 88 million have been hospitalized. And according to the CDC’s expansive way of counting, the number of COVID deaths stands around 269,000, the majority of which occurred in hospitals.

So no matter how you slice it, more than 87 million of the 88 million infected persons so far were in no mortal danger, nor would they have been helped much even if Pfizer’s vaccine or any other vaccine had been available from day one.

So the question recurs. Among the 94 cases reported, how many required hospitalization or involved even a serious home-cured course of the illness?

The company’s press release didn’t say, and when they run the clock to the FDA-approved protocol’s 164 positive-cases mark, they still won’t say.

That’s because, again, due to the any-case-will-do study design, the trial results cannot prove that the vaccine is effective in individuals who would otherwise suffer a severe course of the disease. In fact, according to the current national metrics, among any random universe of 164 infected people, exactly 0.9 persons would be hospitalized, and 0.4 persons would die.

Alas, perhaps even the purportedly brilliant Mr. Kostin would agree that you can’t prove efficacy by comparing fractions of a person.

Nevertheless, out there in the wild, after the vaccine is broadly distributed by, say, next June, the universe of the vaccinated will not be 88 souls as at present with the Pfizer study, but tens of millions. And if the vaccine doesn’t work on the severe cases and even a few hundred deaths and/or hospitalizations are reported among the vaccinated, there will be panic in the already-frightened streets.

As we said, the mainstream narrative is risibly corrupt.

*  *  *

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After opening at a new all time high on Sunday evening following Friday’s record close, S&P futures drifted lower as fresh Sino-U.S. tensions over Hong Kong dented sentiment and renewed last minute disagreements threatened to torpedo Brexit negotiations, while investors also awaited concrete signs of progress on a coronavirus relief bill. Oil fell while the dollar rose.

Shares of U.S. banks including Morgan Stanley, Wells Fargo & Co, JPMorgan & Chase, Citigroup and Goldman Sachs fell between 0.4% and 1% in premarket trading. Intel dropped on a report that Apple Inc. is planning a series of new Mac processors aimed at outperforming Intel’s fastest chips.

Risk aversion hit global markets after Reuters reported late on Sunday that Washington was preparing to impose sanctions on some Chinese officials over their alleged role in Beijing’s disqualification of elected opposition legislators in Hong Kong. China said it firmly opposed U.S. interference in its domestic affairs, in response to the report.

The news hit Hang Seng shares and pulled Asian equities lower, weakening the Yuan and pushing the Shanghai Composite down 0.8% even after 21.1% jump in China exports – the most since early 2018 – pushing its trade surplus to a monthly record high and underlining how global demand for pandemic-related goods is supporting a growth rebound in the economy. Equities in Japan also dropped while Taiwan and South Korea climbed

“There are uncertainties that weigh on sentiment — the U.S. sanction on China, the U.S. fiscal plan that’s yet to be endorsed, and a Brexit deal that didn’t happen over the weekend,” said Mohit Kumar, a strategist at Jefferies International. “Any pullback from last week may be shallow though as overall, I think the market remains optimistic that we will get a fiscal deal and a Brexit deal this week.

Sentiment soured further after the pound tumbled 1.3% against the dollar, dropping as low as 1.3225 after hitting a high of 1.539 on Friday, its biggest drop in three months with gilts rallying, amid concern that trade negotiations between the U.K. and the European Union could collapse. The selloff catalyst was a report from The Sun according to which Prime Minister Boris Johnson is ready to pull out of talks within hours, coupled with a  warning from a British official who said that Brexit talks could fail on Monday unless negotiators make progress in the next few hours as 11th hour negotiation posturing and jawboning peaks. Prime Minister Boris Johnson is due to speak to European Commission President Ursula von der Leyen on Monday evening and that conversation will be a make-or-break moment, another U.K. official said.

In Europe, the Stoxx Europe 600 declined 0.4%, led by autos, travel and energy sectors also underperforming while the export-heavy FTSE 100 Index climbed 0.5%. The Stoxx 600 Banks Index dropped 2%, the biggest decliner on the European sector leaderboard amid a wider underperformance of cyclical stocks. HSBC shares were the biggest drag on the index, falling 2.1%, as the lender is once again swept into Hong Kong’s turmoil. A former pro-democracy lawmaker, who has fled into self-imposed exile, accused the bank of freezing accounts he and his family held. Other U.K. banks Lloyds -4%, Barclays -2.2% among weakest in banks sector as talks on post-Brexit trade deal continue.

Meanwhile, talks aimed at delivering fresh coronavirus aid gathered momentum in the U.S. Congress on Friday, as a bipartisan group of lawmakers worked to put the finishing touches on a new $908 billion bill. After months of deadlocked negotiations between Republicans and Democrats, pressure has mounted on policymakers to help people and businesses hit hard by the surging pandemic, especially after a set of weak labor market indicators.

In rates, Treasuries were higher following bigger gains for gilts facing increased chance of a hard Brexit. Demand emerged in Asian session to buy Friday’s back-up in yields before gains were extended during London morning. Yields were lower by more than 3bp across long end, with 10-year around 0.94%, 2.5bp richer on the day; curve is flatter with 2s10s, 5s30s spreads each tighter by ~2bp. Gilts outperform Treasuries by 3bp, bunds by 1bp. A new Treasury auction cycle starts Tuesday with record $56BN in 3-year note, followed by 10- and 30-year reopenings for $38BN and $24BN over next two days.

In FX, as noted above the biggest mover was the sharp slide in the pound which weakened the most in three months on concern that trade negotiations between the U.K. and the European Union could collapse. At the same time, the dollar was set for its biggest advance in more than a month and Treasuries advanced as efforts to deploy a coronavirus vaccine were outweighed by renewed U.S.-China tensions. The Bloomberg Dollar Spot Index snapped a four-day loosing streak, to rise by as much as 0.6% as the greenback advanced versus almost all of its Group-of-10 peers. The euro fell below $1.21 and bunds advanced after the German state of Bavaria tightened coronavirus lockdown measures; Germany is looking to impose tougher restrictions on movement after a nationwide partial shutdown failed to bring contagion rates down to manageable levels. The Swiss franc and the yen were the best performers as investors sought havens amid a report that the U.S. is preparing to sanction at least a dozen more Chinese officials over their role in the recent disqualification of Hong Kong legislators.

In commodities, oil fell from its strongest close in nine months, hampered by weaker risk sentiment in global markets despite Asia hiking its prices to Asian customers. Gold dropped on a stronger dollar.

On the calendar, we get earnings from Coupa Software, Smartsheet, Casey’s, while the latest consumer credit data hits at 3pm.

Market Snapshot

• S&P 500 futures down 0.5% to 3,680.50
• STOXX Europe 600 down 0.5% to 392.19
• MXAP down 0.3% to 193.35
• MXAPJ down 0.07% to 641.34
• Nikkei down 0.8% to 26,547.44
• Topix down 0.9% to 1,760.75
• Hang Seng Index down 1.2% to 26,506.85
• Shanghai Composite down 0.8% to 3,416.60
• Sensex up 0.8% to 45,433.20
• Australia S&P/ASX 200 up 0.6% to 6,675.02
• Kospi up 0.5% to 2,745.44
• German 10Y yield fell 3.5 bps to -0.582%
• Euro down 0.3% to $1.2089
• Brent Futures down 1.2% to $48.68/bbl
• Italian 10Y yield rose 2.2 bps to 0.513%
• Spanish 10Y yield fell 3.0 bps to 0.051%
• Brent Futures down 1.2% to $48.68/bbl
• Gold spot down 0.5% to $1,830.49
• U.S. Dollar Index up 0.5% to 91.17

Top Overnight news from Bloomberg

• President Donald Trump and Senate Majority Leader Mitch McConnell will come “on board” with a $908 billion package to provide pandemic relief, according to a member of a bipartisan group that’s seeking legislation before the end of the year
• President Donald Trump said his attorney Rudy Giuliani, who has been leading efforts to overturn the results of the Nov. 3 general election, has tested positive for the coronavirus
• China’s exports jumped in November by the most since early 2018, pushing its trade surplus to a monthly record high and underlining how global demand for pandemic-related goods is supporting a growth rebound in the world’s second-largest economy
• Sales of the U.K.’s safest residential mortgage-backed securities, or prime RMBS, have collapsed this year and they are unlikely to pick up significantly in 2021 as banks instead utilize central-bank stimulus programs. That has left riskier deals from non-bank lenders dominating issuance amid a government-stoked housing- market boom
• Riksbank Deputy Governor Anna Breman says she wouldn’t hesitate to expand purchases further and consider other measures such as a rate cut, if conditions in the economy should worsen, according to minutes of the November meeting; Deputy Governor Martin Floden presented a “long list of objections to the proposed decision” to expand QE through to the end of 2021

A quick look at global markets courtesy of NewsSquawk

Asian equity markets were mixed despite the region initially taking its cue from the fresh record levels last Friday on Wall Street in which all major indices posted all-time highs. ASX 200 (+0.6%) was positive with strength in mining names and tech more than compensating for the early sluggishness in the financials sector after the RBA announced the Payments System Board began periodic review of retail payments and noted that the cap on what banks can charge merchants was too high and needs to come down. Nikkei 225 (-0.8%) initially gained but then faltered on the pressure of the recent currency strength and KOSPI (+0.5%) swung between gains and losses in a retreat from its record highs. Hang Seng (-1.2%) and Shanghai Comp. (-0.8%) gave up opening gains with sentiment dampened by several factors including another substantial PBoC liquidity drain and continued tensions between the world’s top two economies as President Trump’s administration is preparing sanctions on at least a dozen Chinese officials over Beijing’s move to disqualify elected legislators in Hong Kong, while FTSE Russell announced it is to remove 8 Chinese companies including Hangzhou Hikvision, China Railway Construction Corp. and China Spacesat from several products following the US blacklisting announcement. Participants also digested mixed Chinese trade data and Hong Kong underperformed as the rejig of its main index took effect in which the total number of constituents was increased to 52 from 50 with the inclusion of Anta Sports (2020 HK), Budweiser APAC (1876 HK) and Meituan Dianping (3690 HK), while the benchmark’s founding member Swire Pacific (87 HK) was removed. Finally, 10yr JGBs began softer after the recent retreat beneath 152.00 amid the bear-steepening in USTs post-jobs data, although prices have rebounded off their lows with some support from the soured risk appetite and with the BoJ present in the market for JPY 580bln of JGBs predominantly concentrated in 1yr-3yr maturities, while it also offered to purchase JPY 300bln of corporate bonds from Thursday.

Top Asian News

• U.S. Poised to Sanction More China Officials Over Hong Kong
• China Official Reserves Rise to Highest Since April 2016
• Hong Kong’s Top Chinese Stocks Drop on Sanction Risk Concerns
• Chevron Shuts Offshore Separator at Wheatstone LNG Plant
• JD Health Shares Trade 28% Higher in Hong Kong’s Gray Market

European equities trade mostly lower as the region took its cue from a similar APAC handover, with Eurozone bourses all in the red (Euro Stoxx 50 -0.5%) whilst UK’s FTSE 100 (+0.4%) bucks the trend. Meanwhile, US equity futures experienced some losses in lockstep with European counterparts but have since trimmed some of this downside. The sectoral performance in Europe sees a more defensive bias, with Healthcare and Staples outpacing peers, the former also aided by gains in AstraZeneca (+2.5%) following a broker upgrade at Morgan Stanley, and in turn providing the FTSE 100 with impetus as its largest weighted stock. Delving deeper into sectors, Oil & Gas and Financials reside as the straddlers amid lower oil prices and yields respectively. Meanwhile, Travel & Leisure retraces some of the recent gains seen in wake of the flurry of optimistic vaccine updates in recent sessions. Elsewhere, UK housing names reside at the foot of the Stoxx 600 amid Brexit jitters, which sees Berkeley Group (-7%), Persimmon (-5.8%), Barratt Developments (-5.0%), Taylor Wimpey (-4.0%) in deep negative territory. In terms of other individual movers, Micro Focus (+16%) catches a tailwind on a broker upgrade at Goldman Sachs. Deutsche Lufthansa (-0.7%) is modestly softer as the group is is expected to cut an additional 10k jobs in Germany next year alongside 20k jobs outside of Germany, according to sources. Finally, Pandora (+5.0%) is firmer after it stated that November had positive sell-out growth and organic growth, whilst reaffirming guidance assuming no lockdowns are imposed.

Top European News

• Elliott Is Said to Make Binding Offer for Swiss Baker Aryzta
• Vaccine Intensifies European High-Grade Managers’ Taste for Junk
• UBS’s Weber Sees No Deal With Credit Suisse in the Near Term
• Zero-Carbon Shipping Race Lures Yara to Upgrade Ammonia Plant

In FX, there has been a plethora of Brexit newsflow has seen renewed weakness in the British currency with the crux of headlines pointing to the remaining outstanding issues, with EU’s Chief Brexit Negotiator Barnier’s early-morning briefing to ambassadors seeing a mixed reception – with some pointing to a neutral briefing and other interpretations pointed to a gloomy prospect regarding an imminent trade deal, whilst he rebuffed weekend reports that a breakthrough has been made on fishing. On the domestic front, the Internal Market Bill (allowing ministers to override the WA) is poised to return to the House of Commons today – which could prove to be a sideshow given today’s crunch talks but seen in Brussels as an aggressive move heading into last-minute talks. Eyes will be on the phone call between UK PM Johnson and European Commission President von der Leyen, with the latest guidance pointing to a call in the afternoon (time TBC). In light of the developments above, and amid the UK PM ‘s threat of pulling out from talks within hours over EU demands, Cable retreated from best levels just shy of 1.3450, through the 1.3400 and 1.3300 psychological marks and below its 21 DMA (1.3294) to a current base sub-1.3250 ahead of 1.3200. The Sterling demise and lacklustre risk tone has fed into Dollar strength with DXY rebounding from its overnight base at 90.686 to a current peak at 91.241 – and with clean air seen ahead of the 91.500 psychological mark coinciding with the 2nd Dec high. As such, the Single Currency yielded its 1.2100 status (vs. 1.2140 at best), but with losses cushioned via the EUR/GBP cross which reclaimed a 0.9100 handle, with the current intraday band at 0.9021-9137.

• NZD, AUD, CAD, SEK NOK – The Dollar’s revival has pressured other G10s to varying degrees, with non-US Dollars the laggards notwithstanding the Sterling’s performances. The overall risk tone and lower Chinese import figures sees AUD/USD back under 0.7400 (vs. 0.7436 at best) and losing ground below the figure as the pair eyes its 21 DMA at 0.7332. NZD/USD threatens a break below 0.7000 having had fallen from 0.7050. The Loonie has trimmed some gains against the Buck seen in wake of last Friday’s jobs numbers, with softer oil prices also proving to be headwinds – and with clean air up to 1.2900. Similarly, EUR/NOK eclipsed last week’s ~8.900 high whilst the SEK side-lined the Riksbank minutes which largely consisted of reiterations and no new information. EUR/SEK makes headway above 10.2500 having had tested 1.3000 to the upside earlier.
• JPY/CHF – The traditional safe-havens have seen resilience despite the firmer DXY with losses seemingly cushioned by haven inflows. USD/JPY sees modest gains as the pair attempts to recoup some recent lost ground, with eyes from a technical standpoint on the 21 and 50 DMAs at 104.42 and 104.77 respectively. USD/CHF meanwhile focuses on Thursday’s 0.8954 high as the pair errs higher from its 0.8896 base.

In commodities, WTI and Brent front month futures kicked the week off on a softer footing following the rally seen last week on the back of OPEC+ expressing unanimity and flexibility with regards to future oil policy, with the next ministerial meeting planned for the 4th of January. Fresh catalysts for the complex have been light in early European trade with prices influenced by overall risk sentiment and Dollar action. Meanwhile, over the weekend Saudi Aramco released its OSPs for January whereby Saudi Arabia set January OSP to Asia at a premium of USD 0.30/bbl over Oman/Dubai which is an increase of USD 0.80/bbl from December and it set OSP to US at a premium of USD 0.55/bbl over ASCI which is lower by USD 0.30/bbl from December. Further, Friday saw the release of the Baker Hughes rig count which showed active oil rigs increasing by five whilst active natgas rigs fell by two. WTI Jan resides around USD 45.50/bbl having earlier fallen to a base around USD 45.40/bbl from best levels at USD 46.25/bbl. Brent Feb 21 briefly dipped below USD 48.50/bbl (vs. high 49.25/bbl). Elsewhere, precious metals were uneventful overnight before succumbing to the Buck, with spot gold meandering around USD 1830/oz after a short-lived dip below 1825/oz (vs. USD 1842/oz) whilst spot silver loses ground below USD 24/oz (vs. high 24.23.oz). In terms of base metals, LME copper prices dipped from eight-year highs amid the overall tone in markets alongside a decline of the red metal imports by China, whilst iron ore imports fell for a second consecutive month, dropping some 8.1% MM.

US Event Calendar

• 3pm: Consumer Credit, est. $16.1b, prior $16.2b

DB’s Jim Reid concludes the overnight wrap

I hope you had a good weekend. We spent a disproportionate amount of time playing with an app called “Elf Yourself” where you can superimpose photos of family or friends onto dancing characters and make a video. The kids loved it so if you have bored children to attend to over Xmas please download this app. You can see our clip if you look at my Bloomberg message header. It’s ridiculous!

Back to more sober matters and there’s lots of European events for us this week although a US fiscal deal could steal the limelight with the weak payrolls number on Friday perhaps focusing minds. It certainly helped encourage the market on Friday as both yields and equities rose following the disappointing data. On matters European, Brexit talks are reaching a denouement (famous last words), the disputes over the EU’s long-term budget and recovery fund continue, a summit of EU leaders is scheduled for Thursday and we’ll see the final ECB meeting of the year on the same day with the central bank expected to recalibrate its policy stance. Over in the US, the aforementioned stimulus talks, as well as the FDA meeting on Thursday when they’ll discuss an Emergency Use Authorization for the Pfizer/BioNTech vaccine will be the highlights. Elsewhere the U.K. will become the first major economy to roll out a Covid vaccine (Pfizer/BioNTech) from tomorrow. So all eyes on how the logistics of that goes.

Starting with the U.K., Brexit will be back squarely in the global headlines today as negotiations continue in Brussels over a trade deal with the EU, with less than 4 weeks remaining until the end of the transition period. Over the weekend there’ve been a number of developments, with a Saturday call between Prime Minister Johnson and European Commission President von der Leyen acknowledging “significant differences” on the three main outstanding issues, but agreeing to continue talks. Last night there were media reports that there’d been a breakthrough on fish, but on the UK side a government source told journalists that this wasn’t the case, saying that “There’s been no breakthrough on fish. Nothing new has been achieved on this today”. Furthermore, Bloomberg and others are still reporting that it’s the level-playing field that’s the biggest issue, with the EU wanting guarantees that the UK will commit not to undercut EU standards in a range of areas, but the UK seeing that as an unacceptable infringement on its sovereignty. All eyes will be on news reports today, with another call between Johnson and von der Leyen scheduled for this evening. In terms of the market reaction, sterling has moved slightly lower this morning, down -0.16% against the US dollar.

Running parallel to this, today also sees the UK government’s controversial Internal Market Bill arrive back in the House of Commons. As a reminder, this is the bill which sought to break parts of the already-reached Withdrawal Agreement with the EU, with the EU reacting very negatively to its publication. After it passed the House of Commons, the House of Lords amended the bill to take out the controversial sections, but the government have said they intend to reinstate them back in the Commons today. This will not be taken well by the EU so a Brexit deal beforehand would suit everyone. If not the relationship between the two could sour at a very bad time.

Over in Asia, equity markets are trading lower this morning for the most part, with the Nikkei (-0.59%), the Hang Seng (-1.69%) and the Shanghai Comp (-0.66%) all losing ground. The exception is the KOSPI, which has managed to gain +0.20%, but S&P 500 futures (-0.23%) are also pointing lower following the record high for the index on Friday. The declines have come as Reuters reported overnight that the US was preparing new sanctions on at least a dozen Chinese officials over the moves to disqualify opposition legislators in Hong Kong, with the report saying that this could come as soon as today. Meanwhile on the data front, China reported a +21.1% increase in exports year-on-year in dollar terms, stronger than the +12.0% increase estimated. Imports rose by a weaker-than-expected +4.5% yoy however (vs. +7.0% expected).

Moving back to EU negotiations, the other dispute to watch out for will be that with Poland and Hungary over rule-of-law conditions that have been proposed for the disbursement of funds, which both countries see as unacceptable interference in their domestic affairs. This issue is likely to be discussed at the EU leaders’ summit on Thursday and Friday, which is the last scheduled European Council meeting this year. It’s hard to believe this will be a stumbling block for the fund but it isn’t great for the smooth path of future integration.

Staying on Europe, the ECB will be announcing their latest monetary policy decision on Thursday. They’ve already preannounced a recalibration of the policy stance at this meeting at a point where inflation is running at -0.3% over the last year and the Euro is hitting two-year highs against the dollar last week. DB’s Mark Wall has suggested the recalibration will most likely focus on PEPP and TLTRO; and the intention of the recalibration is to maintain favourable financial conditions for longer, not to reduce the level of rates or yields further. DB expect an extension by 6 months of the PEPP net asset purchase period and the TLTRO3 discounted interest rate period beyond their current expiry in June 2021. DB also expect an increase in the PEPP envelope (EUR400bn) and other moves on TLTRO3 (e.g., additional tenders, possibly an adjustment to the lending benchmark, etc). No discount rate cuts are expected but the ECB will likely communicate very strongly its willingness and capacity to extend support even further and to ease the policy stance if needed to achieve its objectives. In effect, stronger informal forward guidance. Communications will likely be a key line of defence against a rising exchange rate. See here for their full preview.

Moving across the Atlantic to the US, the stimulus talks will remain in focus with a bipartisan group of senators today expected to table legislation for a stimulus bill amounting to around $908bn according to reports. There’s still tension on both sides so it won’t be an easy sell but things seem to be more positive than they were. On the monetary side, there won’t be much in the way of Fed speakers this week with FOMC members now in a blackout period ahead of meeting next week.

On the coronavirus, one of the main developments this week will be the US FDA’s meeting on Thursday to discuss an Emergency Use Authorization of the Pfizer/ BioNTech vaccine. Vice President Pence has told governors that the vaccine’s distribution could begin next week and then on December 17 we will see another FDA meeting to discuss an Emergency Use Authorization for the Moderna vaccine so there are some key events coming up.

Finally on the data front, the highlights will include the US CPI reading for November on Thursday, before we get the University of Michigan’s preliminary consumer sentiment index for December the following day. Elsewhere, we’ll get the UK’s GDP release for October on Thursday.

Recapping last week now and it was a story of three different deals: US fiscal stimulus, UK-EU Brexit negotiations and OPEC+’s meeting on production hikes. US stocks rose on the week as both Democratic and Republican politicians both sounded more bullish on getting a fiscal deal done in the near-term. The S&P 500 rallied +1.49% on the week (+0.70% Friday), while the NASDAQ composite rose +2.01% (+0.60% Friday) as both indices finished the week at record highs.

The cyclical trade remained strong as bank stocks on both sides of the Atlantic rallied with US banks up +1.62% while European Banks were up a larger +4.39%. European equities underperformed US stocks in general though as the STOXX 600 ended the week +0.21% higher (+0.59% Friday) while the FTSE (+2.87%) and IBEX (+1.61%) notably outperformed on the week.

Speaking of cyclicals, energy stocks rose with oil prices after OPEC+ members came to a consensus on delaying the productions hikes in Q1 2021. Both Brent Crude ($49.01/bbl) and WTI Oil ($46.01/bbl) closed at their highest levels since the pandemic started after rising +1.72% and +1.05% respectively.

Sovereign bonds sold off sharply as equity indices rose to post-pandemic highs in Europe and all-time highs in the US. US 10yr Treasury yields rose +13.5bps (+6.6bps Friday) to finish at 0.973%, which is the highest level since March. 10yr Gilt yields rose +6.7bps (+2.9bps Friday) to 0.35%, while 10yr Bund yields were up +4.1bps (+0.9bps Friday) to -0.55%. Inflation expectations rose notably, with US 5y5y swaps moving up +11bps bps on the week to 2.30% and EUR 5y5y swaps rising +5.1bps to 1.27%. Elsewhere in fixed income, the improving sentiment saw credit spreads in the US and Europe tighten on the week. US HY cash spreads were -27bps tighter, while Europe HY cash spreads tightened -19bps. US IG was -7bps tighter and -2bps narrower in Europe.

The release of US payroll data was the data highlight from Friday, where we learned that the labour market rebound lost significant momentum last month. The US added +245k jobs (+460k expected), though the unemployment rate fell to 6.7%. The weaker numbers seemed to give the market hope that it would spur Congress and/or the Federal Reserve to enact further measures. Other data highlights included the November construction PMIs from Germany and the UK which were at 45.6 (45.2 prior) and 54.7 (53.1 prior) respectively.

As tourism and hospitality-related industries tumble into bankruptcy one after the other as the government money runs out and revenues dry up thanks to the pandemic, Airbnb – the sharing economy pioneer that has managed to shift its focus to offering ‘staycation’-type arrangements for high-strung professionals looking to take a little break from city life – is reportedly raising its IPO price range by more than $10, the latest sign of just how unabashedly frothy markets are heading into the close of a year without equal in modern history. 

According to media reports, Airbnb is boosting its price range to between $56 and $60 a share, from $44 to $50. The new range would give the vacation rental company a valuation of as much as $42 billion on a fully diluted basis (including proceeds from the offering).

DoorDash, the food delivery stalwart that’s expected to go public on Wednesday (one day before Airbnb), revealed late last week that it had also raised its IPO price in anticipation of excessive demand.At the top of the current range, Airbnb could be worht as much as $42BN, while DoorDash could be worth as much as $36BN.

Even with the global economy partially shut down, deal flow has continued at a breakneck pace in 2020 as the new ‘SPAC’ craze, which has helped to raise billions of dollars. Moreover, so far this year, more than $140BN has been raised in via IPOs on US exchanges, a number that far exceeds the previous full-year record high set at the height of the dot-com boom in 1999, according to Dealogic data that dates back to 1995.

According to WSJ, these price hikes for some of the year’s hottest IPOs are just a sign that a gangbusters year for deals is going out with a bang, even though December is typically a quiet time in the IPO market. With COVID making the traditional IPO ‘roadshow’ unworkable, investment bankers have been marketing their offerings to mutual funds, hedge funds and other clients via Zoom meetings, rather than the typical cross-country tour.

In addition to the intense deal flow that is expected to keep investment banking analysts busy through the Christmas holiday, US equity valuations haven’t been this stretched since 1929 (per Professor Robert Shiller’s CAPE ratio).

As November’s payrolls report reminds America just how dire the economic situation truly is, we must ask: what’s wrong with this picture?