U.S. Still Counting Votes as 24-Hour Rise Covid Cases and Deaths Exceed 107K and 1.1K

November 5, 2020

U.S. Election News: Biden’s electoral college count seems likely to reach 270 threshold. Trump is suing to halt counting of absentee ballots, and street protests against such action broke out in several cities overnight. Congress most likely will remain divided with Dems controlling the House and Republicans holding the Senate, but there too ballot counting goes on.

In financial markets, the U.S. dollar fell sharply overnight by 1.1% relative to the euro and 1.3% vis-a-vis the Mexican peso. The greenback lost by 0.8% against the yen, Swiss franc, and both the Australian and New Zealand dollars, and it slipped 0.5% versus the loonie and 0.4% against the Chinese yuan.

Share prices rallied further overnight, closing up 3.3% in Hong Kong, 3.0% in Indonesia, 2.4% in South Korea, 2.9% in Singapore, 1.7% in Japan and 1.3% in China. Markets have so var risen 1.4-1.8% in Germany, Spain, the U.K., and Italy. The Dow and S&P futures are similarly higher and outpaced by a 2.6% advance in the Nasdaq futures.

Among commodity prices, gold advanced 1.7%, while WTI oil is 0.7% lower.

Ten-year British gilt and German bund yields rose 3 and 1 basis points, The yield on the comparable Japanese JGB yield is a basis point softer, and the 10-year U.S. Treasury yield is unchanged.

The Fed’s FOMC will announced its latest interest rate decision at 14:00 EST (19:00 GMT). No policy change is anticipated, but Chairman Powell’s press conference will be gleaned regarding any reaction to the continuing fiscal bill inaction in Congress amid a deepening pandemic in the United States.

In other central bank action, the Bank of England’s Monetary Policy Committee left its bank rate steady at 0.10% but augmented the program of government bond purchases by GBP 150 billion to GBP 875 billion. The bank rate earlier this year was cut 50 basis points on March 11 and by a further 15 bps eight days later to its current level. Today’s MPC policy votes were made unanimously. A released statement observes that Covid infections in the U.K. have risen sharply since the committee last met in September, and CPI inflation is likely to hover around 0.5%. Officials also published their quarterly Monetary Policy Report in which the projected GDP contraction in 2020 was revised to 11.0% from an estimated 9.5% slide in the prior report.

The Central Bank of Norway has retained a zero percent policy interest rate, a level reached after a 25-basis point cut in May. Even earlier this year, the rate had been cut 50 basis points in January and 75 bps in March. A released statement from officials projects that the key interest rate will not be lifted in the next couple of years. While there has been some rebound from the deep recession in the spring, unemployment and general uncertainty remain high, activity is less than pre-pandemic levels, and core inflation has slipped.

Czech monetary policy was also not changed at the Czech National Bank’s latest review. The two-week repo rate has been at 0.25% since a 75 basis point reduction from 1% in late May. There were also two cuts totaling 125 basis points during March.

Today’s batch of released economic data¬† features more October purchasing manager surveys, German factory orders, Euroland retail sales, U.S. productivity and jobless insurance claims, and consumer confidence in a number of countries.

Japan’s service sector and composite purchasing manager indices printed still below the 50 threshold in October but, at 47.7 and 48.0 respectively, represent nine-month highs. Business sentiment also imporoved.

Russian services and composite PMI readings of 46.9 and 47.1 constitute 5-month lows consistent with real GDP this quarter being almost 10% below its year-earlier level.

Brazil’s composite PMI of 55.9 in October was 2.3 points greater than September’s reading and indicates the fastest rate of improvement in over a decade. A service sector score of 52.3 was the best since January.

The British construction PMI dropped back 3.7 points in October to a 5-month low of 53.1.

Euroland’s construction purchasing managers index declined 0.6 index points to a 4-month low of 44.9. The German, French and Italian construction PMI scores of 45.2, 47.3, and 48.1 connote weakening activity and represent the fastest contractions in 4-, 5- and six months, respectively.

A 0.5% increase in German factory orders in September was only a fourth as much as analysts were expecting but still enough to flip the 12-month change into positive territory (1.9%). Export demand fell further, while domestic orders advanced by 2.3%.

Retail sales volume in the euro area sank 2% in September, which is double analyst forecasts. Sales in the third quarter soared 10.2%, nevertheless, but new covid restrictions point to a difficult fourth quarter for sales. The European Commission in fact expects real GDP this quarter to decline in Euroland and consequently revised its growth forecast for 2021 down from 6.1% to a new projection of 4.2%.

U.S. labor productivity advanced 4.9% last quarter from 2Q and 4.1% year-on-year. Unit labor costs dropped 8.9% after successive jumps of 9.6% in 1Q and 8.5% om 2Q. That left unit labor cost 2.5% above the third quarter level in 2019. New jobless insurance claims in the United States last week slid 7k but, at 751k, remained on a rough par with the worst weekly readings of the Great Recession.

Spanish consumer confidence dropped a whole index point in October to a 94-month low and, at 48.5, was still far beneath the pre-pandemic reading of 85.7 last February. Mexican consumer confidence in October rose to a 7-month high. Swiss consumer confidence had rebounded from -39.3 in the second quarter to -12.0 in 3Q but this quarter slipped again to -12.8.

Indonesian real GDP rebounded 5.05% last quarter, a tad less than forecast, but remained 3.5% weaker than a year earlier.

Swedish real GDP rebounded by 4.3% in the third quarter but was still 3.5% weaker compared to its year-earlier level. Industrial production in September recorded a sixth consecutive on-year decline, this time of 2.4%.

Greece’s 16.8% unemployment rate in August was its lowest level since April.

In October, Cypriot and Thai consumer prices were 0.8% and 0.5% below their year earlier levels. Taiwan’s CPI was down 0.2%, its ninth sub-zero on-year change in a row, but Dutch consumer prices were up 1.2% from a year earlier.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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