U.S. Election Outcome Still Uncertain but Republicans Did Much Better than Foretold by Polls

November 4, 2020

The U.S. congress will remain divided, with the senate in Republican hands and Democrats controlling the house of representatives. Officially according to the AP, Biden secured 238 electoral votes whereas Trump so far captured 213 electoral votes. Among undeclared states, more electoral votes lean toward Trump, but margins are thin and subject to switching sides as mailed in ballots get counted. Trump declared victory and wants to get things settled in the courts as soon as possible. Whatever the final outcome, one apparent conclusion so far is that opinion polls underestimated Trump’s support by an even greater margin than in 2016.

Financial markets overnight flopped around in response to the election news. Three net movements jump out. Number one, the 10-year Treasury yield dropped 9 basis points. Fiscal support is less likely to happen, so the persistence of ultra-easy Fed policy is apt to continue for even longer than thought previously. Number two, West Texas Intermediate crude oil is almost 3% higher. Number three, equities in Asia and Europe are higher for the most part, and so far U.S. futures are too, led by a 3%+ jump in the technology-laden Nasdaq.

The dollar fell on balance overnight by 0.6% against hte Mexican peso, 0.3% relative to the yuan, 0.2% versus the yen, euro, and Swiss Franc and 0.1% vis-a-vis the Australian currency. Neither Trump nor Biden would be likely to pursue a strong dollar policy.

ADP’s estimate that U.S. private sector jobs went up only 365k in October is some 300k fewer than analysts are anticipating and less than half September’s total.

The U.S. goods and services trade deficit in September narrowed $3.2 billion to $63.9 billion as a 2.6% monthly rise in exports outstripped the increase in imports by five-fold.

Canada’s trade deficit widened by a third to C$ 3.25 billion in September from C$ 2.45 in the prior month.

Euroland producer prices posted a 2.4% decline in the year to September, their smallest year-on-year decrease in seven months.

Fed by the Bank of Japan’s ultra-loose policy stance including asset buying, Japan’s monetary base showed accelerating 16.3% on-year growth in October, up from 11.9% in the third quarter, 4.1% in 2Q, and 3.6% in full 2019. The central bank’s balance sheet at the end of October was almost 50 trillion yen thicker (roughly $470 billion) than at midyear. Published minutes from the BOJ Board’s policy review in September confirmed a solid majority of policymakers disinclined to augment policy now but a desire to gain further insight into the full economic implications of the Covid pandemic.

The drag induced by renewed activity lockdowns in Europe had clearly begun in October. Euroland’s service sector purchasing managers index dropped 1.1 points to a 5-month low, resulting in a stagnant 4-month low of 50.0 in its composite PMI reading. The composite scores for France and Spain of 47.5 and 44.1 represent 5-month lows, and that of 49.2 in Italy was a 4-month low. The Irish composite score rose to a 2-month high but, at 49.0, reflected a second straight month of deteriorating activity. Within the euro area, only Germany’s 55.0 composite PMI cleared the 50 hurdle that separates deterioration from improvement.

Britain’s composite PMI tumbled 4.4 points to a 4-month low of 52.1. New demand in theĀ  service sector contracted for the first time since June, and job shedding intensified in October.

Other purchasing manager surveys published today were above their previous monthly levels.

  • The Chinese composite and service-sector PMI readings of 55.7 and 56.8 were each at 4-month highs in October.
  • India‘s services PMI leaped 4.3 points to an 8-month high of 54.1, and that economy’s composite PMI of 58.0 constitutes a 7-month high.
  • The Commonwealth Bank of Australia estimates October composite and service-sector PMIs at 3-month highs of 53.5 and 53.7.
  • Sweden‘s composite and services PMI printed at robust levels of 55.9 and 55.0, which indicated the fastest expansion rates since August.
  • Singapore‘s private purchasing managers index rose 3.5 points to a 9-month high of 48.6.
  • Standard Bank’s estimated South African manufacturing PMI increased 1.6 points to a 31-month high of 51.0 and showed the strongest business sentiment since March.
  • Hong Kong‘s private sector PMI 49.8 printed just short of the breakeven level and represents a 32-month high.

New Zealand released quarterly labor market statistics. The jobless rate jumped to 5.3% in 3Q from 4.0% in 2Q and 4.1% a year earlier. The level of employment contracted 0.8% between 2Q and 3Q after a 0.3% slide in the second quarter. Labor costs rose 0.6% last quarter, which was more than expected, but posted a smaller year-on-year increase of 1.9%.

Still ahead: U.S. non-manufacturing purchasing managers survey and motor vehicle sales.

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

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