Share Prices Up and Dollar Down on Favorable Covid Vaccine News

November 23, 2020

A third Covid-19 vaccine has been found to be quite effective in trials, and Regeneron’s antibody therapeutic treatment has received authorization for emergency use against the disease. Global cases are fast approaching the six million mark, 21% of which in the United States. After spiking to nearly 200k last Friday, new U.S. cases fell Saturday and again even further on Sunday to less than 145k. U.S. deaths from Covid last Sunday slipped below 900 to less than half last Friday’s total.

Share prices closed up 1.3% in Singapore, 1.2% in Taiwan, 1.5% in Indonesia, 1.9% in South Korea and 1.1% in China. Japan’s market was closed for the Labor Thanksgiving holiday. In Europe, equities have risen 0.6% in Germany and 0.5% in Italy and France so far. U.S. futures point to about a half percent advance at the open.

10-year sovereign debt yields (up 3 basis points in the U.S., 2 bps in Great Britain and one bp in Germany) and the price of West Texas Intermediate crude oil (+1.5%) also were lifted overnight but vaccine hopes.

The dollar fell overnight by 0.7% against sterling, 0.4% versus the Swiss franc and Mexican peso, 0.3% relative to the euro, loonie, Australian dollar and kiwi and 0.1% vis-a-vis the yen.

President Trump maintained a grip on the news feed over the weekend. Efforts to overturn Joe Biden’s election victory in the courts and/or congress continue to go nowhere in achieving that objective but are solidifying the other objective in cementing an alternative delusion in the minds of his loyal base, and still there has been no groundswell of support for the President-Elect from Republican governors, senators, and congressmen. Trump skipped much of the weekend’s virtual summit of Group of Twenty political leaders. A G20 communique released after those meetings was prevented by the alienation of Trump from the rest from announcing specific fresh coordinated initiatives. The statement warns:

The recovery is uneven, highly uncertain and subject to elevated downside risks, including those arising from renewed virus outbreaks in some economies, with some countries reintroducing restrictive health measures. We underscore the urgent need to bring the spread of the virus under control, which is key to supporting global economic recovery. We are determined to continue to use all available policy tools as long as required to safeguard people’s lives, jobs and incomes, support the global economic recovery, and enhance the resilience of the financial system.

Today’s economic data highlight has been the release of preliminary November purchasing manager surveys that confirm the drag from a renewed imposition of Covid-related restraints.

Euroland’s composite PMI dropped 4.9 points to a 6-month low of 45.1. This broke a four-month sequence of readings of 50 or above and signals a likelihood that real GDP will contract in the current quarter.  November saw the widest gap in 25 years between Euroland’s factory sector PMI (a 3-month low of 53.6) and the services PMI (a 6-month low of 41.3). One bright spot was improved optimism regarding the one-year outlook.

Within Euroland, the French composite PMI, which had spiked to 57.3 last July, relapsed to a 6-month low of 39.9 in November. Manufacturing conditions (49.1) deteriorated only marginally in the latest month, but French services sank 8.5 points to a 6-month low of 38.0. Excluding Germany and France, the other members of Euroland experienced a collective PMI score below 50 for a fourth straight month. That level separates improvement from deterioration in these diffusion indices. The German composite PMI, by contrast, continued to exceed 50 in November. At 52.0, such represents a 5-month low but includes a surprising resilience in manufacturing whose reading was 57.9. In services, which are affected by reinstated Covid restrictions, the PMI subindex fell 3.3 points to a 6-month low of 46.2.

The British PMIs did not deteriorate as much as analysts were anticipating, which partly accounts for sterling’s particular buoyancy today. The composite PMI (a 6-month low of 47.4), manufacturing PMI (a 3-month high of 55.2), and services PMI (a 6-month low of 45.8) were each above what analysts were predicting for November.

The Commonwealth Bank of Australia’s composite PMI for that economy climbed 1.2 index points to a 4-month high of 54.7 this month. Australia’s manufacturing PMI, according to this preliminary estimate, rose to a 35-month peak of 56.1, and services improved to a 4-month high of 54.9.

In other data reported today,

  • Retail sales in New Zealand ricocheted from a 14.8% plunge in the second quarter with a 28.0% upsurge in 3Q. As a result, sales were also 8.3% greater than a year earlier.
  • Polish retail sales fell 2.1% last month, seven times faster than forecast.
  • Taiwan reported several October statistics, including a 3-month low in consumer confidence, a 7-month low in the jobless rate of 3.77%, a 1.4% monthly drop in industrial production (+7.1% year-on-year), and a 9.5% leap in retail sales (+3.3% yoy).
  • The year-on-year third-quarter contraction of Singaporean GDP was revised downward to -5.8% and accompanied by a SGD 22.9 billion current account surplus, 5.3% than a year earlier.
  • Thailand’s imports recorded a larger-than-expected 14.3% on-year slide in October, and its January-October trade surplus of $22.67 billion was more than 2.5 times bigger than accrued during the equivalent period of 2019.
  • Nigerian real GDP grew 12.1% last quarter, far more than reversing the second-quarter contraction of 5.0% and resulting in a net 3.6% slide from the third quarter of 2019.

The State Bank of Pakistan left its main interest rate steady at 7.0%. Starting with two separate cuts in March and augmented by reductions in April, May and June, the rate was slashed from 13.25%. Pakistan is now in a fragile recovery, and inflation is projected to lie within target.

The Bank of Ghana also left its monetary policy unchanged. That country’s central bank interest rate has been at 14.5% since a 150-basis point cut in March.

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

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