Investor Mood Lifted by Vaccine Hopes and U.S. Transition Go-Ahead

November 24, 2020

The U.S. dollar is grinding lower but slowly and in an orderly fashion. The currency dropped 0.8% and 0.7%, respectively, overnight against the New Zealand and Australian dollars overnight but by only 0.2% relative to the euro and loonie, and it held steady versus the yen and sterling. Favorable vaccine news has created a sense that a start is close at hand to a return to normalcy from the economy-crippling Covid-19 pandemic. This process will be stretched out many, many months, and the epidemic meanwhile spreading at an alarming rate. In the past 24 hours, deaths rose about 9k globally and just over 1k in the United States. Over half a million new cases were identified around the world, including over 180k in the U.S..

A second source of investor relief was yesterday’s belated clearance by the Trump Administration and GAS to begin the formal transition process of the federal government. President-Elect Biden is set to announce several cabinet posts today, and the rumored nomination of former Fed Chair Janet Yellen to be Treasury Secretary is being widely applauded.

Share prices advanced Tuesday by 2.5% in Japan, which was closed for holiday yesterday, 1.5% in Singapore, 1.3% in Australia, 1.0% in India, 0.9% in Indonesia and 0.6% in India. Stocks in Europe show gains so far of 1.7% in Italy, 1.2% in France, and 0.9% in Germany, Great Britain, and Spain. Dow futures have traded 1.0% higher.

Other signs of revived risk taking are the overnight 1.3% advance in the price of West Texas Intermediate oil, a 1.6% decline in the price of gold, and one-basis point rises in 10-year U.S., German and British sovereign debt yields.

German real GDP growth last quarter was revised upward 0.3 percentage points to 8.5%. GDP there had plunged 9.8% in the second quarter and had failed to rise since the third quarter of 2019. Consequently, GDP adjusted for variations in the number of business days was still 4.0% lower than a year earlier, and it’s apparent that growth in the final quarter will be at best only slight because of the second wave of the pandemic. German GDP last quarter got big boosts from an 18.1% jump in exports, 10.8% growth in personal consumption, and a 16.0% advance in business investment in machinery and equipment.

The German IFO Institute’s monthly business climate survey for November revealed a smaller-than-feared retreat to a 4-month low. The index printed at 90.7, down from 93.2 in September but well above last April’s nadir of 75.4. Business expectations took a bigger hit than current conditions, and the manufacturing sector’s index actually climbed two more points its its best level in over 14 months.

French business confidence slumped 11 index points in November to a 5-month low. Manufacturing dipped only two points to a 3-month low, but services and retail dropped more sharply to 6-month lows.

The Confederation of British Industries’ monthly distributive trades index slipped much less than feared in November but nonetheless printed at a 5-month low of -25.

Consumer confidence improved in November to a 10-month high in South Korea and an 8-month high in Ireland, but dropped to a 7-month low in the Czech Republic. A 5-month low in Czech business sentiment was also reported.

Manufacturing confidence dropped to a 4-month low this month in Turkey.

South Africa’s leading business cycle indicator increased in September for a fourth straight month, but the 1.7% rise was the smallest in this streak.

Hong Kong’s HKD 36.8 billion trade deficit last month was its widest since March and also 20% larger than in October 2019.

Finnish PPI inflation has been negative for 17 straight months, and the 5.4% on-year drop in October was the most negative since May.

Mexican unemployment fell 0.4 percentage points to a 5-month low of 4.7% in October.

Bank of Japan Governor Kuroda again dismissed the views that Japan is sliding into another prolonged spell of deflation and that monetary policy needs a profound overhaul now. Reserve Bank of Australia Deputy Governor Debelle cautioned against withdrawing monetary stimulus prematurely.

The U.S. data menu today includes the FHFA and Case Shiller house price indices, the Richmond Fed manufacturing survey, and the Conference Board’s consumer confidence index.

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

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