Big Stakes in Today’s Georgian Senate Votes: Investors Await Outcome

January 5, 2021

Polls close at 19:00 EST (midnight GMT) in Georgia where both senate seats are being contested today in runoff elections. Democrats need to win each seat in order to control the senate and oust Mitch McConnell as the upper chamber’s gatekeeper to all legislation. The outcome is uncertain and awaited by investors.

Stock markets, where emphasis is on the short-term, prefer shared and paralyzed government. U.S. stock indicators are unchanged in futures trading after Monday’s large correction downward. In the Pacific Rim, the New Zealand market, which was closed on Monday, soared 2.6% overnight. Share prices also rose 1.6% in South Korea, 0.7% in China and Taiwan, 0.6% in Hong Kong and 0.5% in India and Indonesia, but fell 0.4% in Japan. European markets are also down, with losses so far of 0.8% in France and Germany and 0.7% in Spain and Italy.

The slip-sliding dollar lost more ground overnight, dropping 0.6% against the Australian dollar, 0.5% relative to the loonie, 0.4% versus the kiwi, 0.3% vis-a-vis the yen, 0.2% against the euro and Swissy, and 0.1% versus sterling.

Ten-year U.S. Treasury and British gilt yields rose two basis points, and their German counterpart is a basis point firmer. But the 10-year Japanese JGB yield settled back one basis point to zero percent.

Oil ministers around the world extended their discussion about production into a second day with Russia lobbying for more output and OPEC wishing to keep quotas unchanged. The price of WTI crude oil increased 1.4% overnight. The price of a bitcoin rebounded, too, and is back above $30k. Gold firmed 0.2%.

Swiss CPI inflation remained below zero percent for an 11th straight month in December, edging down 0.1 percentage point to a lower-than-forecast -0.8%. CPI inflation in 2020 averaged -0.7%, 1.1 percentage points down on the prior year’s average. Swiss National Bank officials do not foresee positive inflation before 2022.

German retail sales volume unexpectedly rose in November. A 1.5% monthly advance after +2.6% in October resulted in a 5.6% increases compared to a year earlier and an 8.4% rise from the pre-pandemic level. German labor statistics also produced a pleasant surprise. The number of unemployed workers fell 37k last month instead of rising as analysts had predicted, and the jobless rate stayed at 4.5% for a fourth straight month.

Spanish consumer confidence jumped to a 5-month high reading of 63.1 in December from 55.7 in November and an 8-year low of 48.5 in October. Vaccines will do that.

Mexican business sentiment rose to a 9-month high last month, marking its 7th month-on-month improvement in a row. In Thailand, by contrast, business confidence eased to a two-month low of 46.8 last month. That’s still up from April’s 32.6 reading.

Year-on-year growth in Japan’s monetary base accelerated further to 18.3% in December from 17.0% in 4Q, 11.9% in 3Q, 4.1% in 2Q, and 3.6% in full-2019. The Bank of Japan’s JPY 702.6 trillion balance sheet at end-2020 was 22.6% wider than a year earlier, reflecting relentless quantitative stimulus.

The European Central Bank is also maintaining quantitative stimulus. On-year M3 money growth in the euro area accelerated to 11.0% in November and averaged 10.6% in September-November. The narrow M1 money aggregate accounted for the pick up. Loans by banks to households and non-financial firms were 3.1% and 6.9% above their November 2019 levels, and credit extended to governments jumped by 21.4%.

The non-oil purchasing manager indices rose to 13- and 16-month highs of 57.0 and 51.2 in Saudi Arabia and the United Arab Emirates but fell to a a 6-month low of 48.2 in Egypt, which broke a 3-month string of above-50 readings that signified improvement.

The U.S. Institute of Supply Management reports its manufacturing purchasing managers December survey results at 10:00 EST (15:00 GMT). The IHS-compiled U.S. manufacturing PMI index for December reported yesterday printed at a 6+ year high of 57.1, which is 6.2 index points above the July level.

U.S. December motor vehicle sales also arrive later today, but the magnet of market attention will be Georgia’s election. The congressional count of electoral votes occurs tomorrow. Some Republican lawmakers are planning to do Trump’s bidding by questioning the state-submitted results and forcing a debate. Such will not change the outcome of Joe Biden’s victory but will additionally cement the Republican Party’s internal rupture and inflict long-term damage to the health of American democracy.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.





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