Weekly Market Update: Markets remain encouraged by vaccine news and progress on US stimulus talks
US stocks continued to edge up to new all-time highs this week led by historic outperformance in the Russel 2000. Reports indicated global equity inflows for the week ending December 16th reached a new record high above $46B. Investors looked past the grim rise in Covid-related deaths to focus on continued positive developments on the vaccine front, and growing hopes for a fiscal relief agreement in Washington. Disappointing US economic data only added to the narrative that pressure was building on lawmakers that would propel them across the finish line.
European data was decidedly more encouraging which propelled continued pressure on the US dollar. The Greenback fell to levels not seen in roughly three years which aided continued upward pressure on commodity prices. A host of central banks convened policy meetings, headlined by the Federal Reserve. Chairman Powell outlined what he viewed as powerful new forward guidance on asset purchases, but came up short of signaling any changes to pace or composition of those purchases. By Friday sentiment felt heavier as Brexit negotiations looked to be headed into another do-or-die weekend and no agreements had been reached in Washington on either a relief package or an omnibus spending bill. Adding to the tensions were reports of continued dysfunction between the Trump Administration and President elect Biden’s transition team. Discord appeared to be growing as details emerged of a major cyberattack by Russian hackers who breached numerous US federal agencies including the Energy Department and National Nuclear Security Administration. For the week, the S&P gained 1.3%, the DJIA added 0.4%, and the Nasdaq surged 3%.
In corporate news this week, Apple said it planned to boost iPhone production by 30% in H1’21 amid strong 5G demand, targeting 230M phones for the full year. Lennar posted blowout earnings, with its chairman noting, “It’s never been this easy to sell homes,” adding he expects the strong demand to continue into the new year. FedEx reported a modest Q2 beat, but margins and an uncertain outlook resulted in some profit-taking in the name. An FDA advisory committee voted to recommend Moderna’s COVID vaccine for emergency use, adding a second potential inoculation against coronavirus to the mix for US citizens following last week’s Pfizer approval. Tilray confirmed it would be acquired by Aphria in an all-stock reverse merger deal to create the world's largest cannabis company. AstraZeneca acquired Alexion for $39B as part of a cash and stock deal in a move to expand into the rare disease space. Electronic Arts bought developer Codemasters for $1.2B, outbidding rival Take-Two for the racing game studio. Eli Lilly added gene therapy specialist Prevail Therapeutics to its portfolio for $880M in cash, plus add-ons for a future drug approval.
SUN 12/13 (UK) EU Commission President Von Der Leyen and UK PM Johnson said negotiations on a Brexit deal will continue (no specific deadline now set) - Joint Statement
MON 12/14 (US) NYC Mayor de Blasio: NYC should prepare for possibility of a 'full shutdown' (TR) US announces sanctions on Turkey's Presidency of Defense Industries and President Ismail Demir over Turkey purchase of Russian S-400s - press (had been expected to impose sanctions today) (US) Attorney General (AG) Barr to leave role before Christmas (after his departure had been speculated); Trump appoints Jeff Rosen as acting AG ALXN Confirms to be acquired by Astrazeneca for $175/shr in cash and stock deal valued at $39B; To close in Q3 2021
TUES 12/15 AAPL Said to be planning 30% increase in iPhone production in H1 2021 due to strong demand for 5G phones; Apple said to have told suppliers it is planning to build up to 230M phones in 2021 - Nikkei *(US) DEC EMPIRE MANUFACTURING: 4.9 V 6.2E (US) Sen Maj Leader McConnell: this morning the US officially has a president-elect; wants to congratulate Pres-elect Biden and Vice Pres-elect Harris *(US) NOV INDUSTRIAL PRODUCTION M/M: 0.4% V 0.3%E; CAPACITY UTILIZATION: 73.3% V 73.0%E 2330.TW Taiwan Govt considering helping companies like TSM to remain competitive amid concerns quantum computing could negatively impact semiconductor industry - Digitimes
WEDS 12/16 *(UK) NOV CPI M/M: -0.1% V +0.1%E; Y/Y: 0.3% V 0.6%E *(FR) FRANCE DEC PRELIMINARY MANUFACTURING PMI: 51.1 V 50.1E (moves back to expansion) *(DE) GERMANY DEC PRELIMINARY MANUFACTURING PMI: 58.6 V 56.5E (6th month of expansion and highest reading since Feb 2018) *(EU) EURO ZONE DEC PRELIMINARY MANUFACTURING PMI: 55.5 V 53.0E (6th month of expansion) *(UK) DEC PRELIMINARY PMI MANUFACTURING: 57.3 V 56.0E (7th straight expansion and highest reading since Nov 2017) (US) Capitol Hill negotiators are reportedly on the brink of a $900B coronavirus rescue package; would include a new round of direct payments, but would leave out state and local aid, and a liability shield; deal could come as early as this morning - Politico *(US) DEC PRELIMINARY MARKIT MANUFACTURING PMI: 56.5 V 55.8E *(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 0.00-0.25% (AS EXPECTED); MAKES NO CHANGE TO COMPOSITION AND PACE OF ASSET PURCHASES *(US) DEC NAHB HOUSING MARKET INDEX: 86 V 88E LEN Reports Q4 $2.82 v $2.38e, Rev $6.83B v $6.54Be (US) Pharmacists have found way to squeeze extra doses out of Pfizer vaccine vials, which could boost US supply of vaccine by 40% - Politico
THURS 12/7 (EU) German Agriculture Min Kloeckner: Found solution for fishing quota issue on Brexit; North Sea fishing will be reevaluated in Jan 2021 *(EU) EURO ZONE NOV FINAL CPI Y/Y: -0.3% V -0.3%E; CPI CORE Y/Y: 0.2% V 0.2%E *(UK) BANK OF ENGLAND BANK (BOE) LEAVES INTEREST RATE UNCHANGED AT 0.10%; AS EXPECTED *(UK) BOE DEC MINUTES: VOTED 9-0 (UNANIMOUS) TO KEPT INTEREST RATES SEC Chairman Jay Clayton: We can't regulate euphoria - CNBC *(US) DEC PHILADELPHIA FED BUSINESS OUTLOOK: 11.1 V 20.0E (lowest since June) *(US) NOV HOUSING STARTS: 1.55M V 1.535ME; BUILDING PERMITS:1.64 M V 1.560ME (US) Energy Department and National Nuclear Security Administration reportedly have evidence that hackers accessed their networks - Politico FDX Reports Q2 $4.83 v $3.90e, Rev $20.6B v $19.3Be MRNA FDA advisory committee votes in favor that "Based on the totality of scientific evidence available, do the benefits of the Moderna COVID-19 Vaccine outweigh its risks for use in individuals 18 years of age and older?" (20 yes, 0 no, 1 abstain) - VRBPAC Meeting MSFT Microsoft reportedly was breached as part of suspected Russian hack; Microsoft products said to have been used to infect others - press *(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED
FRI 12/18 (CN) Trump Administration said to plan to add ~80 companies (including SMIC) to US Commerce Dept Entity List on Dec 18th (Friday) *(UK) NOV RETAIL SALES (EX-AUTO/FUEL) M/M: -2.6% V -4.0%E; Y/Y: 5.6% V 4.1%E *(DE) GERMANY DEC IFO BUSINESS CLIMATE SURVEY: 92.1 V 90.0E (UK) BOE’s Vlieghe: Believes that negative rates could help UK complete recovery (US) NOV LEADING INDEX: 0.6% V 0.5%E *FED BANK STRESS TEST RESULTS: will loosen restrictions for share buybacks and will permit limited dividend payouts in Q1