Democrats take control of Congress; President Trump increasingly isolated following Capitol riot
US stock markets forged further into uncharted territory this week despite what can only be described as a historically tumultuous week. Covid cases continued to surge globally as governments struggled to keep the pandemic from overwhelming health care systems. By Friday one out of every one thousand American citizens had succumbed to the virus as the daily death count surpassed 4K for the first time. The surging pandemic was nearly background noise though, as US democratic institutions came under attack. By Wednesday the Democrats had taken control of the Senate by winning the two Georgia Senate runoff seats and President Trump held a rally in Washington DC calling on his supporters to fight the results of last year’s election. The rally morphed into an all-out riot when supporters marched to the Capitol building where Congress was certifying President-elect Biden’s victory and overwhelmed security forces. Mayhem ensued with the Capitol building getting overrun and ultimately resulting in 5 deaths including one Capitol police officer before the National Guard was called in to end the siege. In the aftermath President Trump became increasingly isolated, with business leaders, cabinet members and even the VP distancing themselves while Democrat leaders called for impeachment citing incitement of insurrection.
Strikingly US stock markets had no problem climbing what seemed an insurmountable wall of worry. A reflation trade clearly took hold, aided by the expectation that Biden and the Democrats will be able to push through additional stimulus spending and perhaps an infrastructure bill this year. Not even a disappointing Dec employment report and Fed officials hinting at beginning to discuss pulling back on asset purchases as early as this year could derail the momentum. Interest rates moved up along with stocks and a basket of risk assets. The US 10-year Treasury yield topped 1% for the first time since March, resulting in substantial curve steepening and rising inflation breakeven rates. Bitcoin shot above 40K for the first time and TSLA shares surged above $800, making CEO Musk the wealthiest person on the planet. WTI crude prices moved back above $50/barrel after OPEC+ producers got a surprise cut announcement from the Saudis allowing production to essential stay steady through March. The Russell 2k led the charge following the Georgia runoff results but by week's end nearly all US indices closed at new highs. For the week the Dow rose 1.6%, S&P gained 1.8% and the NASDAQ added 2.43%.
In corporate news this week, Micron posted strong earnings and guided above consensus amid improving DRAM market dynamics. Bed Bath and Beyond Q3 earnings disappointed and guidance fell short of estimates. GM reported its best Q4 retail sales since 2007, and the automaker said it was 'especially bullish' about its new full-size SUVs. EU’s EMA recommended Moderna's COVID-19 vaccine for use in people over 18 years of age, as had been anticipated. The joint healthcare venture between Amazon, Berkshire, and JPMorgan announced it would shut down after three years, concluding a failed effort that had sought to tackle high and rising costs for employee health care. Google and Snap reportedly are in talks to invest in an Indian social network, ShareChat. Boeing entered into a $2.5B deferred prosecution agreement with the DOJ on 737 MAX fraud conspiracy charges. Starbucks CFO Patrick Grismer said he plans to retire in May 2021. Sarepta shares cratered after announcing its Duchenne Muscular Dystrophy treatment study did not produce statistically significant results.
SUNDAY 1/3 (HK) Macau Dec Casino Rev (MOP): 7.8B v 6.8B prior; Y/Y: -65.8% v -70.5% prior
MONDAY 1/4 *(IT) ITALY DEC MANUFACTURING PMI: 52.8 V 53.5E (6th month of expansion) SNAP Google and Snap said to be in talks to invest in Indian social network ShareChat - tech blog AMZN Amazon-Berkshire-JPMorgan healthcare JV Haven to shut down after three years - CNBC (US) Fed Bostic (dove, non-voter): Recalibration of US central bank asset purchases could come in short order if COVID vaccine and economic recovery take hold, new stimulus package will help avoid some of the worst outcomes, but still watching for vulnerabilities
TUESDAY 1/5 *(DE) GERMANY DEC NET UNEMPLOYMENT CHANGE: -37.0K V +10.0KE; UNEMPLOYMENT CLAIMS RATE: 6.1% V 6.2%E (RU) Saudi and Russia reportedly reach compromise that keeps OPEC+ oil output levels steady for Feb but increases in March - press *(US) DEC ISM MANUFACTURING: 60.7 V 56.7E; PRICES PAID: 77.6 V 65.0E (Manufacturing highest since Aug 2018, Prices paid highest since 2018) GM Reports Q4 sales 771.3K vehicles, +4.8% y/y (best Q4 retail sales since 2007); 'especially bullish' about its new full-size SUVs (SA) Saudi Energy Min: To cut 1M b/d oil unilaterally in Feb and March citing preemptive measure
WEDNESDAY 1/6 *(FR) FRANCE DEC PRELIMINARY CPI M/M: 0.2% V 0.4%E; Y/Y: 0.0% V 0.2%E *(IT) ITALY DEC SERVICES PMI: 39.7 V 45.0E (4th month of contraction) *(DE) GERMANY DEC FINAL PMI SERVICES: 47.0 V 47.7E (confirms 3rd straight contraction) *(EU) EURO ZONE DEC FINAL PMI SERVICES: 46.4 V 47.3E (confirms 4th straight contraction) *(UK) DEC FINAL PMI SERVICES: 49.4 V 49.9E (confirms 2nd straight contraction) MRNA EU EMA recommends Moderna's COVID-19 vaccine (as expected); grants conditional marketing authorization for use in people from 18 years of age *(DE) GERMANY DEC PRELIMINARY CPI M/M: 0.5% V 0.6%E; Y/Y: -0.3% V -0.2%E *(US) DEC ADP EMPLOYMENT CHANGE: -123K V +75KE (1st negative reading since April) (US) NYSE will proceed with delisting of three Chinese telecom firms - press *(US) DOE CRUDE: -8.0M V -2ME; GASOLINE: +4.5M V +1ME; DISTILLATE: +6.4M V +1.5ME (US) Association of American Railroads weekly rail traffic report for week ending Jan 2nd: 422K, +1.9% y/y (US) VP Pence statement: I have no authority to unilaterally determine votes; It is not correct that I should be able to accept or reject Electoral College votes unilaterally (US) All US Capitol buildings have now gone into lockdown as protesters have breached the Capitol - press *(US) US GOVT REPORTEDLY MULLING ADDING ALIBABA AND TENCENT TO CHINA STOCK BAN; WOULD RESTRICT US INVESTMENT IF ENACTED - PRESS COST Reports Dec SSS (ex-gasoline) +10.9% v +10.1%e TWTR Locking Trump account for 12-hours; to permanently ban President Trump account with any future violations (CN) S&P Dow Jones to remove ADRs of China telecoms [reverses prior position after similar move by the NYSE] - press
THURSDAY 1/7 *(US) CONGRESS CERTIFIES PRESIDENTIAL ELECTION VOTE FOR BIDEN *(EU) EURO ZONE DEC ECONOMIC CONFIDENCE: 90.4 V 89.8E *(EU) EURO ZONE DEC ADVANCE CPI ESTIMATE Y/Y: -0.3% V -0.3%E; CPI CORE Y/Y: 0.2% V 0.2%E *(EU) EURO ZONE NOV RETAIL SALES M/M: -6.1% V -3.4%E; Y/Y: -2.9% V +0.9%E *(US) INITIAL JOBLESS CLAIMS: 787K V 800KE; CONTINUING CLAIMS: 5.07M V 5.20ME *(US) DEC ISM SERVICES INDEX: 57.2 V 54.5E (highest since Sept) MU Reports Q1 $0.78 v $0.71e, Rev $5.77B v $5.73Be BA DOJ charges Boeing with 737 MAX fraud conspiracy; Boeing to settle for $2.5B (US) Fed's Bostic: Fed may taper bond purchases earlier than expected - Fox Business interview 005930.KR Reports Q4 prelim (KRW) Op 9.0T v 9.5Te (vs 7.2T y/y) , Rev 61T v 62.0Te (vs 59.9T y/y) PFE Exec: according to new study, COVID-19 vaccine appears to be effective against both UK coronavirus variant B117
FRIDAY 1/8 *(EU) EURO ZONE NOV UNEMPLOYMENT RATE: 8.3% V 8.5%E *(US) DEC CHANGE IN NONFARM PAYROLLS: -140K V +50KE (1st negative reading since Apr 2020) *(US) DEC AVERAGE HOURLY EARNINGS M/M: 0.8% V 0.2%E; Y/Y: 5.1% V 4.5%E; AVERAGE WEEKLY HOURS: 34.7 V 34.8E *(US) NOV FINAL WHOLESALE INVENTORIES M/M: 0.0% V -0.1%E