Daily Market Report | Nov. 23, 2020

US FINANCIAL MARKET

Stock Rikse on Covid-19 Vaccine Results – Wall Street Journal, 11/23/20

  • U.S. stocks rose Monday after promising results on a Covid-19 vaccine bolstered hopes for an economic rebound in 2021.
  • Ten of the S&P 500’s 11 sectors gained Monday, with economically sensitive sectors like energy and financials among the strongest performers.
  • The University of Oxford and AstraZeneca said their vaccine was found to be as much as 90% effective in preventing infections without serious side effects in a large trial.
  • The results added to optimism among investors that the deployment of effective vaccines can help bring coronavirus under control next year, allowing beaten-down sectors of the economy to recover.
  • Pfizer and partner BioNTech on Friday asked the U.S. Food and Drug Administration to clear the companies’ Covid-19 vaccine and said distribution could potentially begin in mid-December.
  • Preliminary data showed U.S. business activity accelerated in November to a more than five-year high despite a surge in coronavirus infections and tightening restrictions.
  • The data from IHS Markit, based on surveys of purchasing managers, showed both manufacturing and services activity remained in expansion territory.
  • In Europe, where authorities have taken a more stringent approach to stemming the second wave of coronavirus, restrictions are already taking their toll on economy.
  • Business activity has fallen so far this month, surveys of purchasing managers by IHS Markit showed Monday, with a particularly steep decline in France.
  • The U.S. reported 142,732 new cases of coronavirus Sunday and registered a record number of hospitalizations for the 13th straight day.
  • Reported case counts are generally lower over the weekend, and the country’s rolling seven-day average continues to climb.

Coronavirus Live Updates: U.S. Hospitalization Count Sets 13th Straight Daily Record – Wall Street Journal, 11/23/20

  • With new coronavirus infections continuing at a high level, a number of European countries are figuring out how to best pivot to more targeted regional containment measures and preserve the economically-important Christmas shopping season once their national lockdowns lapse in the coming weeks.
  • In the U.K., which reported over 18,600 new infections and nearly 400 deaths on Sunday, England is planning to move to a tiered system once the nationwide lockdown ends on Dec. 2.
  • France intends to ease its lockdown in three stages to reduce the probability of a new surge of infections and allow more businesses to open at a traditionally busy time of the year.
  • President Emmanuel Macron is expected to outline the strategy on Tuesday.
  • Germany may extend its lockdown, with some state premiers suggesting Monday that the infection rate hasn’t fallen sufficiently to ease restrictions yet. New confirmed cases reaching nearly 11,000 Monday, more than in the same period last week.

More European Governments Prepare for Localized Restrictions Once National Lockdowns End – Wall Street Journal, 11/23/20

  • With new coronavirus infections continuing at a high level, a number of European countries are figuring out how to best pivot to more targeted regional containment measures and preserve the economically-important Christmas shopping season once their national lockdowns lapse in the coming weeks.
  • In the U.K., which reported over 18,600 new infections and nearly 400 deaths on Sunday, England is planning to move to a tiered system once the nationwide lockdown ends on Dec. 2.
  • France intends to ease its lockdown in three stages to reduce the probability of a new surge of infections and allow more businesses to open at a traditionally busy time of the year.
  • President Emmanuel Macron is expected to outline the strategy on Tuesday.
  • Germany may extend its lockdown, with some state premiers suggesting Monday that the infection rate hasn’t fallen sufficiently to ease restrictions yet. New confirmed cases reaching nearly 11,000 Monday, more than in the same period last week.

AstraZeneca-Oxford Covid-19 Vaccine Up to 90% Effective in Late-Stage Trials – Wall Street Journal, 11/23/20

  • AstraZeneca and the University of Oxford said their Covid-19 vaccine was as much as 90% effective in preventing infections without serious side effects in large clinical trials, boosting hopes that a third Western-developed shot could be authorized for use before the end of the year.
  • The partners said Monday that there were no confirmed serious safety events related to the vaccine and that it was well tolerated across different dosing regimens.
  • Its efficacy ranged from 62% to 90% depending on the dosage given, with an average of 70%, they said.
  • The shot was created from a more traditional vaccine methodology than the gene-based technology used by Moderna and Pfizer.
  • The Oxford-AstraZeneca shot doesn’t need to be stored in subzero temperatures, making its rollout easier, researchers and logistics experts say.

Nevada Imposes New Pandemic Restrictions on Casinos, Entertainment – Wall Street Journal, 11/22/20

  • Nevada Gov. Steve Sisolak further restricted public gathering in Las Vegas casinos and other areas of life Sunday in response to rising Covid-19 cases, as the state struggles to balance health concerns with its hospitality-focused economy.
  • The order rolls back occupancy limits in casinos, restaurants and bars to 25% from 50%. It also reduces the cap on public-gathering sizes, including entertainment venues, to 50 people or potentially fewer from 250 people, beginning Tuesday and for at least three weeks.
  • MGM Resorts International, which operates 13 resorts on the Strip, said in a statement Sunday that the company is adjusting operations immediately to comply with the order. “This will clearly have a major impact on entertainment, and we are working with our partners to determine the path forward,” the company said.

 

Global dividends forecast to inch back from coronavirus cliff edge – Reuters, 11/22/20

  • Dividend payouts by the world’s biggest firms in 2020 will fall by 17.5%-20%, equivalent to some $263 billion, as a result of the coronavirus crisis, a report on Monday forecast, but could rebound strongly next year.
  • Although the prediction by investment firm Janus Henderson represents a smaller dividend drop than some had feared at the outset of the COVID-19 pandemic, it will be the biggest since at least 2009 in the wake of the global financial crisis.
  • Broken down by sector, the worst declines in Q3 were from consumer discretionary companies, down 43% in underlying terms, with carmakers and leisure companies making the deepest cuts.
  • Next year’s rebound could be as high as 12% depending on the path of the pandemic and whether Europe’s banks are allowed to restart dividends again, the report estimated, although in a “worst-case scenario” they might flatline.

Merck to Buy OncoImmune Amid Race for Covid-19 Treatments – Wall Street Journal, 11/23/20

  • Merck is buying the biopharmaceutical company OncoImmune, which has reported positive results from a late-stage study of a coronavirus therapeutic candidate, for $425 million in cash.
  • Patients with severe or critical Covid-19 who were treated with a single dose of OncoImmune’s therapeutic candidate, known as CD24Fc, had a 60% higher probability of improvement than those treated with the placebo, OncoImmune said of its interim analysis of data from 203 participants, or 75% of the planned enrollment in its phase 3 clinical trial.
  • Under the deal, expected to close by the end of the year, OncoImmune shareholders would be eligible for milestone- and sales-based payments, the companies said Monday.
  • OncoImmune will also spin off an entity involving certain rights and assets unrelated to the Covid-19 treatment to a new entity owned by existing shareholders before the acquisition, with Merck investing $50 million and becoming a minority shareholder in it, the companies added.

European regulator to lift Boeing 737 MAX grounding in January – Reuters, 11/21/20

  • Europe is set to lift its flight ban on the Boeing 737 MAX passenger jetliner in January after U.S. regulators last week ended a 20-month grounding triggered by two fatal crashes.
  • The head of the European Union Aviation Safety Agency (EASA) said in remarks aired on Saturday that the 737 MAX was safe to fly after changes to the design of the jet that crashed twice in five months in 2018 and 2019, killing 346 people.
  • EASA’s decision is seen as the most important milestone after the FAA’s approval since, as the watchdog responsible for Airbus, it too carries significant weight in the industry.

Delta hints at the possibility of purchasing Boeing’s 737 MAX: FT – Reuters, 11/22/20

  • Delta Air Lines Chief Executive Ed Bastian hinted at the possibility of purchasing Boeing’s 737 MAX, which was recently approved to fly again by U.S. regulators, in an interview to the Financial Times on Sunday.
  • Any Boeing 737 MAX order would be the first for Delta, which did not have the aircraft in its fleet when the plane was grounded in March 2019 following two fatal crashes.
  • “We’re talking to Boeing about lots of different things, the Max included,” Delta’s chief executive told the Financial Times.
  • “If there is an opportunity where we would feel comfortable acquiring the MAX we’d have no hesitation doing that,” Bastian added.

GM must recall 5.9 million vehicles for air bag issue: agency – Reuters, 11/23/20

  • General Motors Co must recall 5.9 million vehicles with Takata air bag inflators after a U.S. safety agency said Monday it had rejected the Detroit automaker’s petition to avoid the callback.
  • The National Highway Traffic Safety Administration said GM must recall the 2007-2014 trucks and SUVs because the inflators “are at risk of the same type of explosion after long-term exposure to high heat and humidity as other recalled Takata inflators.”
  • GM has said it could cost it $1.2 billion if it were required to replace air bag inflators it had sought to avoid fixing.

US ECONOMY & POLITICS

U.S. manufacturing, services activity expanding rapidly in November: IHS Markit – Reuters, 11/23/20

  • U.S. business activity expanded at the fastest rate in more than five years in November led by the quickest pickup in manufacturing since September 2014, a survey showed on Monday in an indication the economy keeps making progress at clambering out of the COVID-19 recession even as infections surge.
  • Markit’s manufacturing index climbed to 56.7 from 53.4 in October, above the median forecast in a Reuters economists’ poll of 53. A reading above 50 indicates expansion.
  • The services index, meanwhile, rose to 57.7 – the highest since April 2015 – from 56.9 a month earlier. The Reuters poll had pegged the expectation at 55.0.
  • Markit’s composite index – a blend of the manufacturing and services readings – increased to 57.9 from 56.3 in October. It was also the highest since April 2015.

White House Weighs New Action Against Beijing – Wall Street Journal, 11/23/20

  • Senior Trump administration officials say they are pushing for new hard-line measures against Beijing, even as President Trump winds down his final two months in office.
  • The most ambitious effort would create an informal alliance of Western nations to jointly retaliate when China uses its trading power to coerce countries, administration officials say. They say the plan was sparked by Chinese economic pressure on Australia after that country called for an investigation into the origins of the Covid-19 pandemic.
  • Under the joint retaliation plan, when China boycotts imports, allied nations would agree to purchase the goods or provide compensation. Alternatively, the group could jointly agree to assess tariffs on China for the lost trade.
  • The administration is also looking to broaden its ban on imports from China’s Xinjiang region that are made with forced labor, and add companies to a Commerce Department blacklist, including Chinese chip maker Semiconductor Manufacturing International Corp. SMIC already faces tough licensing requirements when buying from U.S. firms.
  • The senior officials acknowledged that the new measures face the hurdle of a waning Trump administration. Should they succeed, they would also need the incoming Biden administration to endorse the effort and carry it forward.

Exclusive: In latest China jab, U.S. drafts list of 89 firms with military ties – Reuters, 11/22/20

  • The Trump administration is close to declaring that 89 Chinese aerospace and other companies have military ties, restricting them from buying a range of U.S. goods and technology, according to a draft copy of the list seen by Reuters.
  • The list, if published, could further escalate trade tensions with Beijing and hurt U.S. companies that sell civil aviation parts and components to China, among other industries.
  • Commercial Aircraft Corp of China (COMAC), which is spearheading Chinese efforts to compete with Boeing and Airbus, is on the list, as is Aviation Industry Corporation of China (AVIC) and 10 of its related entities.
  • The list is included in a draft rule that identifies Chinese and Russian companies the U.S. considers “military end users,” a designation that means U.S. suppliers must seek licenses to sell a broad swath of commercially available items to them.
  • News of the list comes at a sensitive time for the U.S. aerospace industry as Boeing seeks Chinese approval of its 737 MAX after it was cleared by U.S. regulators last week.

Student Loan Losses Seen Costing U.S. More Than $400 Billion – Wall Street Journal, 11/23/20

  • The U.S. government stands to lose more than $400 billion from the federal student loan program, an internal analysis shows, approaching the size of losses incurred by banks during the subprime-mortgage crisis.
  • The Education Department, with the help of two private consultants, looked at $1.37 trillion in student loans held by the government at the start of the year.
  • Their conclusion: Borrowers will pay back $935 billion in principal and interest.
  • That would leave taxpayers on the hook for $435 billion, according to documents reviewed by The Wall Street Journal.
  • After decades of no-questions-asked lending, the government is realizing that it has a pile of toxic debt on its books.
  • By comparison, private lenders lost $535 billion on subprime-mortgages during the 2008 financial crisis, according to Mark Zandi, chief economist at Moody’s Analytics.

Joe Biden Picks Antony Blinken for Secretary of State – Wall Street Journal, 11/23/20

  • President-elect Joe Biden intends to nominate Antony Blinken to serve as secretary of state, turning to a trusted diplomat and foreign-policy adviser to oversee his work to rebuild U.S. relationships around the globe, according to people familiar with the decision.
  • The former vice president is also expected to nominate diplomat Linda Thomas-Greenfield to serve as U.S. ambassador to the United Nations and to select Jake Sullivan, a State Department veteran, to serve as national security adviser, the people said.
  • The announcement of Mr. Blinken’s selection is expected by Tuesday at the latest, people familiar with the selection said. Mr. Biden said last week that he had also settled on a pick for Treasury secretary.

Michigan Board Is Under Pressure to Delay Election Results – Wall Street Journal, 11/23/20

  • The usually obscure board that certifies Michigan’s elections is under heightened pressure ahead of a scheduled Monday vote to approve ballot results giving President-elect Joe Biden the state’s 16 electoral votes.
  • The Republican National Committee on Saturday asked the Michigan Board of State Canvassers to take an additional two weeks and conduct an audit of the vote count in Wayne County, which includes Detroit.
  • The RNC’s request echoed a demand by John James, the Republican U.S. Senate candidate who lost to incumbent Democrat Sen. Gary Peters in unofficial results, to look into discrepancies in poll records for Detroit and surrounding Wayne County, and the processes Detroit officials used for counting a record number of mail-in ballots.
  • Mr. James’s campaign sent the state board 30 pages of arguments and affidavits from people who say they witnessed problems with absentee vote-counting at Detroit’s convention center during Election Week.

EUROPE & WORLD

Europe’s Economy Set to Contract Again as Lockdowns Bite – Wall Street Journal, 11/23/20

  • The European economy appears set for a fresh contraction in the final quarter of 2020, as business surveys indicate that lockdowns aimed at containing the coronavirus have led to a sharp decline in activity in the dominant services sector.
  • Data firm IHS Markit said its composite Purchasing Managers Index for the eurozone—a measure of activity in the services and manufacturing sectors—fell to 45.1 in November from 50.0 in October, reaching its lowest level since May.
  • The PMI for the services sector fell to 41.3 from 46.9 in November, pointing to an even larger decline in activity than in October.
  • By contrast, the PMI for the manufacturing sector continued to point to an increase in activity, albeit at a slower pace.
  • Faced with a new lockdown, service providers cut jobs at a faster rate than in the previous month, according to the survey of purchasing managers, while the decline in manufacturing employment was less sharp.
  • Overall, employment fell for the ninth straight month.
  • The French economy relies quite heavily on consumer services, and saw a sharp decline in activity during November.
  • Germany is more dependent on manufacturing goods for export, and its economy continued to expand.
  • A survey of U.K. purchasing managers pointed to a similar decline in activity, again concentrated in the services sector following a national lockdown that came into effect on Nov. 5.

Israel’s Netanyahu, Saudi Crown Prince Hold First Known Meeting – Wall Street Journal, 11/23/20

  • Israeli Prime Minister Benjamin Netanyahu met Saudi Arabia’s crown prince in the kingdom on Sunday, according to two Saudi government advisers, in their first known meeting and amid a U.S. push to normalize ties between the longtime foes. Saudi officials have denied the meeting took place.
  • Mr. Netanyahu made the secret trip on Sunday evening to the seaside corner of northwest Saudi Arabia to join U.S. Secretary of State Mike Pompeo’s meeting with Prince Mohammed bin Salman.
  • Yossi Cohen, the director of Israel’s spy agency, accompanied the Israeli prime minister, according to Israel’s Army Radio.
  • The leaders discussed several issues, including normalization of ties and Iran, but no substantial agreements were reached, one of the senior Saudi advisers familiar with the talks told The Wall Street Journal. He said the meeting lasted a couple of hours.
  • Israel has already made deals to normalize ties with Bahrain, the United Arab Emirates and Sudan and Israeli and American officials have said other such deals are under way, though could be affected by the results of the November U.S. elections.

China Vows to Investigate Bond-Market Misconduct – Wall Street Journal, 11/23/20

  • China warned it would show zero tolerance for misconduct in the debt markets, after a series of defaults by state-backed groups unsettled investors.
  • The warning came from the Financial Stability and Development Committee, a body that groups together China’s central bank and other top financial regulators and that is chaired by Vice Premier Liu He, President Xi Jinping’s point person on economic and financial issues.
  • It followed interventions by other actors, including the securities regulator, a stock exchange, and the industry body for the debt industry, as authorities moved to calm unease that has sent yields on riskier debt to their highest in nearly two years.
  • Beijing will “investigate and deal with fraudulent issuance, false information disclosure, malicious transfer of assets, misappropriation of issued funds and other illegal activities,” the committee said over the weekend after meeting.

Factmonster – TODAY in HISTORY

  • The first jukebox was installed at the Palais Royal Saloon in San Francisco. (1889)
  • U.S. wartime food rationing, of meat, butter, and other foods, ended.  (1945)
  • People’s Republic of China was seated at the UN Security Council. (1971)

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