- Weekly market focus
- Pound jumps as Brexit talks are extended
- Senate bipartisan group will propose a refined $908 billion pandemic aid package today
- U.S. vaccinations roll out this week
Weekly market focus — The U.S. markets this week will focus on (1) whether Congress will pass a pandemic aid package before leaving for their holiday break, (2) whether the FOMC at its Tue/Wed meeting makes any adjustments in its QE program, (3) the pandemic statistics and the implications for the economy, (4) continued uncertainty about control of the Senate ahead of the Jan 5 run-off elections in Georgia, and (5) a busy U.S. economic schedule.
In Europe, the focus remains on Brexit and the pandemic statistics. In Asia, the focus is on Friday’s Bank of Japan meeting, and also on whether the Trump administration in its waning days announces any news sanctions or other initiatives against the Chinese government or companies.
Pound jumps as Brexit talks are extended — The British pound on Sunday evening jumped by about +0.80% after news that Prime Minister Johnson and European Commission President Ursula von der Leyen at a call on Sunday agreed to extend the talks. They had previously set Sunday as a deadline. UK and EU negotiators are scheduled to resume negotiations Monday morning in Brussels.
Presidential election uncertainty effectively ends today with the Electoral College vote — The outcome of the November 3 presidential election will be virtually impossible to challenge after the Electoral College today presumably votes in line with American voters and names Joe Biden as the new president of the United States. At that point, the only step left will be for Congress on January 6 to fulfill its duty to confirm the Electoral College vote. Inauguration Day is January 20.
The markets are not likely to show much reaction to an Electoral College vote today in favor of Joe Biden because the markets long ago discounted the Biden victory and assigned extremely low odds to the possibility that President Trump could somehow overturn the Biden victory.
However, there continues to be substantial political uncertainty in Washington since control of the Senate depends on the two Senate seat run-off elections in Georgia on January 5. Democrats must win both those run-off elections to take control of the Senate. The betting odds at Predictit.org, for whatever they are worth, are at 33% for Democratic control of the Senate in January, which means there is still a 33% chance of blue-wave legislation such as higher taxes and a big stimulus bill.
Senate bipartisan group will propose a refined $908 billion pandemic aid package today — Senate Manchin (D-WV) said on Sunday that the bipartisan group of Senators worked long hours over the weekend to refine their $908 billion pandemic aid package. He said the group will release that package today.
The Hill reported Sunday that the group will split the proposal into a $748 billion portion that includes all the items on which there is strong bipartisan agreement, and a second, and more contentious, package totaling $160 billion that includes state-local government aid and the Covid liability shield. House Speaker Pelosi has already rejected the idea of breaking off the state-local government aid and the Covid liability shield, so the idea may be a non-starter. The failure of a pandemic aid package would mean the expiration of key pandemic unemployment aid programs at year-end as well as the eviction shield.
Meanwhile, President Trump last Friday signed a 7-day continuing resolution, giving Congress a new deadline of this Friday to pass a spending bill and avoid a partial U.S. government shutdown starting on Saturday. Congressional negotiators are still quibbling over the details of the massive omnibus spending bill that would fund the government through the end of the current fiscal year on September 30, 2021.
Congress will have even more on its plate this week if President Trump makes good on his threat to veto the Defense Authorization bill that Congress passed last week. Both the House and Senate passed that bill by veto-proof majorities, but it remains to be seen whether all the Republicans who voted in favor of the bill would do so again if President Trump vetoes the bill and puts pressure on them to vote against the bill the second time around. President Trump has various complaints about the bill, including that it is somehow positive for China, has provisions for renaming of military bases that honor Confederate generals, and doesn’t have a withdrawal of the liability shield for media companies.
U.S. vaccinations roll out this week — Covid vaccinations will get into gear this week after the FDA late Friday gave the emergency authorization of Pfizer’s vaccine. The Moderna vaccine is not far behind. Other vaccines are expected to be rolled out in early 2021. The vaccines will provide a psychological boost for pandemic-weary Americans. However, the vaccines are not likely to put a big dent in the infection numbers until spring, when the vaccines become widely available to the general public.
New U.S. Covid infections have been above 200,000 for the last five consecutive days through Saturday, and the 7-day average is at a record high of 211,074, according to data compiled by Bloomberg. U.S. Covid deaths have been above 2,000 per day since last Tuesday, and the 7-day average is at a record 2,375 per day.