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  • Weekly market attention
  • Markets wait to see if there is a post-Thanksgiving pandemic surge
  • Washington political uncertainty continues 

Weekly market attention
 — U.S. market attention this week will focus on (1) whether the pandemic surge continues and any vaccine news, (2) any progress in Washington on a spending or stimulus bill, (3) political uncertainty as the markets wait for finalized presidential election results and the determination of Senate control with the outcome of two run-off elections on Jan 5 for the Georgia Senate seats, (4) any additional appointments by President-Elect Biden for his economic team, (5) oil prices as OPEC+ meets on Mon-Tue to decide on its production level for Q1-2021, and (6) a busy economic calendar with the highlight being Friday’s Nov unemployment report (Nov payrolls expected +500,000; unemployment rate expected -0.1 to 6.8%).

In Europe, the focus continues to be on the economic fall-out from the pandemic surge.  Also, Brexit negotiations are coming down to the wire with little time left for parliamentary approvals of any last-minute deal.  The tentative schedule would be for EU leaders to approve a deal at a summit on Dec 10-11 and for the EU Parliament to vote on the deal on Dec 16, although that date could be moved back to as late as Dec 28.  The EU Parliament reportedly needs three weeks to study the deal before a vote.  The UK Parliament could approve the deal on short notice.

Meanwhile, the EU is facing a deadline of Dec 7 for EU approval of the next long-term budget and the 750 billion euro stimulus deal, which is being held up by Hungary and Poland over the “rule-of-law” conditionality.

In China, the markets are waiting for any additional actions by the Trump administration against the Chinese government or Chinese companies before Inauguration Day on January 20.  The markets will also be assessing Sunday night’s national PMI reports and the Caixin manufacturing and services PMI reports on Monday night and Wednesday night, respectively.

The markets are on guard for any military action by President Trump during his last weeks in office.  There were reports early last week that the Israeli military has been put on alert in the event that Mr. Trump launches a military strike on Iran’s nuclear facilities.  There could also be a military flare-up over last week’s assassination of Iran’s top nuclear scientist.

Markets wait to see if there is a post-Thanksgiving pandemic surge —  The markets are waiting to see if the Thanksgiving holiday will produce a pandemic surge during the next few weeks.  Recent restrictions appear to have been successful in at least causing new U.S. Covid infections to stabilize in the high-100,000 area.  However, additional restrictions are likely if the pandemic surge worsens since hospitals across the U.S. are already at or near capacity.

The markets will also watch for any news on the vaccine front.  Moncef Saoui, head of the U.S. Operation Warp Speed, recently said that U.S. Covid vaccinations would “hopefully” start in early December.  The U.S. FDA is scheduled to meet on Dec 10 to discuss emergency use authorizations for the Pfizer and Moderna Covid vaccines.

Washington political uncertainty continues — The political uncertainty in Washington continues with President Trump still disputing the election and with Senate control depending on the two run-off elections in Georgia on January 5.  President-Elect Biden’s grip on becoming the next president is strengthening as his official transition continues and as more states certify their results and appoint electors before the Dec 8 deadline.  However, nothing will be certain until the Electoral College meets to elect the next president on December 14 and until Congress meets to count the votes and determine the winner on January 6.  Inauguration Day is January 20.

Meanwhile, control of the Senate in the next session depends on the run-off elections on January 5 for the two Georgia Senate seats.  The Senate election results are currently at 50 seats for Republicans and 48 seats for Democrats.  If Democrats win both of the Georgia seats, then there will be a 50-50 tie, and Vice President-Elect Harris will be able to break the tie in favor of Democrats.

The betting odds at, for whatever they are worth, give Democrats only a 28% chance of winning both the two Georgia Senate seats and taking control of the Senate.  However, that means there is still a 28% chance that Democrats could take full control of Washington, thus allowing blue-wave legislation to proceed, such as higher taxes and a big stimulus bill.

After returning from its Thanksgiving break today, Congress has only 1-1/2 weeks to pass a spending bill to avoid a U.S. government shutdown after next Friday (Dec 11), when the current continuing resolution expires.  There is the outside possibility of a government shutdown if there is a dispute over border-wall funding or other issue.  Congressional budget negotiators are trying to agree on an omnibus spending bill that would fund the government for the remainder of the fiscal year through September 30, 2021.  However, if there are any snags, then Congress would be forced to pass another short-term continuing resolution that would punt a spending bill into early 2021.

The chances for a large pandemic stimulus bill during the lame-duck session remain slim.  Treasury Secretary Mnuchin recently said he was trying to get negotiations restarted but there hasn’t been any progress.  McConnell-Pelosi have so far only restated their highly-divergent positions and have given no indication they will budge.  It remains possible that Congress might put some pandemic relief measures in the December 11 spending bill since there are many relief measures such as extended unemployment benefits that will otherwise expire on Dec 31.

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