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Risk Appetite Continues Following US Election Projections

Notes/Observations

  • US Election is rapidly entering the rear view mirror as uncertainty over the outcome has abated; focus to shift towards vaccine developments, and monetary and fiscal stimulus
  • Biden’s victory in the US presidential election seen as likely support risk appetite

Asia:

  • China Oct Trade Balance: $58.4B v $45.8Be; Exports Y/Y: 11.4% v 8.9%e; Imports Y/Y: 4.7% v 9.3%e (fastest pace for exports in 19 months)
  • China Oct Foreign Reserves: $3.13T v $3.143Te
  • China national adviser stated that Govt to seek to renegotiate trade deal with President-elect Biden; unlikely Biden could do anything that could be construed as being soft on China
  • BOJ Oct Summary of Opinions: BOJ must respond swiftly, appropriately as needed while in close cooperation with Govt and major central banks; desirable to guide 10-year JGB yield around 0%, while allowing for longer end of yield curve to steepen at moderate pace
  • NZIER saw less need for additional stimulus

Coronaviurs:

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  • Total global cases 50.4M (+3.6% vs Fri); total deaths 1,.26M (+1.8% vs. Fri)

Europe:

  • UK PM Johnson stated after a phone call with EU’s vonder leyen that a Brexit deal was there to be done, UK was very well prepared for Brexit. UK to redouble efforts to reach a deal
  • EU Commission chief von der leyen stated that some progress had been made, but large differences remained especially on level playing field and fisheries
  • UK Foreign Min Raab stated that Britain had assured the next US administration it would not risk the Northern Ireland Good Friday Agreement. UK argument was that the EU had put pressure on it with their approach. Saws good change of FTA with the EU if flexibility emerged
  • Germany was said to be considering delaying $4.0B tariff strike on US. EU would be looking to ‘reboot’ trade relationship with US in a ‘post Trump’ environment
  • BOE’s Cunliffe: Negative interest rates might help with bad debts
  • Italy cabinet said to have drawn up plan to provide €2.5B in further pandemic aid
  • Turkey President Erdogan removed central bank Governor Uysal and Fin Min Albayrak resigned citing health issues
  • Moody’s affirmed Italy sovereign rating at Baa3; outlook stable
  • Moody’s raised Greece sovereign rating one notch from B1 to Ba3; outlook Stable
  • Fitch affirmed Germany sovereign rating at AAA; outlook Stable

Americas:

  • Joe Biden was declared the winner of the Presidential election after calling Pennsylvania in his favor with its 20 electoral votes
  • President Trump has no conceded Presidential election to Biden who was declared the winner after securing Pennsylvania
  • President Trump legal team has said they will begin filing lawsuits in key states on Monday (Nov 9th)
  • President-elect Biden speech noted that people had delivered us a convincing victory; pledged to be a President who sought to unify, to make progress we should not treat our opponents as enemies; climate change and systemic racism were a part of his mandate

Energy:

  • Some key OPEC members were concerned are worried that strains could resurface with Joe Biden as US President. Iran sanctions could be re-evaluated meaning their oil could come back to the market risking over supply

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +1.49% at 371.86, FTSE +1.39% at 5,991.65, DAX +1.90% at 12,717.40, CAC-40 +1.65% at 5,042.75, IBEX-35 +1.89% at 7,000.00, FTSE MIB +2.16% at 20,106.50, SMI +0.81% at 10,406.59, S&P 500 Futures +1.47%]
  • Market Focal Points/Key Themes: European indices open markedly higher across the board and stayed amply in the green as the session progressed; better performing sectors include consumer discretionary and materials; while health care and real estate sectors underperforming; Germany considering delaying retributive taxes on US goods following election results; UK-US trade deal seen less likely following election; Countrywide receives takeover offer from Connells; IEA sees lockdowns lowering demand for crude; ECB’s Villeroy sees French GDP contraction of 9-10% this year; reportedly Adidas might get approach for Reebok unit; earnings expected in the upcoming US session include McDonald’s, Beyond Meat, Clear Channel Outdoor and McDonald’s

Equities

  • Consumer discretionary: Taylor Wimpey [TW.UK] +11% (trading update), Countrywide [CWD.UK] +45% (takeover proposal), Ryanair [RYA.UK] +4% (govt subsidies), Norwegian Air [NAS.NO] -17% (lack of govt support)
  • Industrials: Airbus [AIR.FR] +3% (deliveries)
  • Technology: Infineon [IFX.DE] +3% (earnings)

Speakers

  • ECB chief Lagarde: climate risks were not adequately priced and added that it was essential that they be included
  • Bank of France (BdF) commented on economic impact from lockdown restrictions; measures seen reducing activity by 12% compared to 31% back in the April period
  • German Chancellor Merkel: US and EU should not look at just the next four years for its transatlantic relation; should develop a common plan until 2030
  • German Econ Min Altmaier stated that he expected to return to multilateral approach with US
  • ECB’s Villeroy (France) saw French 2020 GDP likely contrac0ingt between 9-10%
  • EU’s Dombrovskis (trade chief): To retaliate against US over Boeing aid; want a negotiated deal on aircraft aid
  • Ireland Foreign Min Coveney stated that they are in the end game now on Brexit talks. Reiterates EU stance that key issues remain level-playing field and fisheries
  • Greece Fin Min Staikouras: Domestic economy to show strong recovery following the conoravirus crisis