US Briefing - Wednesday 12.08
Headlines
  • Fed To Lower Rates For Cities, States Seeking Short-Term Loans
  • McConnell Urges WH, Democrats To Restart Covid-19 Aid Discussions
  • China To Bring Up WeChat, TikTok In The Upcoming US Trade Talks
  • White House Econ Adviser Kudlow: The US-China Trade Deal Is ‘Fine’
  • Biden Vice Presidential Pick: Kamala Harris Chosen As Running Mate
  • Eurozone SA June Industrial Production Misses Estimates +9.1% M/M
  • UK June GDP +8.7% M/M (Est: 8%); Q2 Q/Q -20.4% (Est: -20.7%)
  • UK Chancellor Sunak Sees Promising Signs After Record GDP Hit
  • Money Markets Push Back 10bps BoE Rate Cut To 2022 Vs Dec 2021
  • UK: Most Chapters In US Trade Talks Moving To Advanced Stages
  • RBNZ Expands Bond Purchases To Aid Recovery As Covid Returns
  • API: Larger Than Est. 4.4M Crude Draw, Surprise 2.95M Distillate Draw
  • Gold Gets Sent On Wild Ride As Bulls Fight Back Following Price Rout
  • Shanghai Gold Exchange Raises Gold And Silver Margins Price Limit
  • Tesla Sets A 5-1 Stock Split And Its High-Flying Stock Soars Again
  • Asos Shares Rally; Sees FY Sales, Profit Significantly Ahead Of Views
  • Liberty Global Launches $7.4B Takeover Of Sunrise Communications
  • Tencent Second-Quarter Earnings, Revenue Smash Expectations
Commentary
McConnell Urges Restart Of Covid-19 Relief Negotiations

Senate Majority Leader Mitch McConnell pushed Democrats and the White House to restart coronavirus relief talks on Tuesday as an impasse over aid leaves millions scrambling to cover bills.

 

House Speaker Nancy Pelosi, Senate Minority Leader Chuck Schumer, Treasury Secretary Steven Mnuchin and White House chief of staff Mark Meadows last met Friday, when their negotiations stalled. The sides have not huddled since, even as the expiration of lifelines last month leaves many Americans facing the prospect of financial ruin.

 

McConnell, a Kentucky Republican, has not joined in the talks but set down a marker last month when the Senate GOP released its pandemic aid bill. On Tuesday, he told Fox News that “the American people are sick of the stalemate” after another day passed with no formal discussions between Democrats and the Trump administration.  “I think it’s time for everybody to get back to the table, and let’s get a deal done,” he said.

(CNBC - Continue Reading)

UK Enters Recession In Q2 On Historic Contraction, But Latest Data Suggests Upswing

London, 12 August 2020 (LS NEWS) – UK statistics office has confirmed what many expected: the country hit a new record low for negative growth in the second quarter as the most recent monthly data pointed to increased economic activity as the country began to reopen.

 

Second-quarter GDP contracted by 20.4pct versus the first three months of the year, which the worst performance on record but slightly better than the market estimate of a 20.7pct drop. But GDP expanded at a monthly rate of 8.7pct in June, a vast improvement from May’s 1.8pct growth rate and above the 8pct expected.

 

ONS Deputy National Statistical for Economic Statistics Jonathan Athow said, “The economy began to bounce back in June with shops reopening, factories beginning to ramp up production and housebuilding continuing to recover. Despite this, GDP in June still remains a sixth below its level in February, before the virus struck. “Overall, productivity saw its largest fall in the second quarter since the three-day week. Hospitality was worst hit, with productivity in that industry falling by three quarters in recent months.”

(LiveSquawk – Continue Reading)

China To Bring Up WeChat, TikTok In Upcoming US Trade Talks

US and Chinese negotiators are set to discuss implementation of the phase one trade deal in the coming days, with Beijing pushing for the recent measures targeting businesses including TikTok and WeChat to be on the agenda.

 

A virtual meeting will likely take place as soon as this week though a date hasn’t been finalized, according to people familiar with preparations for the talks who asked not to be named. Along with agricultural purchases and the dollar-yuan exchange rate, which are among topics to be discussed, Chinese officials intend to bring up President Donald Trump’s prospective bans on transactions with the two apps on national security grounds, the people said. They did not elaborate on what China hopes to achieve on these issues.

 

Seven months after the signing of the agreement which paused a tariff war that had roiled the global economy, the purchases of U.S. goods it entails are lagging far behind schedule. The coronavirus crisis and the concurrent deterioration in U.S.-China relations on everything from tech security to Hong Kong has meant the trade deal remains one of the few areas where Washington and Beijing are still cooperating.

(Bloomberg - Continue Reading)

Rates Spark: Time To Get Real With Yields

Source: ING Think, Bloomberg

We’ve had doubts about the global narrative according to which the collapse in real yields, most visible in USD but by no mean a development specific to the US, heralded a change in inflation dynamics. Starting with a rates-centric view, the divergence between nominal yields and inflation break-evens is an extremely rare event.

 

Most previous adjustments in real yields were brought by a sharp move in one of its components, whilst the other remained stable (eg in 2012 when inflation break-evens rose whilst yields stayed pinned down).A more dovish Fed, and likely moves towards average inflation targeting, is a convenient culprit. After all, the Fed directly depresses nominal yields through QE, and its tolerance for higher inflation does provide an explanation for the move in break-evens.

 

Given the Fed’s track record in boosting inflation in the past decade, and various constraints ranging from the zero lower bound to a flat Phillips curve, we find it surprising that rates markets would attribute the Fed so much credibility all off a sudden.

(ING Think - Continue Reading)

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