Archives of “November 26, 2020” day

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China compliance with US Phase 1 trade deal is less than half after 10 months

  
  Analysis

This will come as no surprise, but a catch up on the Phase 1 ‘trade deal’.

This via The Peterson Institute for International Economics (PIIE), an independent nonprofit, nonpartisan research organization:
  • With ten months of 2020 now in the books, China has purchased less than half of the US exports Trump pledged it would buy this year under his Phase One deal.
There is plenty of detail in the group’s report, here is the link.
In Summary:
This will come as no surprise, but a catch up on the Phase 1 'trade deal'.

There are still 2 months to go on this year’s figures but any non-biased assessment will conclude the actual will fall well short of the promised targets. The pandemic is often cited as a reason for the gap between target and actual.

FOMC minutes: Market participants increasingly focused on how asset purchases might evolve

  
  Analysis

Minutes of the November 5 FOMC

  • Some market participants expected the Committee to eventually lengthen the weighted average maturity of the Federal Reserve’s purchases of Treasury securities.
  • Meeting participants generally saw the current QE pace and composition as effective
  • While participants judged that immediate adjustments to the pace and composition of asset purchases were not necessary, they recognized that circumstances could shift to warrant such adjustments. Accordingly, participants saw the ongoing careful consideration of potential next steps for enhancing the Committee’s guidance for its asset purchases as appropriate.
  • Staff noted that financial market participants generally expected the Committee to continue its net asset purchases at the current pace through next year and at a reduced pace in subsequent years
  • The September FOMC statement indicated that asset purchases will continue “over coming months,” and participants viewed this guidance for asset purchases as having served the Committee well so far. Most participants judged that the Committee should update this guidance at some point and implement qualitative outcome-based guidance that links the horizon over which the Committee anticipates it would be conducting asset purchases to economic conditions.
  • Most participants judged that the guidance for asset purchases should imply that increases in the Committee’s securities holdings would taper and cease sometime before the Committee would begin to raise the target range for the federal funds rate.
  • Most policymakers thought Fed should implement outcome-based guidance for QE because of uncertainty over economic outlook
  • Full text
There is so much talk about tweaking QE in the minutes. The volume of the talk alone starts to sound like a signal. My quick read is that a change in guidance is likely coming in December and that will set up more action at a future meeting.
Here is some of the talk on changing QE:
Participants commented on considerations related to the appropriate pace and composition of asset purchases. Participants generally saw the current pace and composition as effective in fostering accommodative financial conditions. Participants noted that the Committee could provide more accommodation, if appropriate, by increasing the pace of purchases or by shifting its Treasury purchases to those with a longer maturity without increasing the size of its purchases. Alternatively, the Committee could provide more accommodation, if appropriate, by conducting purchases of the same pace and composition over a longer horizon. Pointing to the recently announced change in the Bank of Canada’s asset purchase program, several participants judged that the Committee could maintain its current degree of accommodation by lengthening the maturity of the Committee’s Treasury purchases while reducing the pace of purchases somewhat. In their view, such a change in the Committee’s purchase structure would have to be carefully communicated to the public to avoid the misperception that the reduced pace of purchases represented a decline in the degree of accommodation. A few participants expressed concern that maintaining the current pace of agency MBS purchases could contribute to potential valuation pressures in housing markets.

S&P 500, Dow pull back from all-time closing highs after grim jobless data

  
Analysis, US Market

The S&P 500 index closed lower on Wednesday as mounting U.S. layoffs in the wake of new mandated lockdowns to contain surging COVID-19 infections dampened investor risk appetite.

The market appeared to be replaying the previous two weeks, which began with rallies driven by promising vaccine news but pivoted back to stay-at-home plays on near-term pandemic realities and lack of new fiscal stimulus.

Still, the vaccine developments and removal of uncertainties surrounding the U.S. presidential election have driven Wall Street indexes to record closing highs, and put the S&P 500 on course for its best November ever.

Market participants believe U.S. stocks have more room to climb. A recent Reuters poll showed analysts believe the S&P 500 will gain 9% between now and the end of 2021. The index has surged about 66% since the coronavirus-led crash in March and is up about 12% so far this year.

The Dow Jones Industrial Average fell 173.77 points, or 0.58%, to 29,872.47; the S&P 500 lost 5.76 points, or 0.16%, to 3,629.65; and the Nasdaq Composite added 57.08 points, or 0.47%, at 12,094.40.

Of the 11 major sectors of the S&P 500 seven ended the session in the red, with energy suffering the largest percentage loss.

The economically sensitive banking sector lost ground, with the S&P 500 Banks index shedding 0.7%.

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