You can pencil in at least $1000 for direct checks in US stimulus package

GOP proposal includes $1000

10 US Republicans Senators are out with an alternative proposal to Biden’s $1.9 trillion stimulus. The price tag is $618B and includes:
  • $160B for direct pandemic response, $132B for UI
  • $20B for child care, $20B for schools
  • $50B for small businesses
  • $220B for direct payments ($1,000)
  • $12B for nutrition
  • $4B for mental health service
One thing that isn’t included is $15/h minimum wage, which isn’t a surprise.
If Democrats want a bi-partisan package, this is basically the starting point so you would expect it to go up.
I get the sense that Democrats are planning on using reconciliation anyway and bypassing Republicans but politics is a tough thing to predict. With this though, you can feel secure that more money is coming (and probably headed straight into call options in meme stocks).
More details:
GOP proposal includes $1000

Risk appetite keeps in a better spot so far in European morning trade

S&P 500 futures are up 1% after being down 1% in the early stages today

E-minis 01-02

Risk appetite continues to show signs of a bounce back after Friday’s rout, with European indices holding around 1% gains – mirroring the mood in US futures.
Things started off poorly early in Asia but S&P 500 futures have gradually advanced and turned around a 1% drop to a 1% gain as of European trading now.
The chaos from the retail trading frenzy played a role in elevating volatility and impacting broader market sentiment but that is calming down a little now as the focus shifts towards silver instead – which is up over 10% at $29.82 currently.
That sets up Wall Street for a modest bounce at the open but we’ll have to wait and see if that will be the case as we get things started on the new week.

Eurozone January final manufacturing PMI 54.8 vs 54.7 prelim

Latest data released by Markit – 1 February 2021

The preliminary report can be found here. Little change to the initial estimate as also noted in the French and German reports earlier. This mainly just reaffirms that factory conditions are seen holding up decently despite tighter virus restrictions in the region.
Markit notes that:

“Eurozone manufacturing output continued to expand at a solid pace at the start of 2021, though growth has weakened to the lowest since the recovery began as new lockdown measures and supply shortages pose further challenges to producers across the region.

“Supply chain delays worsened during the month to a degree only exceeded once – during the global lockdowns early last year – in more than two decades of survey history.

“At the moment, manufacturing is providing an important support to the economy as the service sector is hit by COVID-19 restrictions, but this support is waning. Consumer goods producers in particular are struggling. While future prospects brightened, with manufacturers’ optimism striking a three-year high in January to sound a reassuring note of confidence at the start of the year, any potential delays to the vaccine roll-outs will add an additional layer of uncertainty to the outlook.

“Supply shortages have meanwhile put pricing power in the hands of suppliers, pushing raw material prices sharply higher. Increased shipping costs are adding to the burden. These price pressures should ease once more supply capacity comes online, although there remains some uncertainty about how much pent-up demand exists and how sticky these higher prices may prove to be.”

Nikkei 225 closes higher by 1.55% at 28,091.05

Asian equities switch higher in trading today

Nikkei 01-02
The focus of the retail trading frenzy is turning towards silver to start the new week and that is taking some of the sting out of broader market sentiment as stocks recover.
Asian equities are faring better with US futures clawing its way higher from losses earlier. The Hang Seng is up 2.4% while the Shanghai Composite is up 0.5%. Meanwhile, S&P 500 futures are seen up 0.5% after having been down by 1% during the early stages.
Major currencies remain little changed in general, with the dollar mildly softer while silver is holding gains of over 5% at around $28.50 after having closed near $27 last week.

Its not all about silver – keep an eye on the PBOC and its liquidity squeeze today

On Friday overnight yuan borrowing costs surged:

  • China’s interbank overnight repo rate hits 10%
The squeeze comes amidst plenty of promises that extra liquidity will be provided soon, before the long Lunar New Year holiday at least (which is still a way away, commencing on February 11).
On Friday the People’s Bank of China said it would not be raising the costs of the standing lending facility (SLF). This had been rumoured in the market. Also on Friday the PBOC did add funding to the market via OMOs, not a huge amount to be sure but it was the first injection for a week.
On the 7-day repo rate, its close to the SLF rate, which is considered the ceiling of China’s interest-rate corridor (overnight repo rate is already above it).
The PBOC is mindful of the support the squeeze on rates gives the yuan. The currency has stabilised somewhat after it’s strong gains, which may partly reflect corporate demand as exporters cover dollar revenues ahead of the Lunar New Year. I doubt the Bank wants a much stronger currency from here.
On Friday overnight yuan borrowing costs surged:

ECB’s Lane spoke over the weekend – says stocks, bank bonds not in toolbox

European Central Bank chief economist Philip Lane spoke in an interview with German newspaper Sueddeutsche Zeitung.

  • ECB not buying stocks or bank bonds, not likely to
  • everything is considered at some level – but these measures are not part of our current toolbox
  • “Our active toolbox is a combination of our short term rates, asset purchases, targeted lending and our forward guidance.”
European Central Bank chief economist Philip Lane spoke in an interview with German newspaper Sueddeutsche Zeitung.
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