The Dark Before Dawn

There was little in the way of fresh news in the market coming off the US holiday. Traders and investors are staring (somewhat incredulously) at one of the best months for global stocks in history, and that’s juxtaposed against a pandemic that continues to claim lives.

The vaccine sprint is nearly complete, yes, but mass inoculation and herd immunity will take months. “Normal” is coming to a theater near you — but likely not until at least summer 2021. Whether any actual theaters will still be in business by then is an open question.

In another depressing sign of the ongoing toll from the pandemic, Disney is cutting an additional 4,000 jobs, bringing the total to 32,000. If you’re keeping score at home (while binge-watching Marvel movies on Disney+) that’s at least 1/10 of the company’s total workforce. Disney’s theme parks lost more than $1 billion last quarter, offset by blockbuster growth in streaming. Back in September, when Disney first announced the layoffs, which totaled 28,000 in the initial wave, Josh D’Amaro, chairman of the parks division, emphasized the company’s existing cost cutting initiatives, including furloughing “cast members while still paying benefits”. As I put it at the time, that presumably meant that early in the pandemic, Goofy kept his health insurance while he sat at home chuckling his way to the bottom of a Jack Daniel’s fifth.

In Europe, economic sentiment fell for the first time in seven months, data out Friday showed. This comes amid fresh lockdowns which are expected to result in a double-dip recession, at least for some countries.

The color that accompanies this month’s results underscores the “two-speed” nature of the European economy.

“In the euro area, the decline was fueled by diving confidence in retail trade, services and among consumers [while] sentiment in industry and construction held up rather well, posting comparatively mild deteriorations,” the survey says. “Retail trade confidence saw an abrupt end to its six-months recovery, as retailers’ expected business situation nosedived and their appraisals of the present business situation and the adequacy of the volume of stocks got more tepid.”

Remember, flash PMIs for November showed a sharp deceleration in activity in the services sector, even as manufacturing remained somewhat resilient.

“The progress on a vaccine has improved the outlook, but that isn’t being reflected in the data just yet as concerns about the winter months are mounting,” ING said. “What we’re experiencing now is the dark before dawn for eurozone businesses and consumers.”

Meanwhile, in China, dawn is already here. Industrial profits surged 28.2% in October, Beijing said Friday. The world’s second largest economy continues along the road to a robust recovery, or so we’re supposed to believe based on the official data. That’s not to say the data isn’t “real,” it’s just that caveats are obligatory.

While China is doing relatively well, I’m not sure this particular print is very useful. Last October, industrial profits posted what, at the time, was the biggest drop on record, so I assume part of what you see in the figure (above) is due to base effects.

A statement from the NBS flags growth in industrial enterprises’ accounts receivable. “The pressure on cash flow has increased, which bodes ill for the continuous recovery of companies’ production and operation,” an NBS economist remarked.

Finally, Bitcoin “stabilized” (if that’s the right word) on Friday following Thursday’s harrowing plunge.

I’m sure it’ll be smooth sailing from here.