Wall Of ‘What, Me Worry?’

Global equities looked to take a step back Monday, in cautious trading on the last day of a blockbuster month.

Stocks put up one of their best performances ever in November, as vaccine news, the prospect of more predictable politics in the US, and a role for Janet Yellen in the incoming Joe Biden administration helped propel risk assets, even as virus lockdowns proliferated across western economies, threatening to plunge Europe and (quite possibly) the US, into double-dip downturns.

Rebalancing flows (out of equities) could be a factor. You’ll invariably hear chatter to that effect early this week. JPMorgan estimated that as much as $150 billion may need to come out of stocks as multi-asset investors rebalance.

The global economic narrative got another shot in the arm (bad vaccine pun fully intended) from still more solid data out of China, where the economy continues to rebound.

The official manufacturing PMI printed 52.1 for November, the NBS said Monday. That’s the highest in more than three years, and better than estimates. The non-manufacturing gauge touched 56.4, up slightly from October.

The PBoC added CNY200 billion in MLF Monday, a welcome move and arguably a “surprise” coming as it does after the central bank already (more than) rolled maturing funding this month. The rate was unchanged.

Tensions with the outgoing Trump administration continue. Reuters said Monday that both SMIC and CNOOC will be added to the list of blackballed Chinese military companies, bringing the total number of designated entities to nearly three-dozen. This comes two weeks after Trump issued an executive order banning US investments in Chinese companies owned or operated by the PLA and amid what sources have variously described as an accelerated push to turn the screws on Beijing ahead of Biden’s inauguration.

Shares of CNOOC plunged Monday on the news. “There will be huge impact on the company because the oil-and-gas value chain involves a lot of US companies from upstream, mid-stream all the way to the gas side,” one analyst told Bloomberg. “This also means they cannot procure parts and software from US companies.” A subsidiary also saw its shares dive.

“The upcoming move, coupled with similar policies, is seen as seeking to cement Trump’s tough-on-China legacy and to box Biden into hardline positions on Beijing,” Reuters, which initially reported the plans, said, in the course of reminding everyone that according to their reporting, the Trump administration is also “close to declaring that 89 Chinese aerospace and other companies have military ties, restricting them from buying a range of US goods and technology.”

SMIC has been in Trump’s crosshairs for months, at least. The company continues to maintain it has no ties to the PLA. The latest move would apparently add insult to injury following the Commerce Department’s broadside three months back.

Again, this should be viewed in the context of the Trump administration attempting to effectively tie Biden’s hands on diplomacy. The assassination of Iran’s top nuclear scientist last week, presumably by Israel, is now widely viewed as part of a similar effort.

In other news, OPEC+ is still locked in debate over whether to delay a planned output increase, and China’s spat with Australia turned particularly caustic.

Ultimately, November will be remembered as one of, if not the, best month on record for stocks.


Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.

4 thoughts on “Wall Of ‘What, Me Worry?’

  1. Blacklisting Chinese companies isn’t just a matter of “turning the screws” on the Chinese. Like tariffs on Chinese goods, it weighs on US companies who trade with those companies. Focusing only on the burden it places on the blacklisted companies screws our regard for the Executive action, making it look one-sidedly punitive.

    1. It would be helpful if such measures, one-sidely punitive as they might be, were used in conjunction with trillions in USD investments in the US toward further developing our nation’s AI, robotics, biochemistry, updates to the grid, venture capital ecosystem, etc.

      In other sources, I’ll be curious to read about these blacklistings and why the current administration didn’t seek to enact such measures sooner. From the readings above, it’s just a vindictive president trying to make politics more difficult for his successor.

      If these firms really are apparatus of the PLA, an interpretation is that Trump was soft, that he should have acted sooner. And yet, these actions can be used in further diplomatic actions by the incoming administration.

      Notwithstanding, war is not an answer. We have to compete with China on an industry-to-industry basis. They are winning. If we don’t want to lose, we have to make investments that increase our productivity and that generate long-term economic value. Sadly, I have not seen evidence that we are up to the task.

      1. @Runamok! Please! That’s a government industrial policy. ” We don’t pick winners! We let the free markets decide! Have you forgotten Solyndra?” And look at the results! Thanks to private equity and venture capital, we lead the world in food delivery and scooter rental apps!

  2. The crackdown on CNOOC and Mike Pompeo’s antics in the Middle East are his “farewell for now” antics. He makes John Bolton look like a wimp!

    But don’t worry, he’ll be in the running fore the GOP nomination in 2024. Fighting against Tom Cotton. Two would-be despots duking it out.

NEWSROOM crewneck & prints