Global equities were muted Thursday, loitering near records as market participants await the next catalyst, whether it’s vaccine rollout, an agreement on stimulus in the US, or something else.
Investors will probably shrug at US legislation that could ultimately result in the delisting of some Chinese shares if they can’t meet a series of regulatory requirements. The House passed the measure on Wednesday evening, and Donald Trump will likely sign it, but this was well telegraphed. The long-running dispute over auditing has been debated and analyzed to death, and in all likelihood will be resolved with some manner of compromise. After all, booting companies worth some $2 trillion from US exchanges “could jeopardize the US’s status as the world’s financial center,” Brendan Ahern, CIO of Krane Funds Advisors, said, in a note called “More Bark Than Bite,” cited by Bloomberg.
“As the optimists would see it, there is still a three-year window before any firm will suffer this fate according to the text of the bill, giving lots of potential wiggle room ahead, or at least enough time for the political winds to perhaps blow back in the other direction,” Rabobank’s Michael Every remarked, before sarcastically citing a Wall Street Journal article called, “China Has One Powerful Friend Left in the US: Wall Street.”
On the stimulus front, Joe Biden is backing the same $908 billion, bipartisan proposal that Nancy Pelosi and Chuck Schumer publicly supported on Wednesday. Speaking to workers and small business owners virtually, Biden lamented opposition to the package from the White House and hardline Senate GOPers. “To state the obvious, my ability to get you help immediately does not exist,” he said, referencing the fact that he isn’t yet president. Just to drive the point home: This is a bipartisan proposal, and it is $1.4 trillion less than Pelosi’s October offer and $2.4 trillion less than the original HEROES Act. Now you tell me: Who’s compromising and who isn’t?
Meanwhile, Los Angeles Mayor Eric Garcetti warned of a “devastating tipping point” for the city and issued a stay-at-home order. He didn’t mince words. If it gets worse in the city, “patients would start to overwhelm our hospital system, in turn risking needless suffering and death,” he said. “The way to avoid that dreaded scenario is clear. We must refrain from gathering with people from outside our household wherever possible.”
Wednesday was the deadliest day of the entire pandemic for the US. In excess of 2,700 Americans died from the disease or complications on December 2. Hospitalizations breached 100,000, a level previously seen as unthinkable by some health officials. The CDC’s data differs slightly from Johns Hopkins, but the figure below gives you a sense of things.
“If you tell me the hospitalizations are up this week, I’ll tell you that several weeks down the road, the deaths will be up,” Jeremy Faust, an emergency medicine physician at Brigham and Women’s Hospital in Boston, told The New York Times.
In Iran, total infections topped 1 million. Javad Zarif warned that US sanctions are blocking the country’s access to vaccines.
This is the backdrop for near record high equity prices. I don’t need to repeat this but here it is anyway: It’s a tug of war between what’s going on right now and expectations for brighter days in 2021.
“What’s starting to make me nervous about chasing things higher, including the shiny things (Gold) is that I remain skeptical about the idea of a great rotation or reflation as both have proved to be fairly fleeting in the past,” AxiCorp’s Stephen Innes said Thursday. “Given the moves in breakevens, do you really want to chase them here?”
OPEC+ inched closer to some kind of agreement Thursday, ahead of the (postponed) meeting. The same is true of Brexit — negotiators are inching closer to a deal.
The bottom line on Thursday, ahead of jobless claims and, of course, NFP on Friday, is summed up by Bloomberg: “The pandemic’s relentless spread is tempering the buoyant mood that pushed global stocks to a record monthly gain on vaccine breakthroughs and Joe Biden’s presidential victory.”
That’s the long and the short of it.
