Cooperation And Contacts

Mixed global markets reflected investor reticence Tuesday, as rates traders awaited the Fed and the equities crowd pondered the next catalyst.

Stimulus talks stateside are poised to go down to the wire. With just days left to pass legislation that can be attached to a broader spending bill, top Democrats will need to decide whether to allow a vote on one part of the $908 billion bipartisan proposal which was split in two this week. Countenancing a vote on the $748 billion chunk without moving forward on more than $150 billion in funding for state and local governments would represent yet another concession from Nancy Pelosi and Chuck Schumer.

Mitch McConnell has consistently advised pushing the discussion around state and local aid into 2021 along with his demands for employer liability protection. It’s not entirely clear whether he would back even the $748 billion “core” legislation from the bipartisan deal. On Monday evening, he cynically cited the need for Congress to “deliver crucial COVID relief to families, workers, and businesses across the country.” That, from a lawmaker whose position hasn’t changed materially since September, despite Democrats reducing their demand from $3.4 trillion (the original HEROES Act) all the way to $908 billion.

Now, Pelosi is being asked to forget aid for state and local governments and back a $748 billion proposal. Again, it’s not even clear that would satisfy McConnell. “We hope our Democrat counterparts share our sense of urgency,” he went on to muse, in a joint statement with Kevin McCarthy. As ever, McConnell’s attempts to deflect blame for the delay would be comical were they not so pathological.

Notably, Dick Durbin is in favor of allowing a vote on the core package, which does include an extension of federal unemployment assistance, albeit at just $300 per week, half the supplement received by the jobless during the initial pandemic relief push.

Meanwhile, in the UK, The British Medical Journal and the Health Service Journal implored Boris Johnson to forbid mixing by households during the Christmas holiday in order to safeguard the National Health Service. The joint editorial, described as “rare,” argues that relaxing social distancing restrictions would be a serious “blunder” that could “cost many lives.” Londoners are now operating under the country’s strictest containment protocols as officials and researchers caution on a possible “new variant” of COVID-19.

As Bloomberg recounts, “UKHospitality Chief Executive Kate Nicholls said there is ‘still no hard evidence’ that restaurants and bars drive infection rates, while theater producer Cameron Mackintosh said the move is ‘devastating’ and ‘smacks of panic.'” Mackintosh is right. Officials are panicking. Namely, because lots of people are getting infected with a potentially new strain of deadly viral pneumonia, and at times like these, going to the movies simply isn’t the overriding concern.

US equities will try for their first gain in five sessions Tuesday. Data out of China was ostensibly bullish overnight, underscoring the resiliency of the world’s second-largest economy. “Activity data from November again illustrated the undisrupted momentum of the Chinese economy, and GDP growth in 4Q looks on track to print above 6% – stronger than our current forecast of 5.5%,” SocGen’s Wei Yao and Michelle Lam wrote. “The strong data should embolden policymakers to continue with policy normalization and structural reform.”

Oh, and Vladimir Putin finally acknowledged that Joe Biden will become President next month. “I am ready for cooperation and contacts with you,” Putin said, in what was described as a “congratulatory telegram.”

One thing that could impede such “cooperation and contact” is this week’s historic breach by suspected Russian hackers of the the US Department of Commerce, Homeland Security, and Treasury. Although I suppose that’s technically “cooperation and contact” — with just a splash of coercion.