U.S. Cases Slow to Lowest in More Than Two Months
The number of new reported infections in the country fell below 34,000 on Monday, according to data compiled by Johns Hopkins University, the lowest number since June 22. While Covid-19 cases remain elevated compared with the earliest days of the summer, they have been trending down in recent weeks. (…)
Regional differences are numerous. The NE keeps on testing and its positive rates remain very low, unlike the Midwest. The South and West have slacked testing and their positive rates, still much higher than average, have declined in step.
It is more difficult to play with hospitalization and death numbers. Given recent trends, daily deaths should ease toward the 500 mark in the next 2 weeks.
Worldwide, case remain very high in the U.S., India and South America. Africa and Oceania are trending down remain while the E.U. has seen its daily cases multiply by 5 since mid-July:
E.U. cases are rising almost across the continent but Spain and France have become problematic. Schools are reopening today in France and Spain. Half of German schools reopened on August 10. Testing has generally increased across the E.U. in recent weeks.
As we approach the U.S. elections, the virus is increasingly politicized:
- The CDC revises Covid-19 testing guidance under pressure from the Trump administration.
- The FDA confirms an advisory committee meeting on October 22nd to discuss Covid-19 vaccines. Specifically, the Vaccines and Related Biological Products Advisory Committee (VRBPAC) meeting will talk about the development, authorization, and/or licensure of vaccines.
- The Trump administration is reportedly considering fast tracking AstraZeneca’s vaccine before the presidential election. Treasury Secretary Steve Mnuchin and WH Chief of Staff Mark Meadows met with Democratic congressional leaders Nancy Pelosi and Chuck Schumer on July 30 to discuss plans about approving a Covid-19 vaccine even before it completes Phase 3 trials. According to the Financial Times, one option being considered involves the FDA implementing an emergency use authorization (EUA) for the vaccine. The public report cites three people briefed on the plan, but the FDA has denied this claim, saying that it is “absolutely false”, while AstraZeneca has said that they weren’t involved in any discussion around the use of an EUA.
- 66% of Americans don’t want to share a vaccine right away with the rest of the world if the U.S. gets there first, according to a recent Harris poll.
Covid-19 Vaccines: What’s Coming and When?
Some 170 Covid-19 vaccines are in development around the world, according to the World Health Organization, each one promising to protect people from the deadly coronavirus and allow them to go back to work and school.
Now, a handful are starting or nearing the final stage of testing. Depending on the results, some companies say their vaccines could be greenlighted for use as soon as this year. (…)
Nine of these have advanced into Phase 3, which tests whether the dose that would be given to the public works safely. (…)
The latest update to our consumer comfort tracker finds the generational gap in comfort returning to leisure activities has closed nearly across the board. Millennials and baby boomers are now equally likely to be comfortable dining out, at 33 percent. Read More.
IHS Markit Small Business Employment Watch
The latest Paychex | IHS Markit Small Business Employment Watch shows that despite hiring remaining flat since its drop-off in April, employees of small business are seeing the benefits of solid wage growth. Hourly earnings growth was steady at 3.28 percent in August and weekly earnings continue to improve as the number of hours worked increases. The national jobs index stood at 94.39, moderating 0.21 percent from the previous month.
The above seems to mean that if you are employed, you are almost fine. Otherwise…
THE MANUFACTURING PMIs
USA: Fastest manufacturing expansion since January 2019
August PMI data from IHS Markit signalled a solid improvement in operating conditions across the U.S. manufacturing sector, with overall growth accelerating to the strongest since early-2019. The upturn reflected faster increases in output and new orders, with firms also indicating a renewed rise in employment. Moreover, companies registered the highest degree of confidence in the outlook for output over the coming year since April 2019 amid hopes of further growth of client demand.
On the price front, input costs rose sharply amid supplier price hikes and raw material shortages. Firms were able to partly pass on higher cost burdens through a modest increase in selling
prices.The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) posted 53.1 in August, down slightly from the previously released ‘flash’ estimate of 53.6, but up from 50.9 at the start of the third quarter. The upturn in operating conditions was only the second in as many months, following the easing of coronavirus disease 2019 (COVID-19) restrictions and the reopening of large sections of the manufacturing sector. Overall growth was solid and the sharpest since January 2019.
Contributing to the overall expansion was a faster increase in
new order inflows in August. The rate of growth was solid and
the steepest since the start of 2019. Firms often linked the rise in
new sales to stronger client demand and increased marketing.New export orders also picked up, as companies registered the
first upturn in foreign client demand in 2020 so far. Moreover,
the pace of increase was the quickest in four years.Reflecting strengthened demand conditions, manufacturers
recorded a steeper pace of output growth. The upturn was the
quickest since November 2019.
At the same time, goods producers expanded their workforce numbers for the first time since February. The rate of
employment growth was the joint-fastest since March 2019,
with firms attributing hiring to greater production requirements
and upwards pressure on capacity. Backlogs of work rose at the
sharpest rate for over a year as new order inflows picked up.Meanwhile, manufacturers remained optimistic regarding the
outlook for output over the coming year in August. Confidence
reportedly stemmed from hopes of a return to stronger demand
conditions and an end to the pandemic. The degree of positive
sentiment was solid overall and the highest since April 2019.August data signalled an acceleration in the rate of input price
inflation, as cost burdens rose sharply amid raw material
shortages and supplier price hikes. The pace of increase was the
steepest since early-2019, but firms were only able to raise their
output charges modestly amid efforts to retain clients.Finally, the quicker increase in new sales drove input buying
up in August. Firms also sought to rebuild stock levels, as preproduction
inventories rose at the fastest pace in 2020 so far. At
the same time, post-production inventories stabilised, bringing
to an end a seven-month sequence of contraction.
CHINA: Manufacturing sector expands at solid pace in August
China’s manufacturing sector continued to expand strongly in August, adding to signs of a further recovery in conditions after the coronavirus disease 2019 (COVID-19) virus outbreak earlier in the year. Production and new orders both expanded at sharper rates than in July, while firms reported the first increase in export sales in 2020 to date. Firmer demand conditions led to a sustained increase in purchasing activity, although the rate of expansion eased slightly since July. Meanwhile, staffing levels fell at only a fractional, hinting that employment was close to stabilisation as firms registered a further increase in backlogs of work. Prices data meanwhile indicated softer increases in both input costs and output charges compared to the previous month.
The headline seasonally adjusted Purchasing Managers’Index ™ (PMI ™ ) rose from 52.8 at the start of the third quarter to 53.1 in August. The reading was indicative of a solid overall improvement in the health of the sector, and one that was the most marked since January 2011.
Helping to lift the headline PMI were steeper increases in both output and new orders in August. Total new work expanded at the sharpest rate since the start of 2011 amid reports of firmer client demand as the domestic and global economy continued to recover from the pandemic. Notably, manufacturers registered the first increase in new export sales since December 2019.
Higher new business led to a further expansion of output. The rate of growth also picked since July and was the most marked since January 2011.
Manufacturing employment in China edged closer to stabilisation in August. Staff numbers fell at a fractional pace that was the slowest in the year to date. While some firms cut staff numbers to contain costs, others mentioned increasing their headcounts due to rising workloads. Furthermore, a combination of reduced staffing levels and rising sales drove a solid increase in outstanding business.
Greater amounts of new work also led to a sustained rise in buying activity in August, with the latest expansion solid overall. Consequently, stocks of purchases rose for the third month in a row, albeit only slightly.
Inventories of finished items meanwhile increased for the first time since April. Though only slight, the upturn reflected efforts among a number offirms to restock as a result of the improved sales trend.
Vendor performance continued to deteriorate in August, albeit to a weaker extent than in the previous month. Panellists often mentioned that delivery times had lengthened due a lack of stock at suppliers.
Chinese goods producers faced a further increase in average input costs during August. Though not as strong as in July, the rate of inflation remained solid overall amid reports of greater raw material costs. Companies partially passed on their higher operating expenses to clients in the form of higher selling prices. That said, the rate of increase was mild overall.
Although firms generally expect output to rise over the next year, the degree of optimism edged down to a three-month low in August. While many companies anticipate global economic conditions to improve further, many expressed concerns over how long the pandemic would impact operations and customer demand.
EUROZONE: Modest growth of eurozone manufacturing sector sustained |
The recovery of the euro area’s manufacturing sector from the severe constraints on economic activity related to fighting the global coronavirus disease (COVID-19) continued during August. Output and new orders both rose at marked rates and ensured that the IHS Markit Eurozone Manufacturing PMI® remained above the 50.0 no-change mark for a second successive month. The headline index posted 51.7 in August, unchanged on the earlier flash reading and little-moved on July’s 51.8.
Growth was again widespread, with all three market groups registering an improvement in operating conditions compared to the previous month. The consumer goods category was again the best-performing, retaining a solid pace of expansion. Relatively modest gains were seen in the intermediate and investment goods categories.
Country level data indicated some divergent trends in manufacturing performance. Italy led the way in terms of growth, registering its best improvement in operating conditions for over two years. Ireland, the Netherlands and Germany – where growth hit a 22-month peak – all recorded solid improvements in operating conditions since July, while Austria registered modest growth.
In contrast, manufacturing performance stagnated in Spain and France, while Greek manufacturing conditions deteriorated for the sixth month running.
Eurozone manufacturing output growth was recorded for a second successive month during August and accelerated to reach its highest level for over two years. Germany, Italy and Ireland registered the strongest increases in output.
New orders also increased for a second month in succession, with growth again marked despite easing slightly on July’s near two-and-a-half-year peak. The domestic market was again the primary driver of new order books, with export orders continuing to rise, but at a relatively modest pace. To help meet the growth in new orders manufacturers continued to utilise stocks of finished goods, which fell to the greatest degree since the start of 2010.
Continued gains in new business led to a slight increase in backlogs of work during August, the first growth in two years. Nonetheless, manufacturers continued to make sharp reductions in employment: Latest data showed that job numbers were cut for a sixteenth successive month, albeit at the slowest rate since March. Job shedding remained most acute in Germany.
Manufacturers continued to utilise existing input stocks in production wherever possible. With purchasing activity little-changed on the month, inventories of raw materials and semi-manufactured goods declined to the greatest degree since January. This was also partly driven by ongoing delays in the delivery of inputs. Average lead times were reported to have lengthened for a seventh successive month (albeit to the weakest degree in this period).
Meanwhile, prices data indicated little overall change in input costs faced by manufacturers. Declining prices in Austria and Germany were offset by inflation across the rest of the region.
Competitive pressures led to a fourteenth successive monthly fall in output charges, although the latest contraction was marginal and the weakest recorded in the past year.
Finally, confidence about the future continued to pick up during August, reaching its highest level for over two years as firms looked forward to the ongoing recovery from the impacts of the pandemic on economic activity. Italian manufacturers were the most optimistic about the future, whilst French firms were the least confident.
JAPAN: Manufacturing sector moves closer to stabilisation in August
Latest PMI data showed that the manufacturing downturn in Japan
continued to ease in August. Companies reported the softest falls in
output and total new orders since February and January, respectively. (…)The headline au Jibun Bank Japan Manufacturing Purchasing
Managers’ Index™ (PMI)® picked up from 45.2 in July to 47.2
in August. Although pointing to a solid decline in the health of the
sector, the latest PMI figure was the highest since February. (…)
Supporting the higher PMI reading were softer falls in both production
and new business in August. Although solid, the latest drop in output
was the least marked since February, while total orders declined at
the weakest rate since January. Meanwhile, new work from overseas
fell at the slowest rate for seven months. According to panel members,
an easing of COVID-19 related restrictions worldwide had helped to
ease rates of reduction for output and sales. That said, there were still
widespread reports that the pandemic continued to weigh heavily on
work schedules and demand conditions, both at home and abroad.Although employment fell further, the rate of job shedding eased to
its weakest for three months in August, with payrolls falling modestly
overall. At the same time, signs of excess capacity persisted, as
highlighted by a further steep decline in backlogs of work.In line with the trend for output, purchasing activity fell at a weaker, but still sharp, rate in August. Although demand for inputs remained
muted, the time taken for purchased items to be delivered to
manufacturers lengthened again. Panellists often mentioned that the
pandemic had continued to adversely impact supply chains. (…After stabilising in July, prices charged by Japanese manufacturers
fell slightly in August due to efforts to stimulate sales. In contrast,
input costs rose modestly as companies widely commented on higher
raw material prices.Encouragingly, business confidence picked up further from April’s
record low, and was the highest since before the pandemic in
January. Optimism was linked to hopes that the pandemic will end
and market conditions will recover. However, a number of firms
expressed concerns over how long the recovery would take.
Euro-Area Inflation Turns Negative in Worrying Sign for ECB The inflation rate came in at -0.2%, missing economists’ median estimate for a reading of +0.2%. Core inflation hit a record low, in part dragged lower by discounting during summer sales.
You Think FAANG Is Distorting the S&P? Consider ATM Alibaba, Tencent and Meituan dominate Chinese stock indexes. Investors are scrambling to diversify.
Many have lamented the lack of depth in the U.S. stock market, marveling at how a handful of big tech companies have grown to dominate almost a quarter of the S&P 500 and become responsible for all of this year’s gain. But that lopsidedness is nothing next to China, where the top three stocks in the benchmark MSCI China Index now have more than a 38% weight. (…)
Passive fund flows, unleashed by the super dovish tone of the Federal Reserve, are propelling these three stocks even higher. That makes beating the benchmark MSCI China Index an impossible task. Value investing remains a losing game, because banks, the only segment big enough to tilt the index, are still struggling with bad loan writedowns.
To outperform the index and reduce reliance on ATM, then, investors have no choice but to hunt for smaller growth stocks. JD.com and Pinduoduo, for instance, are hedges against the Alibaba behemoth; both saw their market caps more than double this year. Electric vehicle startups XPeng Inc. and Li Auto Inc. have launched successful IPOs, as investors increasingly see the industry as recession-proof.
Meanwhile, bullish equity analysts are telling tall tales to justify sky-high valuations. (…) Once artificial intelligence is involved, profitability no longer matters. (…)
The ever-so-useful-and-generous Ed Yardeni has this chart showing that from pre-pandemic levels, the S&P 500 P/E rose about 17% to 22.2 while ex-FAANGM it rose some 11% to 18.9x forward EPS:
The FAANGMs currently contribute 3.3 P/E points to the S&P 500, from 2.0 in February. The FANGs, excluding AAPL and MSFT, contribute 2.0 points, up from 1.3. It follows that AAPL and MSFT contribute 1.3 P/E points, up from 0.7.
Apple, Tesla Shares Keep Rising After Stock Splits Apple and Tesla shares rose to new heights after their stock splits took effect, extending their meteoric rallies this year.
JPMorgan Says Investors Should Prepare for Rising Odds of Trump Win
Betting odds that earlier had Trump well behind challenger Joe Biden are now nearly even — largely due to the impact on public opinion of violence around protests, as well as potential bias in polls, said strategist Marko Kolanovic.
Based on past research, there could be a shift of five to 10 points in polls from Democrats to Republicans if the perception of protests turns from peaceful to violent, he said. People giving inaccurate answers could artificially skew polls in favor of Biden by 5%-6%, he added. (…)
Biden’s narrowing advantage in polls evokes memories of the 2016 election, when such tallies seemed to favor Hillary Clinton strongly. While Clinton won the popular vote by several million, the Electoral College, a state-by-state count that determines the election outcome, ended decisively in Trump’s favor.
Kolanovic, who has been accurate on calls including the stock rally after Trump’s election and the rebound from Covid-19-fueled lows earlier this year, said important drivers of the election in coming weeks include developments on the Covid-19 pandemic, which looks like it might subside as the vote nears. (…)
- Biden accuses Trump of stoking violence in US cities Speech comes as president plans to visit Kenosha despite local officials’ objections
Dem group warns of apparent Trump Election Day landslide
A top Democratic data and analytics firm told “Axios on HBO” it’s highly likely that President Trump will appear to have won — potentially in a landslide — on election night, even if he ultimately loses when all the votes are counted.
Way more Democrats will vote by mail than Republicans, due to fears of the coronavirus, and it will take days if not weeks to tally these. This means Trump, thanks to Republicans doing almost all of their voting in person, could hold big electoral college and popular vote leads on election night. (…)
