Daily Comment (December 9, 2020)

by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EDT] | PDF

Our Daily Comment today opens with the latest coronavirus news.  Importantly, the U.K. vaccinations yesterday turned up two negative reactions in people with allergy issues, but the news doesn’t seem to be undermining vaccine euphoria yet.  There’s also a new pandemic relief proposal from the White House to consider.  We follow the coronavirus news with an update on the U.S. presidential transition and the latest on Brexit negotiations.

COVID-19:  Official data show confirmed cases have risen to 68,387,002 worldwide, with 1,560,117 deaths.  In the United States, confirmed cases rose to 15,174,018 with 286,338 deaths.  Here is the interactive chart from the Financial Times that allows you to compare cases and deaths among countries, scaled by population.


  • Newly confirmed U.S. infections topped 215,000 yesterday, while hospitalizations related to the virus rose to a new record of 104,600.  Among those hospitalized, the number in intensive care rose to a record of 20,483.  The number of new deaths surpassed 2,500, bringing the seven-day average of virus-related deaths to a near-record of 2,237.  Responding to the latest resurgence of the disease, state and local governments continue to impose new restrictions on business and social activity.
    • In Washington State, Governor Inslee extended broad limits on gatherings, restaurants, and other indoor activities until January 4.
    • In North Carolina, Governor Cooper said that beginning Friday he will institute a new, modified stay-at-home order, requiring business closures and people to remain at home from 10 p.m. to 5 a.m.
  • Just a day after the U.K. started injecting people with the new coronavirus vaccine developed by Pfizer (PFE, 42.56) and BioNTech (BNTX, 128.11), British authorities said two recipients with a history of “significant” allergies had negative reactions to the shot.  In response, the Medicines and Healthcare Products Regulatory Agency said people with a history of allergies shouldn’t receive the vaccine.  Fortunately, there is little indication that the setback has damaged optimism about getting the pandemic under control, perhaps because observers understand that problems with allergies were investigated in clinical trials and not found to be a major issue.
  • In the U.S., the leader of the advisory panel charged with evaluating the Pfizer/BioNTech vaccine said the shot is very likely to obtain emergency-use authorization because of its apparent high-efficacy rate of approximately 95%.  The panel meets to consider the vaccine tomorrow.
  • The United Arab Emirates is the first foreign country to approve a COVID-19 vaccine developed by the Chinese state-owned pharmaceutical group Sinopharm (SHTDY, 12.24), saying the vaccine has 86% efficacy, according to interim results of a phase 3 trial.  The figures suggest the major foreign vaccines being developed outside the U.S. and Britain could be similarly effective.  If so, they could help ensure a successful global effort to rein in the disease.
  • Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, yesterday said the new coronavirus vaccines could diminish the disease as successfully as the polio vaccine did for polio.  This would enable workers to return to offices and restaurants in the second half of 2021.  However, Fauci cautioned that hurdles still exist, including some people’s hesitancy to get vaccinated and getting through the current resurgence of infections.

 Market Impacts

  • Investors betting that coronavirus vaccines will propel the global economic recovery next year continue to buy assets outside of the U.S., pushing the dollar lower and complicating European policymakers’ efforts to boost inflation.
    • The euro is currently up more than 8% against the greenback this year, putting it near its highest level since April 2018.
    • In technical terms, the U.S. Dollar Index has recently broken below a key support level, adding to expectations that the greenback will continue to weaken.

 U.S. Policy Response

  • The Trump administration threw a curveball into the ongoing congressional negotiations over a new pandemic relief bill when he offered Democratic leaders a $916 billion bill that includes another round of direct payments to taxpayers.  The bill gives payments to individuals totaling $600 per person, but it wouldn’t include the $300 per week in extra unemployment benefits that were in last week’s bipartisan proposal.  Various lawmakers, ranging from Democratic Senator Bernie Sanders of Vermont to Republican Senator Josh Hawley of Missouri, have swung around to the idea of another round of direct payments to individuals, although it’s not clear whether they have enough momentum to get the idea into a bill.
    • Because of the exclusion of increased jobless benefits, House Speaker Pelosi and Senate Minority Leader Schumer expressed coolness toward the White House proposal.
    • Negotiations continue on the $908 billion bipartisan proposal, which would include aid to state and local governments as well as virus liability protections for businesses, nonprofits, and schools.
    • In any case, the continued negotiations and broad pushback against any effort to dramatically narrow the package should be evidence that a deal is more likely than no deal.  That should continue to support risk markets, as it did in helping lift the S&P 500 to yet another record close yesterday.

 U.S. Presidential Transition: Sources say President-elect Biden will nominate Ohio Representative Marcia Fudge to lead the Department of Housing and Urban Development and former Iowa Governor Tom Vilsack to head the Department of Agriculture, as he did through much of the Obama administration.

Brexit: British Prime Minister Johnson travels to Brussels today for a working dinner with European Commission President von der Leyen in what may be the last chance to resolve their differences over a post-Brexit trade deal between the U.K. and the EU.  Ahead of the meeting, the Brits offered an olive branch by saying they will modify the Internal Market Bill currently being considered in parliament in order to eliminate controversial provisions that would allow Britain to break its withdrawal agreement with the EU.  All the same, German Chancellor Merkel warned that Brussels will accept a no-deal outcome of the talks if the two sides cannot minimize the risk of unfair competition between their markets.  We still believe a deal is likely, but the to-and-fro of the negotiations could spark some volatility in British and European assets or currencies in the coming days.  On a related note, the Johnson government said it will stop enforcing the EU’s punitive tariffs against the U.S. over aircraft subsidies, in an attempt to curry favor with the Biden administration and pave the way for a post-Brexit trade deal.

 Japan-North Korea: Lawmakers in Japan’s ruling party have approved a plan for the country to develop its own missiles capable of reaching North Korea as part of a defense buildup that would give Tokyo the ability to launch a preemptive strike if it anticipates an attack.

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