Daily Comment (November 10, 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 developments in the post-election political and legal maneuvering.  Naturally, we follow that with a discussion of coronavirus news and what to expect after yesterday’s blockbuster announcement regarding the vaccine development by Pfizer (PFE, 39.20).  We end with various other international and market news.

U.S. Elections:  President Trump continues to pursue legal remedies to his apparent re-election loss.  Although the legal challenges still seem unlikely to change the result, they continue to slow the timing of certifying the results and complicate the prospects for a smooth transition of power.

  • The Trump campaign and its allies have unveiled a new tactic to contest election vote counts.  They are suing to stop state officials from finalizing results due to fraud allegations in Michigan and the limits imposed on poll observers in Pennsylvania.  However, legal analysts say judges would probably be reluctant to take the rare step of blocking final vote counts without seeing substantial evidence of fraud or irregularities widespread enough to change the election.
  • Separately, Attorney General Barr has authorized federal prosecutors to investigate possible instances of electoral fraud in the presidential poll.  The move was a break from past practices that delayed such probes until after an election was settled, so it wouldn’t appear the Justice Department was trying to tip the scale in favor of one candidate.  However, the order did limit prosecutors to investigating only “clear and apparently credible allegations of irregularities that, if true, could potentially impact the outcome of a federal election in an individual state.”
  • Several foreign leaders seen as ideologically close to President Trump continue to withhold offering their congratulations to Vice President Biden.  Russian President Putin’s office, for example, says he will not offer congratulations to Biden until the results are “officially” announced, even though he congratulated President Trump in 2016 shortly after news media called that election for Trump.  Indeed, Russian state media voiced support for Trump’s assertions that the vote was marred with irregularities.  Some Russian politicians predict that a Biden presidency would further sour relations between Moscow and Washington.

COVID-19:  Official data show confirmed cases have risen to 50,913,451 worldwide, with 1,263,089 deaths.  In the United States, confirmed cases rose to 10,110,552, with 238,251 deaths.  Here is the interactive chart from the Financial Times that allows you to compare cases and deaths among countries, scaled by population.


  • New confirmed U.S infections totaled almost 120,000 yesterday, while virus-related hospitalizations approached 60,000 and deaths topped 600.  The ominous figure is that among those hospitalized, over 11,000 are in intensive care units, which brings the total number of ICU patients to the highest since early May.
    • Mentioning this isn’t meant to take anything away from yesterday’s positive news about vaccine development and the rip-roaring impact it had on the financial markets.  However, the current data do serve as a reminder that there are still many challenges to overcome before things are back to something approaching normal.  For example, it’s important to remember that producing, distributing, and administering vaccines will still be a big challenge going forward.
    • In the meantime, economic lockdowns of one type or another remain a risk, even if it should now be easier to think of any new restrictions as probably being relatively short-term.  The good vaccine prospects also may take some wind out of the sails for those working toward a new fiscal relief package in Congress.  And finally, yesterday’s upswing (which was especially strong for travel and leisure stocks, real estate firms, and distressed debt) was simply so strong that it wouldn’t be surprising to see some profit taking today or in the near term, even if longer-term prospects have brightened.
  • Despite the good news on the vaccine from Pfizer, some vaccines under development continue to hit roadblocks.  Brazil has suspended final-stage trials of a Chinese vaccine after adverse reactions to the shot raised safety concerns.  The suspension deals a blow to Beijing’s effort to use medical diplomacy in the wake of the pandemic.
  • Housing and Urban Development Secretary Ben Carson tested positive for COVID-19 yesterday morning, making him the latest member of President Trump’s orbit to contract the virus after White House Chief of Staff Mark Meadows tested positive last week.
  • While a new wave of infections is sweeping around Europe and the U.S., this wave is proving less deadly than the initial wave last spring.  In the U.K., for example, the number of “excess deaths,” or deaths significantly higher than average, is about one-third smaller than at the U.K.’s peak last spring.
  • After Australia went three straight days with no local transmissions, Prime Minister Morrison said his government is considering allowing travel to the country from some Asian countries, including parts of China, in a bid to revive Australia’s tourism industry.

 Economic Impacts

 U.S. Policy Response

United Kingdom:  Treasury chief Rishi Sunak yesterday outlined a review of finance rules, including possible changes to make it easier for companies to raise money in London.  This is aimed at keeping the country’s vast financial sector competitive with New York after Brexit.  Given the financial services industry’s prevalence in the British economy and their high representation in the British stock market, maintaining global competitiveness in this sector could be critical in maintaining the U.K.’s attractiveness as an investment destination.

EU-U.S. Technology Firms:  Reports indicate the EU will announce formal antitrust charges against Amazon (AMZN, 3,143.74) today regarding how it uses data about merchants on its platform.  The case focuses on Amazon’s dual role as both a marketplace for third-party vendors and a competitor selling its own goods.  The charges turn on concerns that Amazon may be abusing its role by using the data it gathers on merchants to compete against them.  These charges are also part of a long line of EU legal challenges to U.S. technology firms and their business models.  Coupled with yesterday’s positive news about coronavirus vaccines and the possibility of the global economy getting “back to something like normal,” the continuing EU regulatory attacks suggest tech firms will face increased headwinds in the near term.

Nagorno-Karabakh:  Azeri forces fighting Armenian troops over control of Nagorno-Karabakh accidentally shot down a Russian military helicopter, killing two crew members.  The incident apparently helped prompt the Kremlin to intensify its effort to resolve the conflict, and reports today say Armenia and Azerbaijan have signed a ceasefire deal that will deploy Russian peacekeepers in the territory.  The Russian troops are reportedly already being deployed.  The truce, which follows the capture of a strategically decisive city by Azeri forces, represents a major military victory for Baku, cementing its large territorial gains and raising questions about the future of the Armenia-controlled enclave.

Japan:  The Bank of Japan said it will exempt regional banks from negative interest rates if they agree to merge or cut costs.  Regional banks with approved restructuring plans will be able to earn a positive interest rate of 0.1% on their deposits at the BoJ, instead of minus 0.1%. That is an incentive that could be worth billions of yen, and it’s a highly unusual use of monetary policy to reshape the financial sector.

Peru:  The country’s Congress has ousted President Martín Vizcarra over what appears to be trumped-up charges of corruption and incompetence related to the coronavirus pandemic.

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