Morning Markets Brief 12-22-2020

Summary and Price Action Rundown

Global risk assets are steadying this morning as the long-delayed US pandemic relief package heads to the President’s desk, Brexit negotiators soldier on despite more setbacks, and vaccine rollout continues apace. S&P 500 futures indicate a 0.2% gain at the open after the index closed with a modest 0.4% loss yesterday after being down nearly 2% in the morning, shaving year-to-date gains to 14.4%. Meanwhile, the Nasdaq continued its outperformance trend amid the Covid-19 resurgence. Equities in the EU are retracing a portion of yesterday’s steep loss, which was spurred by fears of the mutated Covid-19 strain in the UK and Brexit concerns, while Asian stocks were mostly lower overnight. A broad dollar index is holding above its recent multi-year low and longer-dated Treasuries are flat, with the 10-year yield at 0.93%. Brent crude prices are retreating toward $50 per barrel as OPEC+ considers its supply cut trajectory.

 

US Pandemic Relief Bill Finally Passes Congress

The House and Senate approved the $900 billion compromise relief package late last night alongside a spending bill to fund the government through the fiscal year, with President Trump set to sign it today. This long-awaited pandemic relief bill features $600 in direct payments to individuals (adults and children), which Secretary Mnuchin said yesterday could be sent to bank accounts as early as next week. Additionally, the package includes expanded and extended unemployment benefits of $300 per week through March 14th, $325 billion in support for small businesses, extended eviction moratorium and $25 billion in aid to renters, $15 billion for airlines, and assistance for schools, childcare, and vaccine rollout. The total includes $429 billion in unused funds from the CARES Act and the entire package will be appended to the $1.4 trillion omnibus spending bill that will fund the government through the end of this fiscal year. Both President-Elect Biden and House Speaker Pelosi indicated their belief that more stimulus will be needed next year, particularly given the relatively brief period granted for additional unemployment benefits. The provision to prevent the Fed from restarting any of the five CARES Act lending programs, or create similar ones in the future, had become the main sticking point last week once the two most controversial elements, direct funding for state and local governments and liability protections for businesses, had been omitted. While GOP Senators asserted that the provision would exclusively target the five Fed programs, Democrats accused Republicans of trying to hamstring the incoming Biden administration and limiting the ability of the Federal Reserve to respond to economic distress in the future. The final version of the bill is said to narrow the restriction on the Fed to identically reproducing the CARES Act programs, thereby allowing novel formulations of Fed emergency lending facilities in the future. – MPP view: Better late than never. And with the Democrats and Republicans both falling short of their two “must-haves” in this bill (state and local government aid, and corporate liability limits, respectively), we expect a resumption of negotiations after the inauguration.

Brexit Negotiation Bog Down in Waning Days Before the Deadline

The pound is extending its decline from recent highs against the dollar and euro as the UK and EU remain deadlocked over the stubborn sticking point of fishing rights, with the deadline looming next Thursday. Having missed yet another artificial deadline on Sunday, Brexit talks remain stalled this morning after the UK’s proposed compromise on fishing rights remained unacceptable to the EU. The pound, which has acted as a barometer for the fortunes of Brexit, at one point yesterday was down nearly 2% versus the dollar and euro, with the latest pandemic developments adding to the pressure, but steadied in later trading as the UK gave more ground on this challenging issue, and analysts note that more concessions may be forthcoming. With a reimposition of total lockdowns in southeast England and freight stoppage between the UK and France as the fraught backdrop, Prime Minister Johnson is reportedly set to decide in the coming days whether to accept EU terms on fishing and other outstanding issues or opt for a no-deal departure from the single market at midnight on December 31st. In the absence of a firm UK decision, however, reports suggest that talks could continue straight up to the deadline. – MPP view: We are retaining our out-of-consensus call for a hard and/or disorderly Brexit at year-end, as fishing rights remain intractable and the timeline is dwindling. But with both sides seemingly ready to continue talking past the deadline, Brexit may seem, from a market perspective at least, less like an acute shock and more like a chronic condition. 

Additional Themes

Possible Easing of OPEC+ Output Cuts – Russia gave indications today that it intends to support OPEC+ raising output by 500,000 barrels a day at next month’s meeting. The hike would take place in February, matching the increase already agreed for January. 500,000 barrels is the maximum monthly incremental supply hike allowed by the cartel’s agreement in early December. OPEC+ shifted their schedule to monthly meetings in order to be able to adjust their production more rapidly to changes in the market. The new stance from Russia came after Brent crude had already dropped toward $50 a barrel due to the UK implementing a new full lockdown in London and southeast England to combat a more contagious strain of Covid-19 that is spreading rapidly. Furthermore, a host of nations around the globe limited travel to and from the UK. Brent fell 2.9% today. – MPP view: Like stocks, oil prices have been in a transition phase as traders try to look past the dire near-term outlook to the post-vaccine demand surge. As we had expected, the latest OPEC boost provided short-term support to prices, and US stimulus expectations seem to have given some additional lift, with rising tensions (and increasing incidents) in the Gulf and dollar weakness adding to the upside impetus. Still, we have expected the dismal demand dynamics of the coming quarters to keep prices capped and see OPEC+ commitment to output cuts as difficult to maintain in the coming months. Today’s development is aligned with our base case expectation that oil prices will have a hard time making significant headway from here. 

Traders Eye Georgia Runoffs – Market commentators are noting options activity in the Treasury market in anticipation of the two Senate runoff elections scheduled for January 5th, though early and mail-in balloting is well underway with a reported 1.5 million votes already cast. For context, traders would expect to see longer-dated Treasury yields jump and the dollar slump in the event of a Democrat sweep of the two contests, which would deliver control of the Senate and facilitate a far more expansionary fiscal stance in the first time of the incoming Biden administration. Betting lines and a popular prediction market are reflecting odds of the Republicans achieving at least a split in the two races and retaining Senate control at over 70%. – MPP view: Our base case is aligned with consensus but we expect odds to tighten into polling day on January 5th and investors will not be able to take a GOP win for granted, which will keep longer-dated Treasury yields biased upward and will remain a headwind for the dollar. Though the potential for a Dem sweep might give rise to concerns over taxation at the margin, enthusiasm for a less constrained pro-growth and fiscally stimulative Biden economic program would, we expect, render that result a comfortable net positive for equities.

Morning Markets Brief 12-1-2020

Summary and Price Action Rundown

Global risk assets are mixed this morning after stellar month-to-date performance, with US equities registering record highs last Friday, as investors assess the latest China-related developments and await a key OPEC decision tomorrow. S&P 500 futures indicate a 0.2% lower open after the index edged to a new record high in Friday’s holiday-shortened session, gaining 0.2% to up its year-to-date gain to 12.4%, while the Dow Industrials has slipped a bit after crossing 30,000 for the first time last week. Equities in the EU are consolidating their recent gains as well, while Asian stocks were mostly lower overnight. A broad dollar index is descending to a new multi-year low, at a level last seen in April 2018, while longer-dated Treasuries are generally steady, with the 10-year yield ticking up to 0.85%. Brent crude is paring its recent upside, dipping below $48 per barrel, ahead of a pivotal OPEC meeting (more below).

 

China Headlines in Focus

Solid purchasing managers’ index (PMI) figures overnight reflected the robustness of China’s recovery but more potential additions to the US trade blacklist highlight ongoing US-China tensions. China’s official PMI figures for November topped estimates across the board overnight, with the composite reading registering a solid 55.7 versus October’s 55.3. For context, PMI readings over 50 denote expansion. The manufacturing reading accelerated to 52.1, outpacing the consensus forecast of 51.5 and the prior month’s 51.4. Services were even more impressive at 56.4, topping estimates of 56.0 and October’s 56.2. Nevertheless, the People’s Bank of China added liquidity to the financial sector as analysts cited proactive management of year-end cash needs. This positive data has helped support the renminbi near its strongest level versus the dollar since June 2018, which takes pressure off the incoming Biden administration on the currency front, but other key US-China sources of tension persist, with the outgoing Trump administration obviously intent on keeping up the pressure in its final weeks. Reports overnight indicated that the White House is preparing to add more Chinese companies to its trade blacklist due to ties with China’s military, including chip giant SMIC and oil major CNOOC, shares of which fell 2.7% and 14.0%, respectively, on the Hong Kong exchange overnight. Analysts have been pondering the extent to which the Biden administration will continue President Trump’s hardline policy direction against China. – MPP view: We believe the Biden administration will take a more multi-lateral approach to confronting China, focusing more on using its human rights transgressions to marshal international pressure on officials and businesses, while still maintaining the segments of the Trump China policy that cover national security, IP, property rights, and investments. We expect trade and currency to be de-emphasized, or perhaps more accurately, dealt with in a more subtle fashion.

OPEC+ Members Lack Consensus Ahead of Pivotal Meeting

With the cartel and its allies meeting today and tomorrow, traders are highly attuned to signs of disagreement over the key issue of whether or not to extend supply caps into 2021. The full cartel meeting will commence later today following headlines indicating that informal interactions among members revealed rifts over the potential extension of price-supporting output restrictions beyond their scheduled expiry in January. Oil prices are retracing a portion of their recent upside this morning, but remain close to multi-month highs, as caution sets in over the possibility of a less ambitious extension or even a deadlock. For context, prices of international benchmark Brent crude and US benchmark WTI both reattained levels from early March last week amid a confluence of bullish factors, including the brightening demand outlook stemming from the encouraging Covid-19 vaccine developments, a weakening dollar, and indications that Saudi and Russia were set to push their fractious OPEC+ allies to hold to their supply curbs well into 2021, with a three-month extension the consensus expectation. Reports now suggest that the timeframe could be limited to two months or feature a gradual tapering of the curbs over three to four months. The UAE is said to be one of the key holdouts and had reportedly threatened to withdraw from OPEC earlier this month over dissatisfaction with other members’ uneven compliance with the cartel supply cuts. Nigeria and Iraq are the two OPEC members that have struggled to implement the curbs and have been pushed for compensatory cuts. – MPP view: Like stocks, oil prices are in a transition phase as traders try to look past the dire near-term outlook to the post-vaccine demand surge. This will make cartel discipline harder to maintain into 2021, but Russia/Saudi should succeed in securing one last supply curb extension at their meeting this week. As we have expected, anticipation of this last OPEC boost will provide some short-term support to prices, and post-election US stimulus dynamics (when they materialize) should provide some additional lift, but we expect the dismal demand dynamics of the coming quarters to keep prices capped, though this short-term rally has exceeded our expectations. This burst of optimism in oil markets increases the risk that OPEC fails to deliver meaningful additional support to the market in this week’s pivotal meeting, as member discipline will be questionable.   

Additional Themes

Black Friday Spending Shows a Resilient US Consumer – US consumers spent $9 billion online on Black Friday, up 21.6% on a year ago. Adobe had originally forecast sales of between $8.9 billion and $9.6 billion. The figure makes Black Friday the second-largest online spending day in US history, after 2019’s Cyber Monday. The National Retail Federation (NRF) has predicted that holiday sales during November and December will increase between 3.6% and 5.2% this year from 2019 to a total of between $755.3 billion and $766.7 billion, up from last year’s 4% gain that totaled $729.1 billion. Of that amount, NRF expects that online and other non-store sales will increase between 20% and 30% to between $202.5 billion and $218.4 billion, up from $168.7 billion last year. Nevertheless, holiday sales metrics can often contrast with overall consumption figures, and the disappointing October retail sales reading suggested a degree of deterioration in demand as the pandemic intensifies into its second winter season.

Signs of Progress Keep Brexit Deal Hopes High – The pound is turning higher again this morning, though remains below recent multi-month highs versus the dollar and euro, amid upbeat assessments of the prospects for an agreement this week between the UK and EU to avoid a disorderly year-end Brexit. The thorny matter of fishing rights apparently remains the key sticking point, though UK Foreign Secretary Raab expressed optimism that a compromise could be found, and indicated greater clarity on possible resolution of UK state aid and “level playing field” issues. – MPP view: Our base case remains a hard and/or disorderly Brexit at year-end, though the renewed pressure from the pandemic is adding further impetus for PM Johnson to compromise and secure a deal, while the sidelining of arch Brexiteer Cummings also suggests a possible softening of the UK position. We do not expect the EU to give much ground from here.

Morning Markets Brief 11-3-2020

Summary and Price Action Rundown

Global risk assets are subdued this morning after yesterday’s losses as investors continue to weigh the grim near-term outlook for the pandemic and the global economy against upbeat medium-term prospects for stimulus measures and eventual vaccine rollout. S&P 500 futures indicate a 0.1% lower open after the index retreated further from Tuesday’s record high yesterday, dropping 1.2% to reduce its year-to-date upside to 10.4%. Equities in the EU are lagging as regional leaders ponder further coronavirus containment measures, while Asian stocks were mixed overnight. A broad dollar index is up slightly from its recent multi-year low, while longer-dated Treasuries are firm, with the 10-year yield dipping to 0.86%. Brent crude is hovering around $44 per barrel despite some bearish signs of OPEC disunity ahead of its pivotal month-end meeting.

 

Investor Focus Shifts Back to Dire Near-Term Pandemic Dynamics Despite Vaccine Optimism

The announcement of school closures in New York City yesterday due to the accelerating coronavirus outbreak highlighted the downside risks to the economy over the coming quarters before widespread vaccine availability. US stock futures are still in the red this morning after equity losses accelerated yesterday afternoon following the announced closure of schools in New York City due to rising infection rates across the metropolis. The specific trigger was the weekly average rate of positive tests rising over 3%, which some analysts had thought might occur as early as last weekend. Mayor de Blasio characterized the closure as temporary but gave no indication of the timeline for reopening and cautioned a decline in the positivity rate alone may not be sufficient to send city students back to the classrooms. Although President-Elect Biden’s public health advisors have declined to support a strict lockdowns like the one imposed in South Australia this week, or even partial shutdowns like those instituted in Germany and France late last month, more state and municipal leaders are tightening restrictions and calling for families to stay home for the Thanksgiving holiday. Most recently, Kentucky announced statewide school closures this morning as well as a ban on indoor dining. Near-term concerns over the pandemic and its economic fallout are overbalancing more upbeat vaccine news, this time from AstraZeneca and Oxford University. Specifically, this vaccine is said to be highly effective in older adults, who are more vulnerable to this coronavirus and would be a higher priority for immunizations. – MPP view: We expect renewed US fiscal stimulus negotiations in December to be challenging and result in only a mini-deal before year-end (if that) and disabuse more optimistic investors of the notion that a GOP-controlled Senate will go higher than $500 billion for the post-transition pandemic relief deal (minus any amounts agreed next month). This puts the spotlight on the Fed, and we think they will not shy away from signaling augmented asset purchases at their December meeting.   

US Jobs Data in Focus Amid Rising Concerns of Double-Dip Recession

Analysts will be attuned to this morning’s jobless claims data for any signs of backsliding after weeks of improvement. After US retail sales for October signaled a warning about consumer fortitude ahead of what is increasingly likely to be a challenging winter from both a public health and economic standpoint, with large swathes of the US beset by the ongoing seasonal Covid-19 surge, labor market dynamics will be a key focus for market participants and policymakers alike. Initial jobless claims for the week ending November 14th are expected to improve slightly to 700K after the prior week’s tally showed that 709K Americans filed for unemployment benefits, down from the previous week’s revised level of 757K and below market expectations of 735K. This is the lowest number since late March but still well above pre-pandemic levels. Also, there were more than 298K new applicants to the Pandemic Unemployment Assistance (PUP) scheme, which covers workers that do not qualify for initial claims, compared with 362K in the previous period. So combined, 1.007 million claims were filed in the last two weeks. Furthermore, 6.79 million Americans filed continuing jobless claims in the week ended October 31st, comparing favorably with market expectations of 6.90 million and marking the lowest level since the pandemic began. All told, as of October 24th, 21.157 million Americans are receiving some fort of Federal assistance, down from 21.531 million in the previous week.

Additional Themes

Fed Nominee Shelton Faces Tough Odds – With the Senate now on recess until November 30th, and the potential for the balance of the Senate to shift with Democrat Mark Kelly being sworn in that day to replace Martha McSally after winning the race in Arizona, Judy Shelton’s nomination to the Fed Board is in jeopardy. For context, the process to confirm her was stalled in the Senate on Tuesday after Vice President-elect Kamala Harris returned to the chamber to cast a key vote today as two key Republicans were absent because of exposure to Covid-19. The other nominee under consideration, Christopher Waller, has broad support and is expected to be confirmed. Analysts have begun to speculate about which candidates the incoming Biden administration might consider if Shelton’s nomination falters and they have the chance to fill the vacancy. – MPP view: This would be a windfall for the Biden White House, particularly given the importance of Fed-Treasury coordination going forward. Even if her nomination fails, the Shelton precedent remains a signal to future administrations to get “your people” onto the FOMC to have your back.   

Turkish Lira Spikes on Rate Hikes – Turkey’s volatile currency is up 1.8% versus the dollar this morning, extending its recovery from late September’s all-time low, as the newly installed central bank governor implemented a 475 basis point interest rate hike to 15% at his inaugural meeting. President Erdogan has sent mixed messages regarding his support for the program of the newly installed economic team, and has a track record of interfering with central bank independence and advocating unorthodox economic theories. – MPP view: Emerging market assets have generally received a positive impetus from the Biden win, as he is assumedly more constructively engaged in international cooperation and development goals, along with the boost from a weaker dollar (please see our Market Viewpoints piece on EM from November 8th).    

Morning Markets Brief 11-17-2020

Summary and Price Action Rundown

Global risk assets are pausing their recent rally this morning as investors continue to grapple with questions over the timeline and dynamics of a vaccine rollout while the near-term picture remains grim as the pandemic’s autumn wave continues to accelerate. S&P 500 futures indicate a 0.6% lower open after the index posted a fresh record high yesterday, gaining 1.2% today with growth-sensitive stocks remaining in the lead, to hoist its year-to-date upside to 12.3%. Equities in the EU are similarly retracing a portion of their recent upside, while Asian stocks were mixed overnight. A broad dollar index is sliding to a new multi-year low, while longer-dated Treasuries are rallying modestly, with the 10-year yield descending to 0.88%. Brent crude is fluctuating below $44 per barrel as traders look ahead to the month-end OPEC+ meeting.

 

Vaccine Optimism Contends with Near-Term Covid-19 Uncertainties

Markets are digesting yesterday’s latest announcement of highly encouraging vaccine data and pondering whether it is too early for the prevailing pandemic market trends to go fully into reverse. US stock indices soared to record highs yesterday after Moderna announced that its experimental coronavirus vaccine is 94.5% effective at preventing infection, according to recent results from its large-scale Phase 3 trial. Moderna is the second company to announce preliminary data on an apparently successful product, following Pfizer and BioNTech’s announcement last Monday that its experimental dose is 90% effective. Analysts also note that Moderna’s vaccine remains stable without the deep freeze required for Pfizer’s doses, easing the logistical burden of rollout. Meanwhile, Pfizer announced a four-state pilot program for distribution of its vaccine in New Mexico, Rhode Island, Tennessee, and Texas,

After yesterday’s announcement, “stay-at-home stocks” slipped, with shares of Zoom, Netflix, Logitech, and Teladoc down 1.1%, 0.8%, 0.3%, and 3.4%, respectively, while those stocks that have struggled during the pandemic rose, with AMC, Norwegian Cruise Lines, and Royal Caribbean climbing 4.7%, 6.3%, and 6.9%, respectively, and all major airline carriers posting robust gains as well. However, these price responses were considerably milder than after Pfizer’s announcement last Monday and there appears to be scant follow-through today, as tech-heavy Nasdaq futures are higher while S&P 500 and Dow Industrials futures are down. This speaks to the dilemma for equity investors, who are seeing the relative appeal of the pandemic winners lessened by the vaccine news but are concerned that it is still premature to aggressively rotate to those sectors more impacted by Covid-19 given the near term resurgence in infections and relatively lengthy timeline for vaccine rollout even under the most optimistic scenarios.

US Economic Data in Focus

Although official data remains relatively resilient, this morning’s retail sales and industrial production data for October will be scrutinized for signs of backsliding. The pace of US retail sales growth in October is expected to decelerate to 0.5% month-on-month (m/m) from 1.9% in September, with the core reading that strips out autos and gasoline similarly forecast to register 0.6% versus 1.5% the prior month. These estimates for a more sober pace of consumer demand comes as high-frequency indicators, such as restaurant and travel bookings, are showing incipient signs of rolling over in recent weeks, corresponding with the nationwide surge in coronavirus cases. Analysts are pondering the degree to which the grim backdrop of the pandemic and lingering economic impact will affect holiday shopping season. Meanwhile, industrial production for October is estimated at 1.0 m/m%, which would be an improvement over September’s -0.6% reading. While manufacturing has generally held up better than service sectors during the pandemic, there have been some regional disparities. Yesterday’s release of the New York Fed’s factory gauge for November showed a slower-than-anticipated pace, printing 6.3 versus a consensus forecast of 13.5 and the previous month’s reading of 10.5. Overall, US economic indicators have evidenced resilience in recent months despite the resurgence of Covid-19 and the dwindling of fiscal support measures enacted by Congress in the spring.

Additional Themes

Pound Advances on Brexit Deal Hopes – The pound is up 0.5% versus the dollar this morning and 0.3% against the euro amid reports that negotiators from the UK and EU may be nearing a deal, with a prospective announcement possible as early as Monday. UK negotiators, however, cautioned that a breakdown in talks remains a risk, as the key points of contention over fishing rights and the “level playing field” businesses have yet to be fully resolved. Friday is seen to be a critical day as EU Chief Negotiator Barnier is set to present his progress report to EU leaders after which Prime Minister Johnson is potentially set to call European Commission President von der Leyen, pending confirmation.

Fed Nominee Shelton Faces Key Vote – After Senate Majority Leader McConnell initiated the process of confirming Judy Shelton to the Federal Reserve Board of Governors last week, she faces a procedural vote today. Shelton was one of President Trump’s nominations to the Fed’s Board, alongside Christopher Waller, though following her nomination 17 months ago, Shelton has not been able to garner enough support in the Senate to win confirmation. Senators on both sides of the aisle had criticized Shelton’s policy views for being well outside the mainstream, including her advocacy of the gold standard and questioning central bank independence. Other critics have pointed to her apparent willingness to abandon long-held views in order to conform to prevailing policy preferences of the Trump administration in an effort to secure her nomination, with Democrats flagging her supposed loyalty to President Trump after her work as an informal advisor to his campaign in 2016. Though upon Joe Biden’s victory, Senate Republicans appear to have reevaluated the nomination and are likely to vote next week. Senators Romney, Collins, and Alexander are the three Republicans in the chamber who have publicly opposed Shelton’s nomination, though with Alaska Senator Lisa Murkowski’s recent affirmation of support, Shelton may finally have enough support to move forward.

Morning Markets Brief 11-9-2020

Summary and Price Action Rundown

Global risk assets are surging this morning as the positive impulse from easing US political uncertainty has been further boosted by exceptionally positive news on the Covid-19 vaccine front. S&P 500 futures indicate a 3.6% jump at the open, which would add to the 7.4% rally last week that upped the index’s year-to-date gain to 8.7%, only 2.0% below early September’s record high. Equities in the EU are also soaring while Asian shares were mixed overnight. With risk appetite in ascendance, a broad dollar index is dipping to a new multi-year low, while longer-dated Treasuries are climbing, with the 10-year yield back at multi-month highs of 0.92%. Brent crude is surging toward $43 per barrel this morning as the demand outlook brightens.

 

US Political Uncertainty Eases as Biden Named President-Elect

Concerns over a breakdown of the rickety US electoral process and civic unrest amid extreme partisan pressures have been allayed as the slow but steady process ultimately resolved into a relatively clear-cut victory for Biden/Harris, although President Trump continues to dispute the result. Major news outlets called the election for Democratic candidate Joe Biden after he was declared the winner in Pennsylvania and Nevada early on Saturday, securing 279 electoral votes versus President Trump’s current tally of 214. Final results in the presidential race are still pending in North Carolina, Georgia, Arizona, and Alaska though with Biden already beyond the 270 electoral votes needed to win, these results are largely academic. Biden and Harris delivered their victory speeches on Saturday night, with the President-Elect calling for national unity and announcing the formation of a coronavirus task force to coordinate a federal-level response to the worsening pandemic. President Trump has declined to concede the race and vowed to continue an array of legal challenges, seeking overturn the result while making unsubstantiated allegations of ballot fraud and unfounded declarations of victory. On the Senate front, the balance currently stands at 48-48 between the two parties. The contests in North Carolina and Alaska are expected to deliver wins to the GOP candidates, though counting is still ongoing. That puts Georgia’s two races firmly in the spotlight, as Republican frontrunner David Perdue’s vote share has slipped below 50%, resulting in two run-off elections in January for the state’s two Senate seats. The outcomes of these elections are therefore set to decide control of the Senate. While Biden may win Georgia, both Perdue and Senator Loeffler will be favored against their Democrat opponents, with a win for either keeping control of the Senate in Republican hands. – MPP view: Our base case had long been for narrow and disputed results in the presidential race and key Senate contests, with uncertainty dragging on beyond election day. And though this is how events played out over the past week, it is a great relief to us, and to financial markets, that the worst case scenario of a breakdown of our obviously creaky electoral system accompanied by major civic unrest has been avoided (thus far, at least). Meanwhile, uncertainty persists over control of the Senate, with significant policy implications, the most immediate of which is the pandemic relief bill. We expect a small lame duck session stimulus and a somewhat larger deal post-election but do not expect a GOP-controlled Senate (our base case) to go above the $500 billion level of their proposed bills, particularly since the vaccine news may be showing us the light at the end of the pandemic tunnel.

Covid-19 Vaccine News Lifts Market Spirits

With the pandemic resurgence accelerating in the US, EU, and UK, this morning’s disclosure from Pfizer and BioNTech that its vaccine trials are yielding highly encouraging results is boosting investor sentiment. The drug giants have announced that their third stage vaccine trial is indicating 90% effectiveness with no serious safety concerns, with analysts expressing surprise and elation at such a positive announcement. For context, a Covid-19 vaccine was generally expected to be 60-70% effective, with the possibility that it would be even lower, like a seasonal flu vaccine, which can be merely 40% effective. The Pfizer/BioNTech trial is continuing and other biotech firms working on vaccines are expected to announce their results in the coming days or weeks as well. Pfizer has estimated that it will have 50 million doses available before the end of the year and 1.3 billion doses distributed in 2021, though each individual vaccination requires two doses. – MPP view: Outstanding news! Pending further details and additional confirmation, this is better than we dared hope. Time of rollout and degree of public uptake are key variables, and it will be a delicate policy balance to deploy sufficient stimulus and rebuild trust in the scientific community in order to facilitate deployment.

Additional Themes

Earnings Season Wraps Up – Third quarter earnings season is winding down after providing scant direction to equities. This week, a smattering of earnings reports remains on the calendar, including McDonald’s, Beyond Meat, Lyft, DR Horton, and Disney. With 448 of the S&P 500 corporates having reported, 83.2% of results have featured a positive earnings-per-share (EPS) surprise and 75.9% have topped revenue estimates, far exceeding typical rates of outpacing consensus. But since the start of reporting season, the S&P 500 had been down 0.7% going into today’s session and price action has been driven primarily by macro factors.

Oil Prices Vault Higher – With the Covid-19 vaccine news lifting growth-sensitive asset prices, crude prices are jumping this morning as the prospect of a widely available and effective vaccine brightens the demand picture. This comes as Saudi’s energy authorities have been gearing up for another contentious OPEC+ meeting later this month at which they were likely to push for a pause in plans to taper the cartel’s supply curbs despite apparent slippage in discipline among some members. The positive prospects for a near-term vaccine, however, may allow OPEC+ to continue on its current supply increase trajectory without sinking oil prices.

Morning Markets Brief 10-21-2020

Summary and Price Action Rundown

Global risk assets are trading with a cautious tone this morning as investors continue to monitor US stimulus negotiations and digest mixed earnings reports. S&P 500 futures indicate a 0.2% lower open after the advanced 0.5% yesterday, upping the index’s year-to-date gain to 6.6%, which is 3.9% below early September’s record high. Equities in the EU are underperforming while Asian shares were mixed overnight. The dollar is sliding back toward recent lows while longer-dated Treasury yields are continuing higher within their recent range, with the 10-year yield at 0.80%. Brent crude prices remain choppy around $42 per barrel after the OPEC ministerial meeting earlier this week produced few headlines.

Pre-Election Stimulus Hopes Waver as Differences Persist

Thought House Speaker Pelosi has downplayed her self-imposed deadline of yesterday and talks are continuing today, mixed signals are dampening optimism for a pre-election pandemic relief package. With time running short for House Democrats and the White House to successfully bridge their key differences over stimulus bill terms before the election, Speaker Pelosi has signaled that she will continue negotiating through the end of the week rather than hold to her deadline of this evening. Speaker Pelosi and Secretary Mnuchin continued their talks yesterday, though no deal was finalized, and are set to meet again today. White House Chief of Staff Meadows made encouraging statements on CNBC after the closing bell, characterizing the two sides as narrowing their differences and Speaker Pelosi continued to express optimism. Senate Majority Leader McConnell, however, has reportedly been warning the White House against making a deal with House Democrats prior to the election when his priority is confirming Amy Coney Barrett to the Supreme Court. Yesterday, McConnell stated he would bring a comprehensive coronavirus bill to the Senate floor should an agreement be reached, though it is not clear whether there would be sufficient support from the GOP caucus to pass it. Meanwhile, the Senate will vote on a bill that would reallocate unused funds from the March stimulus package to resume the Paycheck Protection Program and support small businesses. Today, the Senate will also vote on a $500 billion broader stimulus package, though Democrats are expected to block both from passing.

Earnings Reports Continue to Provide Scant Support for Stocks

Amid broadly mixed results for the third quarter (Q3), the high-profile disappointment for Netflix after yesterday’s closing bell is not spilling over into broader sentiment. Shares of Netflix are down 5.3% in pre-market trading after the streaming giant added fewer subscribers than expected and guided for a lower number of subscribers in the upcoming quarter. With so-called “stay at home” stocks like Netflix leading the rebound for US equity indexes over the past six months, some analysts are suggesting that this downbeat result is another sign that despite the persistence of Covid-19, the advantage of the pandemic’s corporate “winners” might be waning. However, shares of Snap are surging, with a 23.2% gain in early trading, after the company impressed analysts with its strong sales figures after yesterday’s closing bell. Proctor & Gamble also beat estimates yesterday and posted moderate gains. Today, Tesla, Verizon, CSX, and Chipotle will issue results, with AT&T, Intel, American Airlines, Coca-Cola, and American Express reporting through the remainder of the week. With 75 of the S&P 500 corporates having reported, 86.7% of results have featured a positive earnings-per-share (EPS) surprise and 72.0% have topped revenue estimates, though these impressive upside percentages have failed to provide support to reporting company share prices, which have mostly declined following results.

Additional Themes

Google in the Antitrust Crosshairs – The Department of Justice (DoJ) announced its intent to file an antitrust lawsuit yesterday against Google, claiming the IT behemoth has engaged in conduct aimed at preserving a monopoly in search and search-advertising services, but its share price closed higher nonetheless and is rising in pre-market trading as well. The filing marks the most aggressive antitrust challenge by the US government in more than two decades, marking a significant shift from policymaker attentiveness to active pursuit of tech giants that have long been identified as suspects of monopolistic practices. Eleven states will join the federal government’s complaint which follows a year-long probe by DoJ investigators and a major congressional report finding that Google and other tech giants have wielded their dominance in anticompetitive ways.

Brexit Headlines Spur the Pound – The UK currency is up 0.8% versus the dollar this morning after EU Chief Brexit Negotiator Barnier made upbeat comments on the prospects for a deal and highlighted the EU’s “respect of British sovereignty.” These remarks drew a positive response from financial markets and also the UK government, with a spokesperson welcoming the ingratiating rhetoric.

Morning Markets Brief 10-20-2020

Summary and Price Action Rundown

Global risk assets are moving higher this morning as investors ponder US stimulus prospects and await key earnings figures. S&P 500 futures point to a 0.6% higher open after the index lost 1.6% yesterday, paring the index’s year-to-date gain to 6.1%, which is 4.3% below early September’s record high. Equities in the EU are flat while Asian shares were mixed overnight. The dollar is steadying near recent lows while longer-dated Treasury yields are edging higher within their recent range, with the 10-year yield at 0.78%. Brent crude prices remain choppy around $42 per barrel after yesterday’s OPEC ministerial meeting produced few headlines.
11th Hour Fiscal Stimulus Push Comes Down to the Wire

Though investors remain focused on the base case of another round of pandemic relief spending after the election, intensifying efforts to reach a deal before tonight’s deadline are likely to keep equity market volatility elevated. House Speaker Pelosi and Treasury Secretary Mnuchin proceeded with further stimulus negotiations yesterday afternoon and are set to talk again today ahead of Pelosi’s stated deadline of this evening to secure a pre-election package. Earlier this month, House Democrats had passed a $2.2 trillion package which has received stark criticism from Republicans. Likewise, the White House’s $1.8 trillion proposal fell short of the Democrats’ target. Over the past few weeks, Pelosi and Mnuchin have struggled to reach a compromise, with state and local government aid, liability protections, coronavirus funding, and tax credits as some of the major sticking points. President Trump has stated recently that he is in favor of a higher-value deal, and has even expressed his readiness to match (or exceed) Democrats’ $2.2 trillion offer. Analysts remain skeptical, however, that Senate Republicans would agree in sufficient numbers ahead of such a high-stakes election when President Trump is meaningfully lagging in the polls. Nonetheless, on Sunday, the President voiced his confidence that members of his party will sign on in support, regardless of many Republican Senators having publicly expressed staunch opposition to a multi-trillion dollar package. Senate Majority Leader Mitch McConnell is preparing a vote on repurposing the money left over in the Paycheck Protection Program and is expected to propose a narrower $500 billion coronavirus stimulus deal to the Senate, though neither stands a chance of passing the House given how the last $650 billion Senate version bill was received by Democrats.

More Mixed Earnings Provide Scant Direction to Equity Markets

High-profile reports today may help set the tone for the remainder of earnings season. After the first week of third quarter (Q3) earnings season, which features results from US megabanks, provided upside surprises on headline numbers but elicited nuanced market reactions, this week’s earnings feature a wider sector variation, including tech and consumer goods. Halliburton and IBM reported yesterday, before the opening bell and after closing bell, respectively, with their upside surprises in both sales and earnings providing little support for their share prices. Oilfield services giant Halliburton showed easing losses in its report, but its stock price closed lower as yesterday’s selloff intensified, while IBM beat estimates after the closing bell owing to the strength of cloud computing business, though its stock is down 2.8% in after-hours trading following uncertain guidance from management for future quarters. Today features results from Procter & Gamble, Netflix, Snap, Texas Instruments, and Travelers, while Tesla, Verizon, CSX, Chipotle, AT&T, Intel, American Airlines, Coca-Cola, and American Express report through the remainder of the week. With 58 of the S&P 500 corporates having reported, 86.2% of results have featured a positive earnings-per-share (EPS) surprise and 69.0% have topped revenue estimates, though these impressive upside percentages have failed to provide support to reporting company share prices, which have mostly declined following results.

Additional Themes
People’s Bank of China (PBoC) Holds Steady Despite Renminbi Strength – As anticipated, the PBoC left its Loan Prime Rate (LPR) unchanged for the sixth straight month overnight, with the one-year LPR at 3.85% and the five-year LPR 4.65%. This comes after the release of an encouraging set of September data over the weekend, featuring upside surprises in retail sales and industrial production. With China’s recovery gathering pace and the central bank continuing to refrain from aggressive monetary easing measures being enacted by its global peers, the renminbi is unsurprisingly trending stronger. Today’s slight gain has taken the Chinese currency to its highest level versus the dollar since early July 2018.

Australian Dollar Reacts to RBA Easing Hints – The Australian dollar is down 0.5% versus its US counterpart this morning, as the currency continues to descend from its nearly two-year high, as traders seize upon remarks by a Reserve Bank of Australia (RBA) official hinted at the possibility of resorting to negative interest rate policy (NIRP). Specifically, RBA Assistant Governor Kent discussed the prospects for further easing, and noted that NIRP was possible. The Bank of England has made similar references to the possibility of negative rates.

Morning Markets Brief 10-19-2020

Summary and Price Action Rundown

Global risk assets are rallying this morning amid possibly brighter US stimulus prospects and solid Chinese economic growth figures. S&P 500 futures indicate a 0.8% higher open after the index closed flat on Friday as tech stocks lagged, holding its weekly performance at 0.2% and its year-to-date gain at 7.8%, which is 2.7% below early September’s record high. Equities in the EU are modestly higher while Asian shares were mixed overnight. The dollar is sinking lower while longer-dated Treasury yields are rising within their recent range, with the 10-year yield at 0.77%. Brent crude prices remain choppy around $42 per barrel.

Fiscal Stimulus Remains in Focus Amid Last Minute Deal Push

With the prospects for post-election fiscal stimulus a key factor for investor sentiment, House Speaker Pelosi’s final offer over the weekend and President Trump’s pro-stimulus rhetoric are helping support this morning’s rally. After continuing talks with Treasury Secretary Mnuchin over the weekend, Speaker Pelosi indicated that any pre-election stimulus deal would need to approved by tomorrow and made no indication that she was altering the position of House Democrats on the $2.2 trillion package they passed into law earlier this month. President Trump, however, has shifted his rhetoric on the size of the package, stating in a campaign stop in Nevada over the weekend that he wants “a bigger number than [Pelosi] wants” and suggesting that he would be able to marshal enough GOP support on Capitol Hill to pass an upsized bill. Analysts remain skeptical, however, that Senate Republicans would agree in sufficient numbers ahead of such a high-stakes election when President Trump is meaningfully lagging in the polls. Consequently, investors remain focused on post-election scenarios for stimulus, but these latest developments still provide some slim hope of more prompt agreement and suggest that in the case that no pre-election stimulus deal is reached and President Trump wins reelection, he will push swiftly for a higher number for the bill.

Earnings Season Enters Its Second Week After a Mixed Start

Investors remain attuned to income reports after the first week of third quarter (Q3) earnings season provided upside surprises on headline numbers but elicited nuanced market reactions. Corporate earnings season thus far has provided little direction to equity markets despite a preponderance of better-than-expected earnings and sales results. Roughly 10% of S&P 500 companies issued results, the majority coming from financials including leading US banks, among which a notably high 86% exceeded earnings per share (EPS) estimates in Q3, and by a wider margin than average. Meanwhile the year-on-year decline remains the second steepest for a quarter since the 2008 Financial Crisis at -18.4% at this week’s close. Meanwhile, 82% of S&P 500 companies that have reported thus far have seen actual revenues exceed estimates by an average of 3.6%, well above the five-year average of 61% of companies. This week’s earnings feature a wider sector variation than the bank-heavy week one, including tech and consumer goods, with Halliburton and IBM reporting today and Procter & Gamble, Netflix, Snap, Tesla, AT&T, Intel, and Coca-Cola through the rest of the week.

Additional Themes

Chinese Growth Data Shows Improvement – Chinese equities were mixed overnight but the renminbi continued to strengthen versus the dollar, registering its strongest level since July 2018, after key mainland economic readings provided an encouraging picture of the ongoing recovery. The 4.9% Q3 GDP growth print was slightly lower than estimates of 5.5% but still reflected improvement from 3.2% the prior quarter, and the latest data from September was even more upbeat. Industrial production grew 6.9% year-on-year (y/y) versus 5.8% expected and 5.6% the prior month, while retail sales also surprised to the upside at 3.3% y/y versus a forecast of 1.6% and an August reading of 0.5%. Fixed asset investment for September was nearly in-line with projections at 0.8% year-to-date after the -0.3% reading for the prior month.

Oil Prices Rangebound as OPEC Meets – Today’s ministerial meeting precedes the broader summit on December 1st, when the cartel and its allies will revisit their plans for ongoing supply restrictions, which have been incrementally loosened over recent months and are expected to be reduced again at year-end. The decision to ease off the tightest level of curbs has been accompanied by the Saudis and Russians adopting a hard line on compliance with the remaining commitments, castigating members that have lagged their output cut quotas. In a feisty press conference at the mid-September monitoring committee meeting, the Saudi oil minister warned that speculators betting on lower crude oil prices would be “ouching like hell.” This comes amid reports that renewed output from Libya is already at 500K barrels per day.

Morning Markets Brief 10-15-2020

Summary and Price Action Rundown

Global risk assets are extending their recent downtrend this morning as muddled earnings, lingering US political and policy uncertainty, and the Covid-19 resurgence continue to dampen investor spirits. S&P 500 futures indicate a 1.0% decline at the open after the index shed 0.7% yesterday, paring its year-to-date gain to 8.0%, which is 2.6% below early September’s record high. Equities in the EU are underperforming as Covid-19 containment measures are reinstated in major regional cities, while Asian shares posted more moderate losses overnight. Boosted by safe haven demand, the dollar is rallying from multi-year lows while longer-dated Treasury yields continue to descend below recent highs, with the 10-year yield at 0.70%. Brent crude prices are also retreating but remain within their recent range, trading above $42 per barrel.

Early Earnings Reporting Season Drawing a Mixed Market Reception

Third quarters (Q3) corporate earnings reporting season continues today, as Morgan Stanley closes out the results from US megabanks, which have been broadly uneven. Yesterday, Bank of America, Goldman Sachs, and Wells Fargo reported their third quarter earnings results with Goldman Sachs outperforming. The megabank reported an earnings-per-share (EPS) of $9.68, trouncing estimates by $4.24, and revenue climbed to $10.78 billion, a nearly 30% increase from one year ago. As with the prior quarter, the upside was driven by trading revenues, with fixed income, currencies and commodities (FICC) revenue climbing 49% and equities trading grew by 10%. Additionally, asset management increased 77%, wealth management by 13%, and investment banking grew 7%. With Goldman primarily focusing on trading, asset management, and investment banking, the need for credit loss provisions is typically smaller, relative to its peers. Goldman increased provisions by $278 million, less than expected, though falling in the same range as other reporters thus far. However, despite the strong performance, shares of Goldman closed mostly flat on the day. Meanwhile, shares of Bank of America fell 5.3% after the bank narrowly beat earnings estimates but fell short of revenue projections. Performance was particularly impacted by shortfalls in net interest income (NII), which declined 16.9% from last year. After yet another disappointing quarter for the bank, executives remain upbeat, as CFO Paul Donofrio stated “Q3 likely will be the bottom for NII and we are optimistic it will move higher in 2021.” Wells Fargo stock fell 6.0% after it too reported a notable decline in NII by nearly 19%. On the positive side, fee income was stronger, mortgage banking grew just over 400% from last quarter, and credit loss provisions of $769 million were well below estimates. So far, megabank results are echoing themes from last quarter, with trading-intensive banks reaping significant returns, and consumer-facing banks falling short as the low rate environment poses a major headwind for NII. Yesterday, the KBW Bank Index closed down 1.8% on the day to deepen its year-to-date loss to 32.2%. This morning, Morgan Stanley will release its Q3 earnings, closing out the US megabank reports.

Significant US Growth and Labor Figures in Focus

Today’s initial jobless claims data kicks off a series of notable US economic releases before the weekend. Initial jobless claims are expected to settle to 825K in the week ending October 10th after posting 840K in the week ending October 3rd, which topped market forecasts by 20K and represented only a slight downtick from the prior week’s upwardly revised 849K figure. This week’s reading is projected to mark the seventh consecutive week that claims remained in the 800K’s territory, roughly four-times the pre-pandemic level, suggesting the labor market has made limited overall improvement amid waning fiscal support. Continuing claims last week fell to 10.98 million in the week ending September 26th, a nearly 1 million drop from the prior week’s report, and registered below market consensus of 11.40 million. The reading marked the lowest level since early April when the effects of the coronavirus pandemic had just started to coalesce. Outside of state programs, Pandemic Unemployment Assistance (PUA) data totaled to 464K in the week ending October 3rd, a 44K decline from the prior report’s figure which underwent a significant downward revision. Total persons claiming unemployment benefits under all programs fell by 1 million to 25.5 million in the week ending September 19th. Also due today are October’s regional manufacturing indexes for New York and Philadelphia, followed by tomorrow’s US September industrial production number, which is expected to show a modest acceleration. Perhaps most importantly, the health of the US consumer will be in focus with tomorrow’s release of September retail sales data and the U. Michigan consumer sentiment gauge for October, with both expected to reflect broad stability at solid levels.

Additional Themes

Covid-19 Resurgence – EU and UK equity indexes are down 2-3% this morning amid rising investor concerns that the second wave of the coronavirus outbreak will reverse the ongoing economic recovery in the region. Both London and Paris are implementing more severe restrictions, though these fall short of the full-scale lockdowns that were prevalent last spring at the outset of the pandemic.

US Political Uncertainty Remains Elevated – With the second presidential debate cancelled following President Trump’s refusal to take part in a virtual version of the event, both candidates will appear in competing “town hall” discussion formats this evening, with Biden on ABC and President Trump on NBC. Some commentators are critical of NBC’s airing of the Trump town all at the same time as the previously scheduled Biden event, denying some viewers the opportunity to view both. Polls remain steadily in favor of Biden, though investors maintain broad skepticism of their accuracy. Equity volatility futures, while moderating over the past week, still reflect expectations of heightened stock market turbulence around the election and for the months that follow.

Morning Markets Brief 10-14-2020

Summary and Price Action Rundown

Global risk assets are struggling for direction again this morning as the recent rally pauses amid key corporate earnings reports and lingering political and policy uncertainty. S&P 500 futures point to a flat open after the index declined 0.6% yesterday, paring its year-to-date gain to 8.7%, which is 1.9% below early September’s record high. Equities in the EU and Asia were mixed overnight. The dollar is stabilizing near multi-year lows while longer-dated Treasury yields continue to slip below multi-month highs, with the 10-year yield at 0.72%. Brent crude prices remain choppy above $42 per barrel as demand concerns remain a headwind.

Earnings Reporting Season Continues with Reports from US Megabanks

Corporate earnings reporting season kicked off in earnest yesterday, as upside surprises from key US megabanks failed to impress investors. Yesterday, JPMorgan and Citigroup kicked off the third quarter earnings season as both US megabanks topped earnings and revenue expectations, but their stocks closed lower amid lack of upside catalysts for the coming quarters. JPMorgan reported an earnings-per-share (EPS) value of $2.92, topping consensus projections by $0.73 and recording a 9% increase from Q3 2019. Revenues totaled to $29.15 billion, a 3% decline from one year ago. JPMorgan saw significant total trading growth of 30% as investment banking revenue rose 12% to $2.1 billion, the fixed income division’s revenues surged 29%, and equities were up by 32%. Importantly, credit loss provisions rose by only $611 million, falling well short of the $2.88 billion forecast and a trivial comparison to the $10.47 billion injection during the second quarter. The move suggests that the bank may be projecting less-than-expected loan defaults moving forward. The increased trading revenues, lower provisions, and healthy deposit growth all offset lower-than-expected revenues from net interest income (NII), which has struggled to yield healthy revenues in the low interest rate environment. Citigroup reported earnings of $1.40 and revenue of $17.3 billion, and also saw its growth driven by higher trading volume and lower credit loss provisions. Fixed income trading activity increased 18% from last year, and equity trading grew by 15%. Citigroup added just $314 million to credit loss reserves, compared to $5.6 billion last quarter. The bank’s initiative to expand branches in the US proved fruitful last quarter, with North America-based deposits climbing 19%. In other reports yesterday, Delta Airlines reported a quarterly net loss of nearly $5.4 billion and reiterated the continued presence of industry shortfalls. Travel demand remains about 70% below the same time last year, and the carrier said it would delay the purchase of aircraft to better suit its outlook. Today, Bank of America, US Bancorp, Wells Fargo, and Goldman Sachs report earnings, with Morgan Stanley issuing its results tomorrow.

UK Backs Away from Brexit Bluff

The pound is stabilizing this morning after reports have indicated that Prime Minister Johnson will not abruptly pull out from Brexit negotiations with the EU at his self-imposed deadline of tomorrow to secure a deal. Citing an unnamed source, the articles suggest that the UK government will continue to negotiate over the coming days and will likely reassess their progress after the EU leaders’ summit. PM Johnson and European Commission President von der Leyen are scheduled to speak today, though no breakthroughs are expected. EU negotiators and leaders, including German Chancellor Merkel, emphasize that key hurdles remain and consensus is insufficient for terms to be considered at the upcoming EU leaders’ summit, which begins tomorrow. PM Johnson has employed brinksmanship in his Brexit negotiations to decent effect and has signaled that he is prepared to take the UK into a no-deal Brexit at year-end. The UK pound, which has served as a barometer for the fortunes of Brexit, is rangebound against the weakening dollar but is hovering barely above five-year lows versus the euro, suggesting a disparity of leverage in these negotiations. Fishing rights remain a key sticking point, along with treatment of Northern Ireland and UK business subsidies.

Additional Themes

Fate of Fiscal Stimulus Hinges on US Election – Yesterday, Majority Leader McConnell indicated that he is preparing a Senate vote next week on another “skinny” stimulus package, this time focused on replenishment of the Payroll Protection Program (PPP), which disburses funds to small businesses. House Speaker Pelosi predictably rejected this approach, while President Trump tweeted “Go big or go home!!!” in response. For context, President Trump announced last Tuesday that he was pulling out of stimulus talks after weeks of prevarication, and then abruptly pivoted to offer a $1.8 trillion deal last Friday, to which the reception has been cool.

Snags in Covid Treatment Trials – Markets were rattled yesterday by a surprise announcement from Johnson & Johnson indicating that a patient in its vaccine trial had become unexpectedly sick, causing a halt to the testing program for the time being. Shares of the pharma giant fell 2.3%. This came ahead of today’s announcement that Eli Lilly’s vaccine trial is also on hold now over health concerns, which sent its shares 0.8% lower in pre-market trading. Such pauses are considered typical in drug trials, and AstraZeneca’s trial was delayed in early September after a subject fell ill. Analysts continue to ponder the outlook for a vaccine, with the base case roughly approximating a partially effective vaccine by next spring.