1. Stocks Rise, Bonds Dip Amid Hope for Stimulus Deal
Global stocks approached another record high as hopes for a U.S. stimulus deal countered fears about resurgent coronavirus cases. Benchmark Treasuries and the dollar slipped for the first time this week. Health-care and banking shares led gains in Europe after equities rose across much of the Asia Pacific. Global equities were energized by the White House’s surprise re-entry into pandemic-relief talks with a $916 billion proposal that opened a potential new path to a year-end deal. S&P 500 futures edged up. Nasdaq 100 contracts slipped following the gauge’s 10th straight gain.
The Stoxx Europe 600 Index climbed 0.7% as of early morning New York time.
Nasdaq 100 Index futures sank 0.1%.
Futures on the S&P 500 Index climbed 0.2%.
The MSCI Asia Pacific Index gained 0.8%.
2. White House Return to Stimulus Talks Boosts Chance of a Deal
Treasury Secretary Steven Mnuchin made a surprise re-entry into talks on a 2020 pandemic-relief package with a $916 billion proposal that opened a potential new path to a year-end deal despite objections from Democrats over elements of the plan. After largely leaving the task to Senate Majority Leader Mitch McConnell since Election Day, Mnuchin pitched a $916 billion stimulus plan to House Speaker Nancy Pelosi in a Tuesday afternoon telephone call. The Mnuchin plan differs in important ways from the alternative that Pelosi and Schumer endorsed as a basis for fresh talks. It includes $600 stimulus payments to individuals, which could win support from both Republicans and Democrats.
3. China State-Backed Covid Vaccine Has 86% Efficacy
China’s state-backed coronavirus vaccine protected 86% of people against Covid-19 in trials conducted in the United Arab Emirates, giving credence to the quickly developed shot that Beijing intends to distribute around the developing world. The data was from trials that included 31,000 volunteers in the UAE, which found the vaccine was highly effective in preventing moderate and severe cases of Covid-19 and had no serious safety concerns. That’s expected to pave the way for full public use of the vaccine and a re-opening of the Gulf nation’s economy. In an early sign of how the vaccine could be a gamechanger to “resume all activities within two weeks” including economic, tourism and cultural operations.
4. DoorDash Set for Trading Debut After IPO Raises $3.37 Billion
DoorDash is making its trading debut Wednesday after raising $3.37 billion in an initial public offering with Airbnb’s IPO set to follow within hours. San Francisco-based DoorDash sold 33 million shares Tuesday for $102 each after marketing them for $90 to $95 each. The company has a fully diluted value of about $38 billion, which includes employee stock options and restricted stock units as detailed in its filings. DoorDash’s IPO is the third-largest U.S. listing this year. The food delivery company is part of a cadre of consumer-facing, web-based businesses that have successfully navigated the coronavirus pandemic and are expected to go public this month.
5. Tesla Shares Are Dramatically Overvalued : JPMorgan
Tesla’s shares are now “dramatically” overvalued and investors thinking of raising their holdings in the company ahead of its impending addition to the S&P 500 Index should not, JPMorgan analyst Ryan Brinkman wrote in a note on Wednesday. The analyst pointed out that in the past two years Tesla shares have risen over 800%. Analysts have raised their price targets by about 450%, and also simultaneously lowered their earnings estimates for the company for the years 2020 through 2024. This data is “strongly suggestive of the idea that something apart from the fundamentals (speculative fervour?) is driving the shares higher,” Brinkman added.
6. Ray Dalio Sees ‘Flood of Money’ With Soaring Asset Prices
Ray Dalio stressed the importance of diversification in a Reddit Ask Me Anything event on Tuesday where he said that a “flood of money and credit” was unlikely to recede. “Assets will not decline when measured in the depreciating value of money,” the billionaire investor told users of the discussion network who asked for his perspective on where financial markets are headed. “I believe that with the enormous amount of debt and money that has been created and will be created in the future, the most important thing to pay attention to is the value of debt and money relative to the value of assets and other currencies.” Dalio added that he saw no reason that stocks couldn’t trade at 50 times earnings and recommended “smart diversification” among asset classes, currencies and countries.
7. Johnson Says No U.K. Leader Could Accept EU Terms: Brexit Update
Boris Johnson said no British prime minister could accept the European Union’s Brexit demands as he prepared to head to Brussels for a showdown with the European Commission’s Ursula von der Leyen on Wednesday. The premier’s team hopes the face-to-face conversation with the Commission president will inject political impetus into the deadlocked process. If the dinner goes well, negotiators could be back in a room hammering out the details within hours. If it goes badly, officials on both sides fear the chances of an agreement being ready before the end of December — when the Brexit transition period expires — will fade away.
8. JPMorgan Says Equities to Get a $1.1 Trillion Boost Next Year
Those with a bullish outlook for stocks in 2021 are set to get another uplift: more demand and less supply to the tune of $1.1 trillion. That’s the conclusion of global market strategists at JPMorgan Chase & Co. as they expect a rise in equity demand of about $600 billion relative to this year. Meanwhile, supply will drop by $500 billion, returning to the very low levels of 2016 to 2018. “This is similar to the equivalent equity demand/supply improvement in 2019 relative to 2018 which at the time had seen global equities rising by around 25%,” JPMorgan said.
9. China’s Yuan Rapidly Falls at Close After Hitting Strongest Level in 2 Years
China’s yuan weakened minutes before Wednesday’s official close, reversing an earlier gain that had pushed the currency to its strongest level in more than two years. The onshore yuan fell as much as 0.26%, touching its session low. The rapid move came after the offshore yuan had earlier strengthened past 6.5 per dollar for the first time since 2018, expanding the gap between the two rates to one of the widest seen this year. A few large Chinese banks were seen buying dollars in a large volume around market close.
10. U.K.’s Vaccine Warning; Merkel Urges Sacrifice: Virus Update
The U.K.’s vaccination campaign hit a snag on its second day as two people with allergies experienced reactions to the shot, and France and Germany battled worsening virus numbers despite weeks of curbs. Chancellor Angela Merkel urged Germans to make an additional sacrifice over the Christmas holidays to contain the coronavirus as the country’s soft shutdown fails to slow its spread. People with a significant history of allergies should not get the vaccine from Pfizer Inc. and BioNTech SE, the U.K.’s National Health Service said after two people experienced reactions. U.S. regulators indicated they may grant the shot emergency-use authorization.