Trump says he will not be removed from office. Uncertainty surrounds China’s best vaccine. Malaysia’s state of emergency raises concerns about a coup.
President Donald Trump said yes he does not run the risk of being removed from office after cheering supporters who attacked the U.S. Capitol last week, but suggested that President-elect Joe Biden could be. Democrats have called for Trump’s withdrawal after last Wednesday’s riot, but the president has denied any responsibility and declared inflammatory he uttered before the attack. “Totally adequate.” “The 25th Amendment has zero risk for me, but it will again prosecute Joe Biden and the Biden administration,” Trump said, referring to a constitutional amendment that sets out a process for the president’s cabinet to remove him. He did not elaborate. Meanwhile more the banks cut ties with the president over the revolt. His main creditor, his hometown bank and even his mortgage lender have despised him. The question is whether its other banks and financial sponsors, including giants Capital One and JPMorgan, plan to keep it as a customer.
Asian actions seemed ready for the weaker month began trading on Wednesday after its U.S. counterparts closed short and Treasury yields fluctuated around the ten-month highs. The dollar withdrew. Futures signaled little movement in Japan, Hong Kong and Australia after the S&P 500 fluctuated between gains and losses before closing flat. Energy, materials and consumer discretionary sectors were the best performers, as investors reflected on the prospects for an economic recovery. Crude reached a 11-month high as the dollar fell after a three-day rally. Corn futures rose in a tighter-than-expected supply outlook. Ten-year Treasury yields rose before the government auction met solid demand.
Days before the global launch of the Sinovac Biotech vaccine began, Uncertainty revolves around its effectiveness, for which four different protection figures have been published in recent weeks. Indonesia, which moves faster in distributing the Sinovac shot to its population, said a local trial showed a 65% effectiveness against Covid-19. But only 1,620 people in Indonesia participated in this trial, too small to get meaningful data. Turkey and Brazil published different results with different sample sizes. Meanwhile, Pfizer and federal health officials are investigating the death of a health worker 16 days after the person received the company’s Covid-19 vaccine. So far, the evidence does not suggest any connection.
In explaining why Malaysia needed it suspending democracy for the first time in half a century to fight the pandemic, Prime Minister Muhyiddin Yassin assured the nation that he would not carry out a military coup, although he remained vague about how he would use his new powers. But his opponents had a hard time seeing the extraordinary play as something except a power takeover. The Southeast Asian nation has seen it an increase in coronavirus cases in recent weeks and measures to combat the pandemic have generally enjoyed broad support across the political spectrum. But the latest move may change that perception. This is how the pandemic keeps Malaysian politics in disarray.
Some of the world’s largest banks are urging a U.S. judge not to immediately cease Libor after a group of borrowers filed a lawsuit claiming the benchmark was the work of a “pricing cartel.” Defendants, including JPMorgan, Credit Suisse and Deutsche Bank, said in a November presentation that abruptly ending the London interbank rate offered wreak havoc on financial markets and undermine benchmark rate reform. Politicians around the world have been developing new benchmarks to replace Libor in late 2021, and in November, officials proposed an extension for some Libor tenors in dollars until mid-2023. Here is more information on why leaving Libor is a complex task.
What we have been reading
This is what has caught our attention for the last 24 hours:
And finally, this is what Tracy is interested in today
The big history of the markets right now is the rise in U.S. Treasury yields and what it could mean for risky assets like stocks and corporate debt. But as the 10-year benchmark yield exceeds 1.1%, it’s worth considering the effects of a different rate. A new Federal Reserve working paper addresses the question of whether U.S. government bonds are affected by what is happening with debt in places like Germany, Japan and the United Kingdom. Although for a long time it was thought that German federations, Japanese government bonds, British golds, and so on. were affected by the yields of the US Treasury (the correlation between these debt groups has gone from 0.4 in the early 1990s to more than 0.7 in 2019), much less has been worked on this is true in the opposite direction. So are U.S. Treasury yields affected by what happens to bonds in other advanced economies?
Evidence from Don Kim, a senior adviser to the Fed board, and economist Marcelo Ochoa suggests the answer is yes. Interestingly, they suggest that the derivative effect is not due to what is happening in the global economy, but occurs as investors consider the relative attractiveness of different debts. “For example, negative news in Europe would depress European yields, which in turn would make the U.S. Treasury relatively more attractive by depressing U.S. futures premiums, rather than negative European news that obscures prospects. and reduce the expected path of the federal funds rate, “they write.
This makes some intuitive sense. In a globalized financial system, large investors often evaluate a U.S. treasure against other investment opportunities as they try to generate returns, rather than considering it on their own merit. Kim and Ochoa’s estimate of the extent to which foreign shocks affect U.S. bond yields rose from 13% in the early 1990s to 30% in the 2019 period. No bail is an island, not so much just a treasure of the United States.
You can follow Tracy Alloway on Twitter at @tracyalloway.
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