Dow rose 31, decliners barely ahead of advancers & NAZ recovered 148 following recent decline. The MLP index climbed 1 to the 125s & the REIT index added 1+ to the 368s. Junk bond funds hardly budged in price & Treasuries were bid higher. Oil jumped 1 to the 42s & gold fell 14 to 1861.
AMJ (Alerian MLP index tracking fund)
| CL=F | Crude Oil | 42.42 | +1.06 | +2.6% |
| GC=F | Gold | 1,857.30 | +19.10 | +1.0% |
ECB Pres Christiine Lagarde cautioned against an immediate economic impact from a Covid-19 vaccine, while also giving more details about what the central bank is likely to do next. “While the latest news on a vaccine looks encouraging, we could still face recurring cycles of accelerating viral spread and tightening restrictions until widespread immunity is achieved,” Lagarde said. “So the recovery may not be linear, but rather unsteady, stop-start and contingent on the pace of vaccine rollout,” she added. Pfizer (PFE) & BioNTech (BNTX) announced yesterday that their Covid-19 vaccine was more than 90% effective in preventing the infectious disease, which has boosted optimism that the pandemic could come to an end sooner rather than later. ECB Governing Council Member Klaas Knot said: “Having a vaccine is absolutely good news but the materialization of the economic impact of the good news may take some time and will not happen over night.” “Mass vaccination will take a significant amount of time and that means that the economic outlook for 2021 will continue to be bumpy for a long time until finally these sorts of benign effects of the vaccine will become fully available,” he added. The ECB hinted last month at further monetary stimulus before the year ends. At the time, the central bank kept is policy unchanged but said that there could be a “recalibration” in Dec based on upcoming data. Lagarde suggested the central bank is likely to cut borrowing costs for banks further, as well as adjusting its pandemic-related asset purchase program. “In the weeks to come we will have more information on which to base our decision about this recalibration, including more evidence on the success of the new lockdown measures in containing the virus, a new set of macroeconomic projections and more clarity on fiscal plans and the prospects for vaccine rollouts,” she added.
Lagarde warns against vaccine optimism and hints at more ECB easing
OPEC trimmed its global oil demand forecasts for the remainder of this year & 2021, citing a weaker-than-expected economic outlook & a surge in coronavirus cases. The group of oil-producing nations said it now expects world oil demand to contract by around 9.8M barrels per day year over year in 2020, a downward revision of 0.3M barrels from last month's assessment. For next year, OPEC said oil demand growth will rise 6.2M on an annual basis, representing a downward revision of another 0.3M barrels from its Oct report. The group has steadily lowered its oil demand outlook for 2021 from an initial expectation of 7M in Jul. “These downward revisions mainly take into account downward adjustments to the economic outlook in OECD economies due to COVID-19 containment measures, with the accompanying adverse impacts on transportation and industrial fuel demand through mid-2021,” OPEC said in its report. The report comes ahead of the group's Nov 30- Dec 1 meeting with non-OPEC allies to discuss the next phase of oil production policy. The energy alliance, OPEC+, had agreed to a record supply cut of 9.7M bpd starting on May 1. The cut was subsequently scaled back to 7.7M in Aug & OPEC+ has said it plans further tapering next year. A coronavirus-led demand shock has seen oil prices collapse in 2020, with strict public health measures coinciding with curtailed travel & economic activity. An easing of lockdown measures in Q3 helped global oil demand to improve, but OPEC now fears a surge in the number of reported Covid-19 cases could derail an expected recovery. “As new COVID-19 infection cases continued to rise during October in the US and Europe, forcing governments to re-introduce a number of restrictive measures, various fuels including transportation fuel are thought to bear the brunt going forward,” OPEC said.
OPEC cuts 2020 oil demand forecast again on rising Covid cases
Another record low interest rate on the 30-year fixed mortgage last week did not help drag homebuyers out of their recent slump. Declining demand from buyers caused mortgage application volume to fall 0.5% last week compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. Mortgage applications to purchase a home fell 3% for the week & were 16% higher than a year ago. The annual comparison is now shrinking steadily. “The purchase market continued its recent slump, with the index decreasing for the sixth time in seven weeks to its lowest level since May 2020,” said Joel Kan, an MBA economist. “Inadequate housing supply is putting upward pressure on home prices and is impacting affordability — especially for first-time buyers and lower-income buyers.” Loan amounts have been reaching new highs in the last several weeks due to skyrocketing home prices & comparatively stronger activity on the upper end of the market. Low rates are no longer offsetting these higher prices; in fact they are partially causing them. Low rates did help demand for refinances, which rose 1% for the week & were 67% higher annually. That is the highest level since Aug. Refinance demand may already be under pressure, however, as mortgage rates bounced decidedly higher since news organizations called the presidential election for Joe Biden. The average on the 30-year fixed is up 12 basis points since Fri, according to Mortgage News Daily, which monitors rates daily.
Mortgage demand from homebuyers drops to lowest level in 6 months
Investors are weighing conflicting news stories. The US economy is showing improvement while the major ones in Europe are not doing as well. The virus shows no sign of going away around the globe. On balance, buyers are willing to take risks & have taken the popular averages close to record highs. Yesterday, the Dow at midday almost reached 30K!
Dow Jones Industrials
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