US stocks are bouncing back after the worst start to the trading year since 2016 after the manufacturing sector surprisingly remained very strong in December. The headline ISM reading jumped to 60.7 the highest level since August 2018, higher than the consensus estimate of 56.8 and prior reading of 57.5. All the regional surveys painted a different picture, so the strong ISM reading was a big surprise. If the US economic recovery follows the Chinese playbook, manufacturing could really accelerate higher once the US gets a better handle on COVID.
All eyes on Georgia’s Senate election
The biggest risk event of the month is finally here, and Wall Street appears to be comfortable with the possibility that Georgia could deliver a blue wave. Some investors are also feeling confident that Republicans will end up winning at least one seat tonight (or tomorrow morning). The new Democrats that voted in Biden might like the idea of having a divided government and will either possibly vote for Republicans Perdue and Loeffler or just not vote for the Democrats Warnock and Ossoff. All the polling pretty much shows both races are coin flips, but normally they exaggerate Democrats election day representation. Republicans will need a strong turnout and if the Northern Georgia congressional districts show high voter turnout, financial markets will begin to further price in a Republican victory.
The electoral college certification is not truly a risk event, but it will draw tremendous press. President Trump doesn’t have the votes to overturn the election. He has been rejected at almost every accusation and has practically no chance of staying in office.
NYSE says won’t delist Chinese telecom firms
The big story overnight was the NYSE announcement that they will no longer delist the three Chinese telecom giants. China Telecom, China Mobile, and China Unicom all surged over 5% on the delisting reversal. The NYSE U-turn appears to suggest that the big three telecom giants do not meet the Office of Foreign Assets Control FAQ 857 requirements, thus rebuking the Trump administration’s accusation the companies are tied to China’s military.
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