Covid-19 cases are again surging across the world. Each side in the U.S. stimulus debate accuses the other of “moving the goalposts.” China’s economy may surpass the U.S. within the next decade.
The U.S. reached a record number of coronavirus infections for the second day in a row, adding another 85,317 cases. President Donald Trump’s chief of staff said the U.S. isn’t going to “control” the pandemic. Spain announced a national curfew while Italy introduced the strongest restrictions since the end of a national lockdown in May and French infections hit another record. U.S. Vice President Mike Pence’s chief of staff tested positive, as did the Reserve Bank of India’s governor. With the virus untamed, it may be time to reset expectations for the world economy.
Nancy Pelosi and White House Chief of Staff Mark Meadows accused each other of “moving the goalposts” on stimulus legislation in back-to-back Sunday interviews on CNN, showing why there’s so much pessimism among U.S. lawmakers that a deal can be reached before Election Day. If no coronavirus relief bill is passed before the election, Pelosi said House Democrats would keep pressing for an agreement in the lame-duck session after the election. She said they would not wait until January
The U.S. dollar edged higher at the start of the week as U.S. coronavirus infections rose. Asia stocks were set for a muted open: Equity futures edged up in Australia and were little changed in Japan, while Hong Kong is closed for a public holiday Monday. The British pound advanced after trade talks between the U.K. and the European Union were extended to Oct. 28. S&P 500 futures opened weaker. U.S. stocks rose Friday. Treasuries advanced as rates traders are questioning the big short position that’s built up in long-maturity Treasuries on the expectation of a Democratic sweep in next month’s U.S. elections. Oil dropped.
Lee Kun-hee, who transformed Samsung Electronics from a copycat South Korean appliance maker into the world’s biggest producer of smartphones, televisions and memory chips, has died aged 78. He was was South Korea’s richest person. Lee passed away on Sunday with his family by his side, the company said in a statement, without mentioning the cause of death. During his drive to foster innovation, Lee told employees to “change everything except your wife and children.”
Kotak Mahindra Bank, backed by Asia’s richest banker, is exploring a takeover of smaller Indian rival IndusInd Bank, people with knowledge of the matter said, a move that would create the nation’s eighth-largest financial firm by assets. Uday Kotak, founder and chief executive officer of Kotak Mahindra, is looking at the possibility of an all-stock acquisition, one of the people said, asking not to be identified as the talks are private. Uday Kotak and the Hinduja family have held initial talks over the proposal in which the founders of IndusInd Bank could retain a stake in the lender after a deal, another person said.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours:
And finally, here’s what Cormac’s interested in this morning
As Netflix shareholders found out last week, lofty global growth stock valuations can come back to bite when a company’s outlook isn’t bullish enough to back them up. Since 2002, the MSCI AC World Growth Index has about doubled the return of its value counterpart, yet its relative earnings expectations have failed to grow at a similar pace. That means a significant valuation gap has emerged between the two types of stocks, one that isn’t necessarily justified by higher relative earnings growth. That leaves growth stocks vulnerable to a sharp valuation correction should investors become disappointed.
Netflix fell as much as 7% on Wednesday after missing Wall Street’s estimates for subscribers, renewing doubts about its ability to maintain growth. About 15% of the companies in the Bloomberg World Index have reported so far this season, with over 80% of tech firms beating estimates. But traders have been unimpressed despite the positivity — the average one-day price move for the companies was -0.4%, the data showed. And for those that disappointed, the share price reaction has been far more severe. IBM shares slumped 6.5% on Tuesday, the most in four months, after failing to provide an earnings outlook. Citrix Systems fell over 7% Thursday, to the lowest since March, after cloud growth lagged investor expectations. As SocGen’s Albert Edwards put it, woe betide any stock that profit warns, making the market realize it had wrongly valued it as a growth stock.
Cormac Mullen is a Cross-Asset reporter and editor for Bloomberg News in Tokyo.