Dec 6, 2019

Axios Markets

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Situational Awareness: The first-ever “Axios on HBO” special airs Sunday at 6:30 pm ET. (catch a sneak peek here)

"I had reasoned this out in my mind: There was one of two things I had a right to, liberty or death. If I could not have one, I would have the other." - See who said it and why it matters at the bottom.

1 big thing: Trump may get the weak dollar he wants

Illustration: Sarah Grillo/Axios

The dollar has fallen every day this week, notching a cumulative loss of around 1% since President Trump complained on Twitter about its strength and took aim at two countries with weak currencies.

  • The decline may continue, reducing the dollar's strength in 2020, experts say.

Driving the news: With U.S. businesses continuing to complain, Trump has made it clear the currency's strength is a major administration concern.

  • On Monday, he announced he would reimpose tariffs on steel and aluminum imports from Brazil and Argentina for "presiding over a massive devaluation of their currencies."
  • Trump's decision to target Argentina and Brazil, two countries whose economies have been hurt by weakening currencies and whose central banks have intervened to strengthen them, signals to strategists at Bank of America Merrill Lynch that a number of other countries could find themselves in his crosshairs.

Between the lines: "Trump has the ability to intervene in the FX market," Michelle Meyer, Bank of America Merrill Lynch's head of U.S. economics, tells Axios.

  • "The dollar size would be pretty small in terms of flows but it would be about sending a signal that he is willing to use that tool."

Yes, but: Currency intervention has been shown to be ineffective unless coordinated between central banks, notes Kathy Lien, managing director of FX Strategy at BK Asset Management.

  • "And that’s certainly not what you’re going to get this time around," she tells Axios.

Be smart: What could really move the needle is a ceasefire in the U.S.-China trade war or Trump holding off on instituting more tariffs on Chinese imports.

  • New tariffs have boosted the dollar in the past, Lien says, by prompting traders to sell out of so-called high-beta currencies like the Australian and New Zealand dollars and emerging market currencies, and buy more greenbacks in search of safety.

The dollar also could be weakened by outside factors, Lale Akoner, global market strategist at BNY Mellon, tells Axios.

  • She expects European economic data to improve, bolstering the euro, and for emerging market currencies to rise against the dollar.
  • The British pound has risen to its highest level since May against the dollar this week and could go higher if a Brexit deal is reached, analysts say.

The last word: With the U.S. economy poised to slow next year, "the economic differential between the U.S. and the rest of the world will decrease," Akoner says, which should lead to less appetite for the dollar.

2. Catch up quick

Facebook is in talks to lease a 700,000-square-foot Manhattan building in a deal that would make it one of New York’s largest corporate tenants. (WSJ)

Saudi Aramco priced its IPO Thursday at 32 Saudi riyals ($8.53) a share and will sell 3 billion shares, or 1.5% of the company, for a total value of $1.7 trillion in the world’s largest-ever IPO. (WSJ)

Uber received more than 3,000 reports of sexual assault in the U.S. last year, a 16% decline in the five most serious categories of sexual assault reported. (Uber)

The number of Americans applying for unemployment benefits fell to the lowest level in seven months, nearing a 50-year low, at the end of November. (MarketWatch)

House Speaker Nancy Pelosi instructed chairs handling the impeachment inquiry to proceed with articles of impeachment against President Trump. (Axios)

3. Jobs report could set the tone for 2020 economy
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Data: BLS, ADP; Chart: Andrew Witherspoon/Axios

Most economists polled are on record predicting the U.S. added 150,000 to 180,000 jobs last month, but following Wednesday's ADP private payrolls report, which came in strongly below estimates, some are bracing for a weak number.

The big picture: Cailin Birch, global economist at The Economist Intelligence Unit, expects job creation softened significantly last month and that the economy is slowing — though she sees a "minor risk" of a looming recession.

  • "The prospects for the US economy in 2020 are fairly mediocre; we do not expect business investment to improve until there is greater clarity on the future of US trade policy and the next steps in the US-China trade war, which is unlikely until 2021," she says in an email.
  • "That said, consumer demand shows no sign of flagging, and this should help to shore up overall growth and job creation, preventing a sharper slowdown in 2020."

Yes, but: Some economists expect the jobs report to outpace expectations because of the resolution of the UAW strike at GM plants across the country, putting job gains above 200,000 and giving a boost to lagging manufacturing jobs.

What's next: The Labor Department will release November's U.S. jobs report at 8:30 a.m.

4. Traders keep stuffing cash into savings accounts
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Data: Investment Company Institute; Chart: Andrew Witherspoon/Axios

The return of bullish sentiment that has driven the stock market to fresh all-time highs hasn't dented the safe-haven appeal of money market funds, which are akin to savings accounts or holding cash.

  • In fact, data shows investors are still selling equities on an overall basis and moving that money into money market funds.

By the numbers: For the week ended Dec. 4, $2.37 billion of inflows had gone into MMFs, taking total holdings to nearly $3.6 trillion, data from the Investment Company Institute show.

  • Money market funds have seen the third-highest annual inflows this year since ICI began keeping track in 1984.
  • This year's inflows trail only 2007 and 2008 when the world was in the throes of the financial crisis.

The intrigue: The flows are happening despite a nearly 25% gain this year for the S&P 500. And even during the market's latest breakout and bull run since September, global and U.S. equity funds have had consistent outflows.

  • Flows into money market funds last week were higher than any weekly fund flows into U.S. equity mutual funds and ETFs since the week ending Oct. 16.
  • U.S. and global equities have seen net outflows in eight of the last 10 weeks, according to ICI's data.

Harriet Tubman escaped from slavery in Maryland for the second and final time on Dec. 6, 1849. She made more than a dozen rescue missions using a network of abolitionists and safe houses known as the Underground Railroad.

  • She also served as a spy for the Union Army during the Civil War and was an activist for women's suffrage.