Axios Markets: Wall Street pencils in new risk

1 big thing: Wall Street pencils in new risk | Monday, January 25, 2021

Open in app View in browser   Presented By NetJets   Axios Markets By Courtenay Brown ·Jan 25, 2021 ☕️ Happy Monday. Courtenay here, steering the ship for a little while longer. If this email was forwarded to you, sign up here. Today's newsletter is 862 words, 3 minutes. It's a big day ... Axios Local launches this morning (!!) in Tampa Bay and the Twin Cities — joining Charlotte, with Denver and Des Moines coming soon. Sign up here. 💬 "If you do not tell the truth about yourself you cannot tell it about other people." — See who said it at the bottom of the newsletter.     1 big thing: Wall Street pencils in new risk Illustration: Aïda Amer/Axios   Wall Street is pinning its bets of an economic rebound this year on mass vaccinations and a virus brought under control. But new coronavirus strains threaten that sunny outlook, a number of firms said in recent days. Why it matters: None downgraded growth forecasts because of the variants, but they're acknowledging there's a new asterisk to the anticipated economic recovery. Driving the news: British prime minister Boris Johnson said Friday the country's more contagious variant is also more deadly — research that the U.K. scientists say is still uncertain and the Center for Disease Control and Prevention plans to review, as CNN reports. Anthony Fauci said last week vaccines appeared to be effective against the mutated coronavirus. But he also warned of non-peer-reviewed studies that raised the possibility that the vaccines may be less potent against the variants — including one first found in South Africa. What they're saying: Goldman Sachs economists said over the weekend the "evolution of a vaccine-resistant virus strain" could push off the explosion in consumer spending expected to fuel the economic recovery. Echoing that sentiment... Barclays: "[N]ew virus variants seem more contagious and potentially also more resilient to existing vaccines ... making for a delayed and less linear path towards a 'restriction-free' economy," per a note out on Friday. MUFG: Coronavirus variants are "obviously ... headwinds for economic activity," rates strategist John Herrmann wrote on Friday, though he noted the recovery still has "strong tailwinds." Colin Teichholtz, head of markets at Element Capital Management, one of the world's biggest macro hedge funds, tells the Financial Times ..."What you are seeing in the UK today you will see over much of continental Europe, and I don't think markets [and] ... policymakers are really grasping that," referring to the variant's spread. Yes, but: If there's a backslide, the Fed has signaled it would step in — vowing to support financial markets and the economy until the recovery is on solid footing. Plus, Wall Street shops have pushed up economic growth estimates for this year, citing the expected flood of fiscal stimulus. What's next: The Fed caps off its two-day policy meeting with a press conference on Wednesday. No policy changes are anticipated, though Fed chair Jerome Powell is expected to reassure investors that the Fed won't back off its bond-buying program anytime soon — and when it does, there will be plenty of notice.     2. Catch up quick Merck is ending its effort to develop coronavirus vaccines after early studies showed lackluster results. (Bloomberg) There have been more than 40 million average daily options traded so far this year — topping last year's all-time record of an average of 30 million contracts traded per day. (WSJ) China was the biggest recipient of foreign direct investment inflows in 2020 — topping the United States (longtime #1 for new inflows) by nearly $30 billion, according to a new report. (Reuters) Global FDI fell 42% last year to $859 billion from $1.5 trillion in 2019.     3. Coronavirus inflamed global inequality Illustration: Aïda Amer/Axios   History will likely remember the pandemic as the "first time since records began that inequality rose in virtually every country on earth at the same time." That's the verdict from Oxfam's inequality report covering 2020 — a terrible year that hit the poorest hardest across the planet, Axios' Felix Salmon and Stef W. Kight report. Why it matters: The world's poorest were already in a race against time, facing down an existential risk in the form of global climate change. The coronavirus pandemic could set global poverty reduction back as much as a full decade, according to the World Bank. By the numbers: A majority of nearly 300 economists from around the world surveyed by Oxfam said they expect the virus to exacerbate gender (56%), racial (66%), wealth (78%) and income (87%) inequalities in their countries. Read the full story.     A message from NetJets Multiple ways to fly with NetJets     The NetJets Card Program™ offers all-inclusive pricing and guaranteed access to the largest fleet in private aviation. Choose from multiple jet card options with the ultimate convenience of NetJets. Discover ways to fly with all-inclusive pricing.     4. Another blast-from-the-past stock run-up Data: FactSet; Chart: Axios Visuals BlackBerry — which no longer manufactures its namesake phone, focusing instead on security software — is the best performer of Canada's leading stock index, where it lists shares. Over the course of seven days, shares shot up 80% — a type of rally the company hasn't seen since the dot com bubble, as Bloomberg reports. What's going on: BlackBerry said earlier this month it settled its patent royalty dispute with Facebook, though terms of the settlement weren't disclosed. The news prompted the massive stock run-up, which at least two executives sold shares into, per Bloomberg. ICYMI: GameStop shares continued to surge, in what has been described as an "epic short squeeze."     5. Company sales gauge recovers to pre-pandemic level Data: National Association for Business Economics quarterly survey of 97 panelists from private sector companies and industry trade associations; Chart: Axios Visuals  A key sales gauge has recovered past its pre-pandemic level, according to a quarterly survey of business conditions by the National Association for Business Economics out this morning. Why it matters: It's another sign of businesses bouncing back from the depths of the pandemic recession, even with soaring coronavirus cases and a full economic recovery still far off. What they're saying: "Momentum has continued to build, and survey respondents seem much more positive about the future today" compared to the last survey in October, Manuel Balmaseda, chief economist at materials supplier CEMEX and NABE president, says in a release. Other findings: The net number of respondents reporting higher prices charged for products surged 14 points from October, largely because of higher prices charged by goods-producing firms. A gauge for the number of firms reporting more expensive materials tripled in the latest survey. Worth noting: Almost half (46%) of respondents said neither the vaccine rollout nor the Biden administration impacted expectations for company sales, hiring or capital spending expectations. But 37% said it impacts outlook positively, while 5% said there's a negative effect.     A message from NetJets NetJets' most popular aircraft model     NetJets' Cessna® Citation Latitude® is designed with your optimum comfort in mind. A new opportunity: This midsize favorite has a generous amount of cabin space and is now available through the NetJets Card Program™. Explore the world's finest fleet.   🙏 Thanks for reading. Hit reply with any tips, questions or suggestions. Quote: "If you do not tell the truth about yourself you cannot tell it about other people." Who said it: British novelist Virginia Woolf in a series of essays published in the late 1940s. Woolf was born on this day in 1882.   Axios thanks our partners for supporting our newsletters. Sponsorship has no influence on editorial content. Axios, 3100 Clarendon B‌lvd, Suite 1300, Arlington VA 22201   You received this email because you signed up for newsletters from Axios. Change your preferences or unsubscribe here.   Was this email forwarded to you? Sign up now to get Axios in your inbox.   Follow Axios on social media: