Investors continue to push global stocks into record territory

Good morning. It’s a risk-on Monday with Asia, Europe and U.S. futures all in the green. That’s because Washington appears to be softening its stance on Chinese tech firms. Also, investors heartily welcomed this weekend’s news the U.S. Food and Drug Administration is looking to expand blood-plasma treatment for COVID-19 cases.

Here’s what’s moving markets.

Markets update

Asia

• The major Asia indexes are trading higher, with Hong Kong’s Hang Seng leading the way, up 1.4%.
• Tencent Holdings popped in early trade on Monday after reports surfaced the ban Washington is mulling won’t preclude U.S. companies entirely from doing business with the WeChat platform in China. The wider Asian markets were also up on the news.
• It was Facebook‘s Mark Zuckerberg who planted the crucial early seeds—way back in October—in Washington that TikTok was bad for American business and bad for America’s belief in “freedom of expression,” the Wall Street Journal reports in a big scoop this morning.

Europe

• The European bourses were solidly positive in mid-morning trade, with Germany’s Dax up 2.3% as it nears break-even for the year.
• British PM Boris Johnson is hanging hopes on a successful-back-to-school period to jumpstart the moribund U.K. economy. Over the weekend, he appealed directly to parents, saying the COVID risk in the classrooms is “very small.”
• Norwegian life insurer Storebrand ASA, which has about $91 billion under management, is dumping its stakes in oil giants Exxon Mobil  and Chevron and going full steam ahead on its divestment from coal as it revamps its climate policy.

U.S.

• The U.S. futures are pointing to a positive open. That’s despite new Goldman Sachs research calculating that roughly one-quarter of U.S. jobs—4.5 million—lost to the pandemic aren’t coming back any time soon.
• Last week was one for the record books. The S&P 500, Nasdaq and Apple all hit a series of all-time highs. It looks like they’ll add to those gains out of the shoot this morning.
• What’s on the calendar this week? It’s the Republicans’ turn to hold a virtual convention; the RNC kicks off later today. There will also be consumer confidence, housing data and, beginning Thursday, the Federal Reserve’s annual symposium on monetary policy, usually held in Jackson Hole, will stream online. It’s unlikely the Fed will say anything to lift the dollar in a meaningful way.

Elsewhere

• Gold is up, nudging above $1,950/ounce.
• The dollar is down.
• Crude too is up, with Brent trading around $45/barrel.

***

European invasion

Suddenly, Europe is looking pretty good to investors. There are a host of reasons for why that might be.

For starters, on a P/E basis, European equities, in general, aren’t nearly as pricey as those in the U.S. And the outlook for the bloc is looking a bit more stable these days. It helps that EU lawmakers have already agreed to a giant stimulus spending package for the trading bloc, so that worry is off the table. Another plus—there are no huge elections in the coming months that could throw the balance of power in any country from Left to Right, or vice versa. And, even with a worrying upsurge in COVID cases in recent weeks, governments feel somewhat confident they can contain it without shutting down whole economies.

Taken together, it’s all looking fairly dull on this side of the Atlantic—a business-as-usual vibe, even. For now, at least.

Most of those factors are driving money managers to give Europe a closer look. Bloomberg cites a recent Bank of America Corp. survey of fund managers who say investors are holding their largest overweight position in euro-area equities since 2018. BlackRock and Goldman Sachs are seeing similar flows.

In fact, Goldman is tracking cross-border investment flows into equities, commodities and fixed-income assets. In recent weeks, Goldman notes, there’s been a big flow out of equities in general as investors start to question whether the U.S. equities rally is hitting its upper limits. Investors though are still fairly bullish on European (but not necessarily on UK stocks) and Chinese equities (though Chinese equities are incredibly volatile) as the chart shows.

The Euro-U.S. advantage is slight at the moment, but it’s notable that, for investment flows, the Euro zone has finally overtaken U.S. equities for the first time in months in recent days, “reflecting,” Goldman says, the “selling of US equity products but steady demand for other pro-risk assets.”

This same sentiment is even more pronounced on the FX front. The euro is up 9% against the greenback since April as dollar-shorts build up.

A lot of this is to be expected. The investment pros often preach a wait-and-see approach ahead of a major U.S. election. And they’re doing so again this year.

But other factors are starting to cloud the U.S. outlook. The questions are numerous: Can the U.S. do a better job of slowing the COVID surge during the crucial back-to-school period? Will Congress agree to a stimulus package to help those most affected? Will the election be a drawn-out, contested affair that divides the country further?

Here in Europe the markets are content that these existential questions, for a change, are being directed at some other part of the world.

Postscript

There are no traffic lights in Montemonaco—population: 558. The closest one is good half-hour drive down into the valley somewhere. (And that traffic light is probably blinking yellow most of the year.)

Montemonaco sits on a ridge below two mountains: Monte Sibilla and Monte Vettore. At 2,476 meters (over 8,000 feet), Vettore is the biggest peak in the Monti Sibillini chain. If you want to climb it, you usually start your expedition from Montemonaco.

Montemonaco is a beautifully spectacular place. But in a country of beautifully spectacular places, Montemonaco finds it hard to compete for tourists. It’s popular with scruffy mountaineers, mountain-bikers and ice climbers (my kinda crowd), but it’s otherwise left off of most travel itineraries. 

Until this year that is. This part of Italy is under invasion. The lakes. The hiking trails. The gelatterie (ice cream shops), bars and restaurants. Strapieno, as the Italians would say. Packed tighter than a cannolo. 

I’ve never seen so many tourists in these parts. The difference this year: it’s Italians making the trip. Italians from North and South—from Puglia and Milan, from Rome and Treviso—are doing their summer breaks closer to home. They’ve ditched the August sojourn in Sardinia, bailed on the great escape to the Greek isles, abandoned the Scandanavian retreat. And they’re coming to places like Montemonaco—no traffic light; one bank, no customers.

It’s a phenomenon happening everywhere in the world: tourists (those who can afford to go on break) are venturing to places nearby—places reachable by car where, they’ve carefully researched, the COVID numbers are relatively low. In the process, tourism has been turned on its head. Out are package tours. In are local haunts that are long on charm but probably have no marketing budget or Instagram accounts. 

Here in this part of Marche, every vacation home is booked. Hotels are near full occupancy. Restaurant reservations are suddenly hard to come by, as we’ve come to learn. Part of it is the strict social-distancing rules. Restaurateurs can no longer cram diners in for tagliatelle and grigliata mista. But it’s also a classic supply-demand puzzle. With so many Italians discovering (or rediscovering) Marche—and, in particular, Monti Sibillini National Park—restaurants suddenly cannot accommodate everyone. 

The locals, a proud lot, are overjoyed (and a bit overwhelmed) by all the attention. 

It’s been a bit of an adjustment for all of us. On most Saturdays and Sundays, we usually head up into the mountains, go for a hike, fly a kite, splash around in a stream maybe. Then we pitch up to one of several favorite local joints. If we have a hankering for a dish of pasta loaded with shaved truffles, we know where to go. If the kids tell me they’re craving the cinghiale (wild boar), we turn left. If I’m peckish for tripe or grilled lamb, we go the other way.

Every place we turned yesterday was fully booked. We finally did find a table, at a favorite place—La Scampagnata—and marveled at the sheer number of diners. The kitchen was slammed. The wait staff was running ragged. 

“I can’t believe this is Montemonaco,” my wife and I kept remarking.

At the end of the meal, the owner apologized. They’d run out of nonna’s pomodori ripieni (stuffed tomatoes), a typical late-summer specialty. From his tone, it sounded like a first. 

Don’t apologize, we told him. “Montemonaco is on the map. Enjoy it.”

Bits and bites

A big thanks to all the helpful reader emails offering advice on how to get a puppy to stop nipping at my heels.

We did make some modest progress this weekend. Now, after Scilla takes bite out of my sandals or goes for my heels, I lean down and gently close her snout shut. A firm “No!” follows.

She listens to me about half the time.

If only my kids would listen to me half the time.

***

Have a nice day, everyone. I’ll see you here tomorrow. 

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's reads

Precious mettle. Gold has been on an epic run, up 28% this year. But the trade has been more volatile than most commodities traders can remember, suggesting, as the Wall Street Journal notes, "that gold and silver have joined U.S. tech stocks among the most crowded trades in markets." Not only that, the volatility would also suggest those big gains could be wiped over a few bad trading sessions.

More cuts at Wells Fargo? The beleaguered San Francisco–based banking giant had pressed pause on its major downsizing initiative once COVID hit earlier this year. But now it appears it's business as usual. Ergo, the cuts are back on the table.

Amazon and on. What do North Andover, Mass., Windsor, Conn. and Glenwillow, Ohio all have in common? They are among the U.S. communities cutting huge sweetheart deals—usually in the form of tax breaks and multi-million-dollar grants; the total value of which is more than $3 billion so far—to attract Amazon to build distribution centers in their towns. Why? In the short term, the answer is jobs. But, Pat Garofalo argues in Fortune, in doing so, "policymakers are funding the demise of Main Streets across America and further entrenching Amazon as a gatekeeper across wide swathes of the economy." Garofalo is director of state and local policy at the American Economic Liberties Project.

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Market candy

Quote of the day

"If that doesn't happen, and the odds of that happening continue to decline, there’s going to be a selloff in the stock market."

That's Mark Zandi, chief economist at Moody's Analytics. Zandi is not alone in thinking that, should Congress and the White House fail to agree on a new stimulus package, the markets will fall. How much of a correction are we talking? Fortune's Anne Sraders and Lance Lambert break it down.