Market Commentary - October 07, 2020
Indecision dominated markets this week with Trump abruptly ending talks with Democrats via a single tweet. As hope for a secondary coronavirus aid package evaporated, so too did Wall Street's gains for the day. A 180-backflip following the Presidents tweet on Saturday stating “USA…needs stimulus. Work together and get it done”. Moment afters the announcement hit news headlines, Dow Jones plummeted 500 pts. Following suite, the S&P 500 and Nasdaq down 60 pts and 260 pts respectively.
Contagion from U.S. seeped into European benchmarks with the STOXX erasing a 0.7% lead, boosted by banks initially, to end the session down 0.8%. Germany’s DAX fared no better, up 0.8% at one point on the back of better than expected factory orders, only to close -0.75% lower.
Figure 1 (Source: Refinitiv): Dow Jones Intra-Day Chart : The effect of a single presidential tweet collapsing Wall Street.
Despite Trump’s surprise announcement, Asia brushed off stimulus gloom with Australia, Hong Kong and Japan rallying on open, either recovering most, if not all ground lost from Tuesday. Investor tone has seemingly shifted from shock to acceptance that one way or another, a stimulus package will be achieved, just not before elections.
Likewise, currency markets reacted in risk-off fashion by piling into U.S. dollars, with the greenback highest for the week. Coincidentally, Fed Chair Powell spoke Tuesday at the NABE highlighting economic perils if additional stimulus is withheld. Elsewhere, gold fell 1.8% whilst oil retreated from intra-day highs of 40.76, to close at 39.73.
Headliner to Review
- U.S. JOLTS job openings decreased from 6.7 million to 6.49 million. The first time in 4 months led by fewer openings in retail sectors and construction as the U.S. economy moderates. With economic future uncertainty on the rise, fewer workers were reluctant to quit their jobs to seek alternatives.
- Whilst U.S. trade balance deteriorated for the month of September, Canada posted a healthy increase. Nonetheless, yesterday’s figure disappointed expectations alluding to a slow-down in global activity where analyst will need to lower future forecast.
- The Australian government released their annual budget for 2021 with a strong commitment for growth however will result in a $213.7bn deficit. Notable budget winners include taxpayers (via tax cuts), apprentices (via apprenticeship packages), first home buyers (via lenient loan schemes) and businesses (via tax deducts and fringe benefits). The biggest loser though, jobseekers as the budget was devoid of any update to payment benefits.
Headliner to Watch
- FOMC meeting minutes to be released today. Of interest, the reasoning behind members whom voted to dissent the policy decision back in mid-September.
- Crude Oil inventories expected to remain in deficit at -1.2M as the industry was hampered by consecutive Hurricanes in the U.S. Gulf Coast followed by worker strikes in Norway’s largest oil producing firm.
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Topics: Market Commentary