After weeks of uncertainty, suddenly there seems to be traction in two major macro factors, or at least this is what market reaction would suggest. With Nancy Pelosi’s self-imposed 48 hour deadline, not really a deadline at all, the Democrats and the White House are seemingly close to agreement on fiscal stimulus. The White House is apparently willing to offer $1.9 trillion, closer to the Democrats’ $2.2 trillion, but the talks continue over whether the two sides can actually sign something. The question is whether anything can be done before the election. Although logistically, this is looking increasingly unlikely, no matter, the market is taking a view that this is a done deal nonetheless. Subsequently the safe haven dollar has come under significant selling pressure and the market seems to be taking a view now. On the other side of the Atlantic, the UK and EU have seemingly made enough progress towards their own agreement on a post-Brexit trade deal. Talks will intensify now and will take place every day for the potential to have an agreement in place by mid-November. Sterling has spiked sharply higher on this and unless there is anything to suggest talks breaking down, it should now be underpinned for the coming weeks. However, despite all this, there are question marks in the market, reflected by the fact that equities are not sharply higher. In fact the one key indicator of risk appetite is under pressure. Wall Street closed lower yesterday and futures are lower again today. Oil is also under pressure. This is a significant disconnect with yesterday’s market moves. Watch to see if bond yields begin to unwind again, something which would play into corrective pressure on equities.
Wall Street closed lower yesterday with the S&P 500 -0.2% at 3435, whilst futures are lower again today (E-mini S&Ps -0.5%). Asian markets were off overnight, with Nikkei -0.7% and Shanghai Composite -0.3%. European markets were weak yesterday and are under pressure again today (FTSE futures -0.3% and DAX futures -0.5%). In forex, after yesterday’s big sell-off on USD there is a mild retracement rally threatening today, although moves are very light currently. This is also reflected on commodities, with gold and silver unwinding yesterday’s gains by around half a percent. Oil is broadly flat in response to yesterday’s -3% sell-off.
There is a bit of a US focus to the economic calendar today. The Weekly Jobless Claims at 1330BST are expected to improve to 860,000 (down from last week’s unexpec