Morning Report – Friday 25th September

Main Headlines

Rishi Sunak replaced the furlough scheme, set to end on 31st October with the ‘Winter Economic Plan’. The scheme would only subsidise those who worked at least a third of their usual hours. “I cannot save every business. I cannot save every job”, Sunak said as the plan effectively transfers the burden from the taxpayer to the employer.

Democrats have started drafting a $2.4 trillion stimulus proposal that they can take the White House over the coming weeks. Markets have been pessimistic that a new stimulus bill would take place before the end of the year, but there are still hurdles as Donald Trump has said previously that he would accept a new stimulus only up to $1.5 trillion.

Markets briefly continued their nosedive down yesterday, and the S&P 500 erased its 2020 gains early yesterday morning. However, the S&P 500 gained last night, and futures are up this morning as news¬ of the proposed stimulus bill has filtered into the market. European and Japanese equities also rose yesterday.

GBP

The pound rose slightly yesterday against the dollar as Rishi Sunak introduced his Winter Economic Plan. The plan is more stringent than the furlough scheme, as the Government don’t want to keep unviable businesses from faltering. Investors generally welcomed the news, although it is too early to tell how the plan will work in practice.

EUR

The euro made very little movement against the dollar, while falling slightly against the pound yesterday. There was no significant news out of the eurozone yesterday. There is some early noise about Brexit today, as French Europe’s minister lamented the UK’s attempt at ‘intimidating’ the European Union.

USD

The dollar continued to gain on most major currencies as plans for a new fiscal stimulus bill gathered pace. The greenback remains the safe haven of choice and could gain further if the Democrats managed to table a credible stimulus bill, much to the delight of investors and Federal Reserve officials. The dollar has fallen, albeit from a very high base, against the pound and yen this morning and there are fears that it is nearing, or has reached, its peak.

Main Economic Data/Central Banks/Government (All times BST)

7:00 a.m.: U.K. Aug. Public Finances

8:00 a.m.: ECB’s Villeroy speaks

9:00 a.m.: Euro-Area August M3 Money Supply

9:00 a.m.: Italy Sept. Consumer, Manufacturing Confidence

9:45 a.m.: ECB’s de Cos speaks

U.K. sovereign debt rated by Fitch

EU sovereign debt rated by DBRS