Morning Report – Wednesday 7th October

Main Headlines

Donald Trump abruptly ended talks on a new fiscal stimulus bill in a series of tweets last night. The president called on Republicans to walk out of negotiations and blamed Nancy Pelosi on major sticking points, such as the Democrats demand for aid to struggling local governments, without which they will have to go to aggressive budget cuts. Later, Trump seemed to urge for more economic relief, possibly reversing his earlier calls.

Markets were in turmoil yesterday, as equities were sold off on the news that additional stimulus was not forthcoming. The S&P 500 and Nasdaq both closed lower, even after morning and afternoon gains. European equities are expected to open lower, but will not be hit as badly as US and Asian markets as investors have had time to digest the news and also find relief in late night tweets that stimulus might still be on the cards.

Jerome Powell said that damage inflicted by the pandemic was “far from complete” in a NABE conference yesterday. Before, Trump’s tirade on twitter, Powell pushed for more fiscal stimulus, and that too little support would lead to a weak recovery. The Chair of the Federal Reserve put the emphasis on more rather than less support as the “risks of overdoing it seem, for now, to be smaller”.

GBP

The pound lost ground against the euro and dollar late last night, but has since recouped some of its losses in early morning trading. Brexit discussions continue this week, and it has become clear that the French President, Emmanuel Macron holds the key as he is the one standing firm on the demand for access for the French fishing industry to British waters, creating tensions even among EU allies.

EUR

The euro also lost ground against the dollar, but is starting to gain this morning. Today is light on the data front for the eurozone, although numbers for Germany and Spain’s industrial production will give a good reflection of how both countries are handling the increase in Coronavirus cases across the continent. Christine Lagarde will speak later today in Paris as well.

USD

The dollar gained against most major currencies last night, as the ‘cancelling’ of the fiscal stimulus bill signalled a risk-off mood for foreign assets. Today is a busy day for the dollar, as US central bank minutes for the mid-September meeting is released and investors will look out for any talk on further easing. The first and only VP debate takes place tonight, and Kamala Harris will look to extend Joe Biden’s lead in the polls.

Main Economic Data/Central Banks/Government (All times BST)
7:00 a.m.: Germany Aug. Industrial Production
7:45 a.m.: France Aug. Trade Balance
8:00 a.m.: Switzerland Sep. Foreign Currency Reserves
8:00 a.m.: Spain Aug. Industrial Output
9:00 a.m.: Italy Aug. Retail Sales
9:30 a.m.: U.K. July House Price Index
9:55 a.m.: Iceland Rate Decision
1:10 p.m.: ECB’s Lagarde speaks
3:30 p.m.: EIA Crude Inventories
5:30 p.m.: ECB’s Villeroy speaks
7:00 p.m.: FOMC Minutes

Poland Rate Decision