Welcome to this weeks overview.
UK
- On the 1st October Brussels opened a suit against the UK over a bill that was put forth in September, though not yet ratified, that would allow the UK to override the rules negotiated last year with the EU surrounding Northern Ireland’s position relating to Brexit negotiations. The most sensitive of the potential issues are involving state aid and export documentation. Cummings has said the party stand by the provision.
- Boris Johnson has warned tighter restrictions are at possibility of being implemented following the chief scientific advisor, Sir Patrick Vallance, stating the virus was ‘not under control’. Despite this, an Imperial College London study of 80,000 volunteers shows Covid infection rates are down from 1.7 at the start of September to 1.1 as of October 1st, showing we are likely through the worst of it. On Wednesday the government said that we are facing a £23bn loss in emergency bailouts due to bad loans arising from Covid, adding to the stress on the overall economy.
USA
- Tuesday 29th September saw Trump and Biden facing off in the first general election debate of the cycle. Trump entered the debate in a weaker position following the New York Times publishing of his tax returns, totalling $750 in federal income tax for 2016. During the debate Trump came across as aggressive due to his incessant interrupting and talking over of both Biden and Chris Wallace, the moderator. Similarly, Biden performed poorly during the first half of the debate, coming across as unsure and weak, struggling not to rise to Trumps goading, he managed collect himself towards the end but there was no winner. The S&P 500 and NASDAQ showed positive gains following the debate, although this will be highly related to the 2nd stimulus package currently being debated in the house as well.
- On Thursday the democratic party delayed a vote on their $2.2tn stimulus package for further negotiations with the White House. S&P500 futures rose 0.9 per cent and NASDAQ 100’s rose over 1 per cent following this news due to the revived optimism from a potential stimulus deal. However, the Trump administration’s $1.5tn proposal lacks direct payment to US households, emergency unemployment benefits, federal aid to businesses, and further funding for municipalities and states that are low on available cash.
- Today, Friday 2nd October, Trump and Melania have both tested positive for Covid-19 but it is not known if they have symptoms. The NASDAQ opened 2% down, gold and silver are both up.
Global
- A number of emerging economies are at risk of defaulting on their debts unless temporary debt relief programs are extended. The IMF urged the G20 to implement a freeze on repayment of their loans to low-income countries until 2021 citing high levels of economic hardship ahead for already struggling countries.
- Changes to key sectors across every developed country’s economy is generally looking up although countries such as Italy and Spain have been seeing dips again this week due to the rising prominence of a second wave. This week has been positive for job vacancy growth in most countries that haven’t had second waves, other than Japan which has stagnated at over 25% below. All countries are recovering in terms of consumer spending well, although most are still down over 10%. Revenues from the tourist industry were improving until late august where they nearly broke back to normal yet are now back down just under 25% below.
- On Wednesday the European Central Bank (ECB) announced it had updated its inflation target from just below 2%, which it set in 2003, to exactly 2%. This has the aim of encouraging higher levels of fiscal stimulus and reduced monetary policy, as reflected in discussions on negative interest rates both domestically and in the EU.
- Thursday saw thousands of riot police deployed in Hong Kong to combat the largest protest since China implemented stricter national security laws back in June. These police are also specifically targeting journalists who are covering these protests in an act to suppress the freedom of the press. Alongside this, Chinese fighter jets flew over Taiwan on Monday showing rising unrest in these areas and likely implicating increased trade restrictions on China, rising tensions in the Chins-USA trade war.
As usual, here is the S&P500 weekly heatmap.
Thank you for reading and have a good weekend.