Bassanese Bites: Stimulus hopes – October 06 2020
Global markets
Global equities enjoyed their first positive week in a month, largely on the back of U.S. fiscal stimulus hopes – and despite polls suggesting Biden is now even more likely to win the Presidential election following a steady performance in last week’s debate. Of course, the week ended with Trump contracting COVID-19 which, while initially causing market jitters in Asian trading on Friday, was soon forgotten by Wall Street given he seems to have made a speedy recovery – and because it’s still salivating over the prospect of more stimulus.
Risk-on sentiment saw the strengthening $US give ground last week, which in turn supported gold prices. Bond yields also edged higher, with U.S. 10-year yields reaching 0.7% – or the top end of its range since spiking to over 1% in early June. Of interest in coming weeks will be whether U.S. yields continue to push on if risk-on equity sentiment prevails – or if (perhaps due to central bank intervention) they remain suspiciously low.
Overall, U.S. economic data continues to show an economy recovering reasonably well, albeit with the pace of recovery slowing (as seemed inevitable) over recent months. Encouragingly, weekly jobless claims fell a bit more than expected last week, and while overall employment growth in September was somewhat weaker than expected (at +660k), this appears partly related to seasonal quirks around public school employment (which, due to ongoing closures, did not bounce back as much as usual in September). Private sector employment rose by 877k, and the unemployment rate dropped to 7.9%, from 8.4%. The recovery in U.S. employment is outlined in the chart below.
