Markets fret as confusion over US stimulus package swirls – as it happened

Graeme Wearden

from on 2020-10-07 15:50 (#58VYJ)

Rolling coverage of the latest economic and financial news

Kudlow: Trump favours $1,200 checks and airline/payroll support
Trump: No stimulus package until after election
Oil falls after Wall Street selloff
Pelosi blasts complete disarray' at White House
UK house prices up... German factory output down

4.50pm BST

And finally... here's my colleague Dominic Rushe on the confusion around the US stimulus talks:

Economists warned on Wednesday that the US economy was facing a watershed moment" as Donald Trump vacillated on agreeing to a new round of stimulus cash for people and businesses hit by the coronavirus pandemic.

Trump pulled the plug on the fractious and lengthy discussions over more aid on Tuesday. I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill," Trump wrote on Twitter.

4.43pm BST

After a rather dull day in the European markets, the main indices have closed where they began!

The FTSE 100 ended 3 points lower at 5946. Rolls-Royce gained 4%, continuing its recent recovery from 17-year lows, along with mining companies and UK retailers such as Ocado and Kingfisher.

Dealers in this part of the world are a little downbeat on the back of yesterday's news that President Trump announced an end to the negotiations in relation to the coronavirus relief package.

Today, the US leader called on politicians to push for a unique bailout for the airline industry. The overall stimulus discussions will recommence after the presidential election but there was talk that Republicans and Democrats might work together on individual areas that they agree upon, so it is possible we could see a mini-version of stimulus programme.

4.27pm BST

Reuters reports that the hope of piecemeal' stimulus has lifted Wall Street today, saying:

The market's trying to read the tea leaves and today it's saying even if it's incremental progress, something is better than nothing," said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts.

4.22pm BST

Here's Connor Campbell, financial analyst at Spreadex, on Wall Street's turnaround Wednesday:

Against the odds the Dow Jones managed an aggressive rebound on Wednesday, more than reclaiming the losses incurred followed Trump's negotiations-ending announcement last night.

The sharp gains - the Dow was up 425 points, surging back to 28,200 - seem to be predicated on the fact that Trump wasn't necessarily anti-stimulus, but rather anti-Democrat. The proximity of the election was always going to make it tough to get a deal done - well, it wouldn't have if they had pulled their fingers out - and effectively the President opted for politics over policy.

4.05pm BST

Donald Trump has now repeated his call for $1,200 stimulus checks to be posted to Americans, rather than the broader stimulus package investors had been hoping for.

Move Fast, I Am Waiting To Sign! @SpeakerPelosi https://t.co/RYBeWWuPC2

Trump may have dented market confidence after calling of stimulus negotiations until the election, but the subsequent market recovery highlights the somewhat sceptical market outlook in the first place.

Trump's decision to call off stimulus negotiations came as the President stated that Democrats were not negotiating in good faith. However, this continued stimulus standoff highlights the importance of seeing one party take both sides of congress, with Jerome Powell warning that the recovery could falter if another stimulus package is not passed.

3.28pm BST

Goodbye Davos, Hello Lucerne!

The meeting will take place as long as all conditions are in place to guarantee the health and safety of participants and the host community.

2.43pm BST

Stocks have opened higher in New York, despite the ending of negotiations over a stimulus deal.

President Trump's tweet-storm cutting off talks of a fiscal stimulus until after the US election has left markets yet again uncertain, increasing volatility.

Pressure is mounting to deliver additional aid to struggling Americans and businesses, and to also sustain the economic recovery of the country. Though Trump has indicated he may be willing to approve some aid for airlines and small businesses using money left over from the previous stimulus, the pressure is only set to increase ahead of winter.

2.36pm BST

Larry Kudlow also seems to have also caused some confusion about the president's movements yesterday....

economic adviser Larry Kudlow to CNBC: The President actually showed up in the Oval Office yesterday, w/extra precautions. getting a lot better, much stronger. so there was some limited activity"

WH says Kudlow was wrong

Trump didn't go to Oval yesterday

cc: @jonathanchait

The president actually showed up in the Oval Office yesterday, with extra precautions with respect to his Covid-19, and he's getting a lot better," Larry Kudlow told CNBC today.

The White House says that's incorrect and that Trump did not go to the Oval yesterday. https://t.co/zNY2CvDMrG

2.32pm BST

Good morning. In case there was any confusion from Trump's tweets last night, White House Chief of Staff Mark Meadows today said: "The stimulus negotiations are off."

2.20pm BST

One of Donald Trump's top economic advisors has hit the TV stations to insist that the president would sign a bill with targeted help for parts of the US economy.

Larry Kudlow, director of the United States National Economic Council, told CNBC that the US still faces an emergency situation, although less so in recent weeks and months".

The data is getting better and better, I think there is a V-shaped recovery.

What President Trump was saying yesterday is, alright, we are too far apart for a gigantic bill.

It's too close to the election. Not enough time to get stuff done at this stage of the game.

On the demand side... the president would provide thousand dollar [$1,200] direct mail economic impact checks to keep thing going.

It's like an insurance policy.

"There are several things that we believe would provide great assistance to specific, targeted areas of this economy. I don't think the recovery depends on a massive assistance package," says NEC Director Larry Kudlow. pic.twitter.com/OOGjVhTxuZ

On the probability curve, further piecemeal aid "is probably still low-probability stuff. I don't want to rule anything out." - Kudlow, on @CNBC now

1.33pm BST

Getting back to the US.... Mohamed El-Erian, chief economic adviser at Allianz, has warned that delaying a new stimulus package until 2021 will cause economic harm to businesses (and thus individuals and families too).

He writes:

I am in no position to predict the outcome of the election or the prospects for improvements in public-health conditions. But I do have some confidence identifying possible economic scenarios and their consequences, and on this question, timing is important. Whether a comprehensive policy response is enacted now or in a few months bears directly on its potential impact.

After all, for every day that lawmakers delay, there will be even less hiring, more layoffs and greater risk of corporate bankruptcies, especially among the growing number of companies whose financial resilience is eroding as they face tighter lending conditions and their cash burns continue. Accordingly, the longer the delay, the greater the problems that any future package will have to address and the harder it will be to design and implement.

1.32pm BST

Greene King has blamed new government restrictions and the end of the furlough scheme for its decision to mothball some pubs, and close others permanently.

The continued tightening of the trading restrictions for pubs, which may last another six months, along with the changes to government support was always going to make it a challenge to reopen some of our pubs.

Therefore, we have made the difficult decision not to reopen 79 sites, including the 11 Loch Fyne restaurants we announced last week. Around one third will be closed permanently and we hope to be able to reopen the others in the future. We are working hard with our teams to try and find them a role in another of our pubs wherever possible."

1.15pm BST

Greene King's proposed job losses would add to a lengthy list of casualties from the pandemic, and the government's restrictions.

Already this week, Cineworld has announced all its screens will close with the loss of 5,500 UK jobs.

"Is there a scientific basis for the 10pm rule?" asks Labour's Keir Starmer

"The basis on which we set out the curtailment of hospitality was the basis on which he accepted it two weeks ago," says PM Boris Johnson "to reduce the spread of the virus"#PMQs https://t.co/N33tcd90SJ pic.twitter.com/p6SUbZdHnR

12.39pm BST

Sky News is reporting that the UK's 10pm curfew is forcing pub chain Greene King to close some outlets, putting hundreds of jobs at risk.

Here's the details:

One of Britain's biggest pub operators is preparing to close dozens of venues and cut hundreds of jobs following a slump in trade exacerbated by the government's 10pm hospitality industry curfew.

Sky News has learnt that Greene King on Wednesday started a consultation with 800 employees about a redundancy process.

Revealed: Greene King, one of Britain's biggest pub operators, is to close dozens of venues and cut hundreds of jobs after a slump in sales exacerbated by the 10pm hospitality industry curfew. https://t.co/BgAEzjnEJ5

12.17pm BST

Oxford Economics has warned that the US economic recovery could be jolted by the Donald Trump's decision to break-up stimulus talks.

They had already predicted that growth would slow sharply in October-December, even with some fresh stimulus. Without it, the economy could stall:

The @OxfordEconomics US real #GDP growth tracker stands at 33.2% (annualized) in Q3.

Importantly, Q4 growth looks much softer at 4.2% (annualized), even with + fiscal stimulus assumed.

Without stimulus, the economy could reach stall speed in Q4.

via @SoberLook pic.twitter.com/WACIkehCzP

Trump's decision to call off stimulus talks until after the elections could represent a watershed moment. Our baseline assumes the extension of a $1.2tn fiscal package, but the absence of additional aid could knock 1.5ppt off US GDP over the next year: https://t.co/O7ZcVpNRhu pic.twitter.com/8u3CqwshUS

11.59am BST

Labour's shadow business secretary, Ed Miliband, has written a vigorous criticism of the UK government's efforts to protect the economy.

He warns that Rishi Sunak's misnamed' jobs support scheme will fail to protect jobs, and help create unemployment misery this winter.

To be clear, this is a million miles from the successful German Kurzarbeit scheme.

It demands employers pay 55% support for 33% of the hours, offers half the level of government support compared with the German scheme and, in fact, gives an incentive to employ one person full-time rather than two part-time.

11.51am BST

After a late slump last night, Wall Street is on track to open a little higher in a few hours time.

The Dow is up 0.5% in the futures market, having shed 1.3% by the close last night.

JPMORGAN this AM: "Today appears to be a re-risking day as markets digest Trump's tweets and US futures are higher this morning."

11.28am BST

The oil price is sinking lower too, on disappointment that a comprehensive US stimulus package may not come until 2021.

Support being provided by a strike in Norway and the risk of supply disruptions as Hurricane Delta moves towards the Gulf of Mexico.

10.47am BST

European stock markets still have a reddish tint, as investors try to work out what's happening in the US stimulus talks.

Stocks fell after Donald Trump nixed hopes of a stimulus deal, or so it seemed. The S&P 500 declined 1.4% on the day having earlier traded higher.

But Trump also called for support for airlines and then sent a tweet addressing the House Democrat leader Nancy Pelosi: If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now. Are you listening Nancy?"

10.29am BST

Codemasters, the UK video game developer that specialises in racing games, has enjoyed a boom in gaming during the coronavirus lockdown.

10.12am BST

Halifax's Russell Galley also has a word of caution, to those pondering a house move.

It is highly unlikely that the housing market will continue to remain immune to the economic impact of the pandemic. The release of pent up demand and indeed the stamp duty holiday can only be temporary fillips and their impact will inevitably start to wane. And as employment support measures are gradually scaled back beyond the end of October, the spectre of increased unemployment over the winter will come into sharper relief.

Therefore while it may come later than initially anticipated, we continue to believe that significant downward pressure on house prices should be expected at some point in the months ahead as the realities of an economic recession are felt ever more keenly

10.09am BST

UK house prices continue to shrug off the pandemic, and have surged at their fastest pace in four years.

Mortgage provider Halifax has reported that house prices in September were 7.3% higher than a year ago, the strongest growth since June 2016.

Context is important with the annual comparison, as September 2019 saw political uncertainty weigh on the market.

Few would dispute that the performance of the housing market has been extremely strong since lockdown restrictions began to ease in May. Across the last three months, we have received more mortgage applications from both first time buyers and homemovers than anytime since 2008.

9.53am BST

Shares in Tesco have jumped 2.3% this morning, meaning it is jostling with Ocado and Taylor Wimpey for the top spot on the FTSE 100 leaderboard.

Investors are cheered that Tesco is hiking its interim dividend by over 20%, from 2.65p to 3.2p per share. This will see around 314m returned to investors (see note 7 in today's results)

Tesco results first impression: all the costs are coming in lower than forecast. Covid costs lower than expected in both H1 and H2. Bank provisions lower than forecast. Sets stage for bumper FY profit/dividend - cue calls to repay business rate relief?

Tesco's lockdown retail sales have come at a cost. The supermarket's UK wide footprint allowed it to adapt quickly to meet the needs of consumers, who have shifted their buying habits towards a one-stop weekly shop. But the price of its investment in meeting customer demand is a lack of profit in the short term.

What's not clear is whether Tesco will be able to maintain customer loyalty at a time when its competitors are innovating; an issue reflected in its share price. Discount supermarkets such as Aldi are diversifying their online strategies to cater for a long-term shift in consumer behaviour, introducing services such as click and collect", that, up to now, had been the preserve of the Big Four.

9.00am BST

Britain's biggest supermarket chain has given a timely illustration of the cost of the Covid-19 crisis, and the economic pain ahead.

Tesco told the City that the bill for extra Covid-19 protection, more temporary staff, sick pay for isolating staff and other disruption has now hit 533m.

Tesco spent more than 500m dealing with the coronavirus pandemic over the last six months and has warned of mounting losses at its bank as the deteriorating economy takes its toll on consumers' finances.

Britain's biggest supermarket chain said UK food sales had surged more than 9% in the six months to 29 August. However, the bill for extra safety measures in its stores hit 533m.

8.49am BST

German factory output has taken an unexpected drop last month, suggesting that the recovery in Europe's largest economy may have slowed.

Industrial output across Germany fell by 0.2% in August, startling economists who expected a rise of 1.5%.

German industrial output unexpectedly drops as virus spreads https://t.co/QFQPpx98eG via @Skolimowski pic.twitter.com/SvAaP8lhtC

Since the easing of lockdown measures in April, there has been an ongoing recovery since May, even if there was a slight decline in August."

In fact, assessing this kind of backward-looking data is currently like looking at pictures of a great summer holiday, the economic prospects for the final quarter resemble the current view out of the window at 8am in the morning: grey and rainy.

While yesterday's industrial orders data gave hope that the manufacturing rebound could last into the final quarter, new restrictions on the back of an increasing number of new infections don't bode well for the service sector.

8.10am BST

Some European stock markets have opened a little lower, with Spain's IBEX down 0.3% and France's CAC off 0.1%.

So, no full-blown panic about president Trump's move - but traders are somewhat fretful, and wondering how Wall Street will react today.

The U.S. futures are fluctuating between gains and losses as investors continue to digest the new decision by President Trump on the stimulus package....

The U.S. airline stock fell hard on the back of Trump's new move. Nancy Pelosi, House Speaker, did assure the U.S. airlines not to let go of their furlough employee as help is on the way. However, the fact that Trump isn't going to do anything about this, it means that airlines will have no other way to but to let people go.

7.44am BST

Deutsche Bank told clients this morning that Trump's decision to halt stimulus package talks is a shock.

Particularly as America's top central banker has been pushing for more fiscal support, fearing that the recovery could falter.

President Trump once again took control of the headlines yesterday when he tweeted late in the US session that he had instructed White House negotiators to stop further US stimulus discussions with Congressional Democrats until after the election. He argued that Speaker Pelosi was not arguing in good faith" and that he wants Congress to focus on the Supreme Court nomination of Judge Barrett instead. This came as a surprise after relatively positive headlines from Pelosi and Treasury Secretary Mnuchin earlier in the week, and also represented a reversal in tone given comments late Monday from White House Chief of Staff Meadows, who said There are a lot of people that continue to hurt, are waiting on stimulus, and the President's committed to getting a deal done...He wants to make sure we move expeditiously, but also in a fiscally responsible manner."

The tweet also came just a few hours after Fed Chair Powell's speech at the NABE's annual meeting. While not much new information was proffered, Powell made one of his plainest cases for fiscal stimulus yet, saying the risks of policy intervention are still asymmetric", and that the risks of overdoing it seems, for now, to be smaller" compared with the risks of offering too little support. If the current polling at both the national and state level holds, and former Vice President Biden were to win the election in November, fiscal stimulus may indeed come but will have to wait until Q1 of next year when a new government is seated.

7.35am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business,"

The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support, & 135 Billion Dollars for Paycheck Protection Program for Small Business. Both of these will be fully paid for with unused funds from the Cares Act. Have this money. I will sign now!

If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now. Are you listening Nancy? @MarkMeadows @senatemajldr @kevinomccarthy @SpeakerPelosi @SenSchumer

Dow closes almost 400 points lower after Trump calls off stimulus, causing sudden drop in stocks. https://t.co/G7w8ENqW7o pic.twitter.com/uIetPZSIHf

The White House is in complete disarray."

Clearly, the President is looking to turn the tables and take back control of the election narrative and put the ball back in the Democrats' court with his standalone $1,200 stimulus check suggestion via Twitter.

Major fiscal stimulus is off the table until after the election. The most that markets can expect before then is income support for individuals that would be positive for risk sentiment at the margin. Income support should not however be conflated with expectations for the post-election stimulus that relies on a Democratic sweep of Congress.

European Opening Calls:#FTSE 5944 -0.10%#DAX 12891 -0.12%#CAC 4884 -0.24%#AEX 554 -0.27%#MIB 19339 -0.47%#IBEX 6908 -0.41%#OMX 1837 -0.12%#STOXX 3226 -0.21%#IGOpeningCall

Source	RSS or Atom Feed
Feed Location	http://feeds.theguardian.com/theguardian/business/economics/rss
Feed Title
Feed Link	http://feeds.theguardian.com/