Risk On Amid US Stimulus Hopes
Fiona Cincotta October 1, 2020 7:47 AM
Hopes that a US fiscal stimulus package could be just around the corner, in addition to upbeat US data, is driving demand for riskier assets as trading kicks off in Europe.
Europe is pointing to a stronger start as optimism from the US spills over. Hopes that a US fiscal stimulus package could be just around the corner, in addition to upbeat US data, is driving demand for riskier assets as trading kicks off in Europe.
Additional fiscal stimulus could be just around the corner in the US after US Treasury Secretary Steve Mnuchin said that talks are progressing very well. He offered a $1.6 trillion package and said that an understanding could be reached today (Thursday). Signs of upcoming fiscal relief in the world’s largest economy is boosting risk appetite and the risk on trade, supporting stocks as reflected by rising equity markets and US futures and demand for riskier currencies.
Hopes of US stimulus is keeping oil steady above $40 after a strong runup overnight. Demand fears have taken the black gold on a wild ride over the past few sessions and across September as a whole. WTI slumped over 5% last month amid fears that resurging covid infections and tighter restrictions to stem the spread of the virus would hit demand again.
In the UK encouraging news regarding the R rate is adding to the improved market mood. The latest study from Imperial College shows that the latest lockdown restrictions are working and the R rate is on its way back down towards the golden figure of 1. This raises the chances that the UK will avoid a economically ravaging national lockdown part 2.
Attention will now turn to manufacturing PMI data for further clues over the recovery of the UK economy. Expectations are for a confirmation of the initial 54.3 reading as the pace of expansion remains strong but eases back from the August’s level, which saw the sector expand at its fastest rate in 6 year at 55.2. Manufacturing has led the economic recovery so far. Investors will be keen to see that the strength in the sector is holding up whilst the service sector comes under increasing pressure from local lockdowns and nervous consumers.