- Weekly global market focus
- U.S. Covid infections turn higher
- Congress expected to make progress on a CR this weekÂ
- U.S. election approaches with little change in betting odds
Weekly global market focus — Market attention in the U.S. markets this week will focus on (1) Washington politics with key agenda items including the need for a continuing resolution by next Wednesday, any progress in pandemic stimulus bill negotiations, the process for replacing Justice Ginsburg on the Supreme Court, and the upcoming election on Nov 3, (2) U.S./Chinese tensions with China possibly preparing to retaliate with its unreliable entities list for the Trump actions against Tik-Tok and WeChat, (3) three appearances this week by Fed Chair Powell before Congressional committees, (4) the U.S. pandemic infection rates, (5) the Treasury’s sale of $177 billion of T-notes, (6) earnings reports by eight of the S&P 500 companies, and (7) an economic calendar dominated by housing reports and Wednesday’s Markit U.S. PMI reports.
In Europe, the focus will be on Brexit developments, Wednesday’s Eurozone Markit PMI reports, and the EU Summit on Thursday and Friday.
Informal Brexit talks will continue this week despite the disruption caused by UK Prime Minister Johnson’s Internal Markets Bill, which violates the Brexit Withdrawal Agreement and sparked outrage among EU officials. PM Johnson continues to press for Parliament and the House of Lords to approve the Bill. The next formal round of Brexit negotiations will begin next Monday (Sep 28), which is due to be the last round of talks before an agreement target date of just before the October 15-16 EU Summit.
In Asia, the focus will mainly be on U.S./China tensions. China on Saturday released details on the consequences of U.S. or foreign companies being named to its “unreliable entities” list. The markets are waiting to see if China names companies to that list, such as Apple, in retaliation for the Trump administration’s moves against Huawei, Tik-Tok, WeChat, and other companies.
President Trump over the weekend said he approved in principle the deal for Oracle/WalMart deal to invest in TikTok Global, and he delayed Sunday’s ban on software downloads of Tik-Tok. However, the Chinese government must still sign off on the deal. Meanwhile, a U.S. federal court blocked the Trump administration’s attempt to halt downloads of WeChat as of Sunday.
U.S. Covid infections turn higher — The 5-day average of new U.S. Covid infections fell to a 2-month low of about 34,000 in early September, according to Johns Hopkins. However, the 5-day average has since risen above 40,000, mainly because of college students returning to campus. The U.S. Covid infection rate shows no sign of evaporating before an effective and widely-available vaccine becomes available, possibly by early next year. There was some good news last week as India’s runaway infection rate finally peaked and turned somewhat lower. Brazil remains in third place in new infections behind India and the U.S.
Congress expected to make progress on a CR this week — The House this week is expected to bring a continuing resolution (CR) to the floor for a vote, thus allowing the Senate to pass the bill before a government shutdown would otherwise occur next Wednesday (Oct 1). Bloomberg reported that the House and Senate are discussing a CR that would last until Dec 11, which would mean that another CR or an omnibus spending bill would have to be passed during the lameduck session after the Nov 3 election.
Bloomberg reported that farm aid emerged as a last-minute issue that delayed the CR. The markets are expecting Washington to finalize a CR by next week because no one in Washington wants to be blamed for a government shutdown this close to the election.
Meanwhile, there has been no movement in the past few days towards any serious negotiations on a new pandemic bill. Fed Chair Powell at his three appearances before Congressional committees this week is likely to again plead for fiscal help. Monetary policy has already done everything it can and yet the economic recovery is being threatened as previous fiscal stimulus measures fade.
President Trump two weeks ago expressed some interest in the $1.5 trillion plan offered by the House bipartisan Problem Solvers group. However, House Speaker Pelosi said Democrats would not come down from their last offer of $2.2 trillion. Senate Republicans are not interested in a package larger than $1 trillion. The White House is making no move to kickstart the negotiations.
The markets continue to have little hope for any serious negotiations on a new pandemic bill until after the Nov 3 election. Senate Majority Leader McConnell is aiming to recess late this week or early next week until the election to give his Republican members who are up for reelection a chance to hit the campaign trail. However, those plans for a recess have been upset to some degree by Mr. McConnell’s statement that the Senate will vote as soon as possible for a replacement for Justice Ginsburg, who died Friday night.
U.S. election approaches with little change in betting odds — U.S. election is now only six weeks away on Nov 3. Meanwhile, the first of the three Trump-Biden debates will be held next Tuesday (Sep 29), with the second and third debates on Oct 15 and Oct 22. The only vice-presidential debate will be held in two weeks on Oct 7.
The betting odds at PredictIt.org, for whatever they are worth, were little changed in the past week. The betting odds are at 59% for a Biden win versus 45% for a Trump win. The betting odds for control of the Senate are at 57% for the Democrats and 47% for the Republicans. The betting odds for control of the House are at 85% for the Democrats and 17% for the Republicans