- Weekly global market focus
- Election betting odds swing sharply towards the Democrats
- U.S. pandemic infection figures rise to 1-1/2 month high
- U.S. ISM services PMI expected to fall but remain relatively strong
Weekly global market focus — The U.S. markets this week will focus on (1) President Trump’s Covid infection, along with the impact of his health on the chances for a stimulus bill and the November 3 election, (2) concern that the U.S. economic recovery is fading after last Friday’s weaker-than-expected payroll report, (3) the rising U.S. and European Covid infection figures, (4) a busy week for Fedspeak with 12 appearances by various Fed officials and with Fed Chair Powell speaking on Tuesday, (5) the Treasury’s auction of $110 billion of 3-year, 10-year, and 30-year securities on Tuesday through Thursday, and (6) anticipation of Q3 earnings season, which begins next week with reports from major Wall Street banks.
In Europe, the focus will be on the Brexit negotiations, which will continue this week ahead of next week’s soft deadline of the Oct 15-16 EU Summit. ECB President Lagarde has speaking engagements on Tuesday and Wednesday. The account of the ECB’s Sep 9-10 meeting will be released on Thursday.
The Chinese markets are closed today through Thursday for National Day. Wednesday night’s Sep Caixin China services PMI is expected to show a +0.2 point increase to 54.2, more than reversing Aug’s -0.1 point decline to 54.0.
Chances for pandemic stimulus bill may improve after President Trump’s tweets support — House Speaker Pelosi and Treasury Secretary Mnuchin last Friday continued their talks about a stimulus deal. The odds for a stimulus bill may have improved after President Trump on Saturday tweeted his support for a stimulus deal from his hospital room at Walter Reed Medical Center by saying that the U.S. “wants and needs stimulus, work together and get it done.”
Treasury Secretary Mnuchin last week offered Democrats a $1.6 trillion deal, but Mr. Trump’s tweet on Saturday may suggest that he is willing to go higher. There was also an optimistic note when Senate Majority Leader McConnell last Friday said, “I think we’re closer to getting an outcome.” The House last Thursday approved Speaker Pelosi’s $2.2 trillion stimulus bill.
House members last Friday left Washington for a recess that is scheduled to last until after the November 3 election. However, House members can be called back to Washington at any time if a vote is necessary on a stimulus bill.
The Senate was originally scheduled to be in session this week, but Mr. McConnell over the weekend said that Senate members will not be called back into session until Oct 19 because three Republican Senators have been diagnosed with Covid (Lee, Tillis, Johnston). Mr. McConnell said the Senate Judiciary Committee will begin hearings next Monday (Oct 12) on Amy Coney Barrett’s nomination for the Supreme Court.
Election betting odds swing sharply towards the Democrats — The presidential election campaign is in the final stretch with only 29 days left until the November 3 election. President Trump is expected to remain at Walter Reed Medical Center until at least early this week as he battles a Covid infection.
There have been no decisions as yet about the last two Trump-Biden debates that were scheduled for next Thursday (Oct 15) and the following Thursday (Oct 22). The only vice-presidential Pence-Harris debate will be held this Wednesday (Oct 7).
The betting odds at PredictIt.org, for whatever they are worth, moved sharply in Mr. Biden’s direction last week by a spread of 15 points, mainly because of the outcome of last Wednesday’s debate and President Trump’s Covid diagnosis. The betting odds as of Sunday were at 65% for a win by Mr. Biden (up 8 points from 57% the prior week) and 39% for a win by Mr. Trump (down 7 points from 46% the prior week).
The betting odds for control of the Senate swung sharply in the past week by 20 points in favor of the Democrats and are now at 68% for the Democrats (up 11 points from 57% points a week earlier) and 36% for the Republicans (down 9 points from 45% a week earlier). The betting odds for control of the House swung by 11 points in favor of the Democrats last week and are currently at 88% for the Democrats (up 6 points from 82% a week earlier) and 15% for the Republicans (down 5 points from 20% a week earlier).
U.S. pandemic infection figures rise to 1-1/2 month high — The markets in the past two weeks have displayed concern about the rising Covid infections figures in the U.S. and indeed in many parts of the world. Europe is seeing major problems with a record level of new infections in various countries.
In the U.S., the 7-day average of new infections last week reached a new 1-1/2 month high of about 46,000, rising from the early-Sep 3-month low of about 34,000, according to Johns Hopkins. U.S. infection rates are rising due to students returning to school and the relaxation of earlier restrictions in some areas.
U.S. ISM services PMI expected to fall but remain relatively strong — The consensus is for today’s Sep ISM services index to fall by -0.7 points to 56.2, adding to Aug’s -1.2 point decline to 56.9. Despite expectations for a back-to-back Aug-Sep decline, today’s expected report of 56.2 would still be relatively strong, indicating that confidence remains high in the U.S. service sector. The index plunged to an 11-year low of 41.8 in April, rebounded to a 1-1/2 year high of 58.1 in July, and then fell back to 56.9 in August.
