Stocks Gain on Stimulus Hopes in Choppy Trading

US stocks finished higher after a volatile session that saw traders whipsawed by reports on the outlook for a new round of government stimulus. The S&P 500 rose by 0.83% to 3,363.00 while Dow Jones was up 329.04 points (1.20%) to 27,781.70.

Fed’s Kaplan Says Markets Have Clarity on Fed’s Policy Path

Federal Reserve Bank of Dallas President Robert Kaplan said the central bank has been clear to investors and businesses on where the benchmark policy rate will be over the next few years. “The markets and the public have pretty good clarity,” Kaplan said. The markets expect that the fed funds rate is going to stay at zero probably until 2023.

Leisure, Hospitality Fared Worst in US Second-quarter Slump

The pandemic recession -- and the widespread US business closures it spawned -- weighed on nearly all industries, as restaurants, hotels and entertainment businesses fared the worst. US gross domestic product shrank at a 31.4% annualized rate in the second quarter, the Commerce Department’s third estimate showed. Twenty of 22 industry groups contributed to the decrease in output during the period.

ECB to Consider Inflation Overshoot in Echo of Fed Strategy

European Central Bank President Christine Lagarde said it’s worth examining a Federal Reserve-style strategy that allows inflation to temporarily rise above the institution’s target. A policy of committing to make up for low inflation after missing the goal for a while “could be examined” as part of the institution’s strategic review, Lagarde said. “If credible, such a strategy can strengthen the capacity of monetary policy to stabilize the economy when faced with the lower bound,” she said.

German Joblessness Falls for Third Month, Retail Sales Rise

German unemployment declined for a third month as Europe’s largest economy experiences a gradual recovery from the pandemic shock. A drop of 8,000 in September left the total number of jobless people at 2.91mn, the Federal Labor Agency said. The jobs market is currently being propped up by government subsidies, with close to 4mn workers on furlough programs, according to estimates by the Ifo Institute.

Thailand to Consider Fresh Stimulus Measures to Revive Economy

Thailand is considering offering tax incentives to its middle and upper income groups to bolster consumption as part of new measures to revive an economy reeling under the impact of the coronavirus pandemic. The nation’s top economic panel will meet on Oct. 7 to discuss the stimulus measures, which may take effect in the fourth quarter, Deputy Prime Minister Supattanapong Punmeechaow said. The tax breaks will come on top of the 51bn baht (US$1.61bn) cash handouts approved by the Cabinet on Tuesday that’s targeted at the low-income groups and welfare card holders, he said.

Philippines Seeks New US$11bn Advance From Central Bank

The Philippines has asked the central bank to lend it 540bn pesos (US$11.1bn) to help finance a budget deficit that’s under strain from Southeast Asia’s worst Covid-19 outbreak. The government plans to settle the debt on or before Dec. 29 at zero interest, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said. The request for a “fresh provisional advance” will be submitted to the Monetary Board for approval, he said.

Oil Falls Back to US$40 as Flight Slump Adds to Demand Concerns

Oil erased some of Wednesday’s gains as a seasonal drop in commercial flights exacerbated demand concerns. Brent crude for November settlement fell US$0.08 to US$40.95 per barrel.

Source: Affin Hwang Research - 1 Oct 2020