Stocks Fall, Bonds Rise After Stimulus Talks Ended

US stocks tumbled and bonds soared after President Donald Trump said he is ending stimulus talks until after the election, just hours after Federal Reserve Chairman Jerome Powell renewed his warning that the economy will stumble without additional fiscal support. The S&P 500 fell by 1.40% to 3,360.95 while Dow Jones was down 375.88 points (1.34%) to 27,772.76.

Trump Halts Stimulus Talks, Spurning Powell and Roiling Markets

President Donald Trump ended talks with Democratic leaders on a new stimulus package, hours after Federal Reserve Chair Jerome Powell’s strongest call yet for greater spending to avoid damaging the economic recovery. “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,” Trump said in a tweet.

Powell Warns of Weak Recovery Without Enough Government Aid

In one of his strongest appeals to date, Federal Reserve Chair Jerome Powell warned of a weak US recovery without sufficient government aid and said providing too much stimulus wouldn’t be a problem. Powell’s remarks were followed a few hours later by President Donald Trump telling his negotiators to halt talks.

ECB Urges More Economic Stimulus for Faltering Pandemic Recovery

Two of the European Central Bank’s top officials signaled the need for extra monetary and fiscal stimulus as the euro zone struggles to sustain its economic recovery from the coronavirus pandemic. ECB President Lagarde said that a “cliff effect” in which fiscal aid is withdrawn too soon is her greatest fear, while chief economist Philip Lane said it could be “prudent” to add extra monetary support to sustainably lift inflation.

French Economic Rebound Grinds to a Halt as Virus Crushes Growth

The French economy is set to stagnate in the last three months of the year, as uncertainty and the risk of lockdowns stifle investment and consumer spending in the euro area’s second-largest economy. Insee, the country’s statistics agency, downgraded its growth forecast to zero from 1%. It said sentiment surveys are “tinged with worry” about the near future.

Australian Central Bank Keeps Policy on Hold, Awaits Budget

Australia’s central bank kept monetary policy unchanged, clearing the field for the government to unveil a fiscal blueprint designed to drive the economy’s recovery from a Covid-induced recession. Reserve Bank Governor Philip Lowe kept both the key interest rate and three-year yield target unchanged at 0.25%. The labor market is a key focus for the bank, which is due to release fresh forecasts next month, he said.

Vietnam Says 31.8 Million Citizens Economically Hurt by Virus

About 31.8 million Vietnamese have suffered economically this year through September because of the coronavirus epidemic, according to a survey by the General Statistics Office. Their setbacks range from lost jobs and furloughs to reduced working hours, it said. As a result the nation’s labor force has shrunk by 1.2 million workers to 54.4 million during the period..

Oil Pares Gains With Stimulus Doubts Threatening Demand Rebound

Oil pulled back from a two-week high in New York after President Donald Trump said he’s halting stimulus talks until after the election, sapping optimism for a much-needed boost in demand. Brent crude for December settlement rose US$1.36 to US$42.65 per barrel.

Source: Affin Hwang Research - 7 Oct 2020