Stocks Drop on Stimulus Deadlock as Banks Tumble

Stocks fell on speculation that recent gains have outpaced prospects for a quick end to the stalemate over fresh economic stimulus. Treasuries and the dollar climbed. The S&P 500 fell by 0.63% to 3,511.93 while Dow Jones was down 157.71 points (0.55%) to 28,679.81.

US Inflation Gauge Increases at Slowest Pace in Four Months

A key measure of US consumer prices rose in September at the slowest pace in four months, signaling little threat of accelerating inflation as the economy recovers. The consumer price index rose 0.2% from the prior month after a 0.4% gain in August. Compared with a year earlier, the gauge increased 1.4%, after August’s 1.3% rise. The core CPI, also increased 0.2% from the prior month and climbed 1.7% from a year ago.

IMF Sees Shallower Recession, Tough Path Back to Recovery

The International Monetary Fund warned that the world economy still faces an uneven recovery until the coronavirus is tamed even as it offered a less-dire view of this year’s recession following massive stimulus from central banks and governments. The fund now forecasts world gross domestic product to shrink 4.4% this year, compared with the 5.2% drop seen in June, according to the latest World Economic Outlook released. For 2021, the IMF sees growth of 5.2%, down from 5.4%.

EU Weighs When to Hit US Products With Tariffs Approved by WTO

The European Union won World Trade Organization permission to hit US$4bn of American goods with tariffs but will likely hold fire until after the US presidential election next month, according to three officials familiar with the EU’s thinking. The EU has drawn up a list of American products to hit with levies.

Investor Hopes for German Economy Drop Amid Virus Resurgence

Investor confidence in the outlook for Germany’s economy plunged, in a sign of concern that resurgent infections could hurt the recovery. A gauge by the ZEW dropped to 56.1 in October -- the lowest in five months -- from 77.4 in September, below even the most pessimistic estimate in a Bloomberg survey. The measure for the euro area also dropped. The loss of confidence came alongside a report from the country’s central bank warning of strains in the financial system from company failures and debt problems.

UK Job Cuts Jump Most on Record With More Pain on the Way

UK job cuts jumped the most on record in the three months through August even as lockdown eased, raising concern that the worst is yet to come. The number of redundancies climbed 114,000 in the June-August period, the most since 1995, the Office for National Statistics said. That left the total at 227,000, a rate of more than 8 per 1,000 employees.

Bank Indonesia Holds Rate as It Focuses on Debt Purchases

Indonesia’s central bank kept its policy rate unchanged as it uses other measures, like government bond purchases, to help shore up the economy. Bank Indonesia kept its seven-day reverse repurchase rate at 4%. The central bank has been buying bonds directly from the government to help fund stimulus measures, and has also eased banks’ reserve ratio requirements as well as liquidity rules.

Oil Rises With Robust China Crude Imports Lifting Demand View

Oil advanced after data showing a rise in China crude imports signaled strengthening demand, even as uncertainty over US fiscal stimulus kept price gains in check. Brent crude for December settlement increased by US$0.73 to US$42.45 per barrel.

Source: Affin Hwang Research - 14 Oct 2020