US Stocks Drop With Spending-aid Deal Elusive

US stocks fell to the lowest in almost two weeks as Congress remained apart on a fresh government spending deal, denting hopes for a breakthrough before the election. Treasuries slipped with the dollar. The S&P 500 fell by 1.63% to 3,426.92 while Dow Jones was down 410.89 points (1.44%) to 28,195.42.

Clarida Says Economy Facing Lengthy Recovery Amid Uncertainty

Federal Reserve Vice Chair Richard Clarida said the US economy faces a long and uncertain recovery from the Covid-19 pandemic, and requires continued support from monetary and fiscal policy. “It will take some time to return to the levels of economic activity and employment that prevailed at the business cycle peak in February, and additional support from monetary and likely fiscal policy will be needed,” Clarida said.

Fed’s Bostic Warns More Permanent Layoffs Pose Risk to Recovery

Slowing US employment gains and an increased proportion of permanent layoffs could undermine the economic recovery with disproportionate harm to minorities, said Federal Reserve Bank of Atlanta President Raphael Bostic.“Widespread permanent job loss could become a material risk to the recovery,” Bostic said. The data on this are clear: permanently laid off workers find it far more difficult to rejoin the labor force.

Bank of Canada Sees Lingering Weakness in Business Sentiment

Business sentiment in Canada improved over the summer but remains near historical lows as uncertainty around the path of the virus curbs demand and sales prospects, according to the Bank of Canada. The results from the autumn Business Outlook Survey show businesses report conditions have improved as warmer weather and lower Covid-19 case counts encouraged consumers to go out and buy goods and services.

Lagarde Urges EU to Consider Recovery Fund as Permanent Tool

European Union leaders should consider whether the region’s 750bn-euro (US$878bn) recovery fund could be made a permanent tool, according to European Central Bank President Christine Lagarde. “This recovery plan tool is a response to an extraordinary situation,” she said. “We should discuss the possibility of it remaining in the European toolbox so it could be used again if similar circumstances arise.”

China’s Economy Plows on as World’s Only Major Growth Engine

China’s recovery from the coronavirus slump continued in the third quarter and showed signs of broadening in September, keeping the economy on track to be the world’s only major growth engine and validating Beijing’s aggressive approach to controlling the pandemic. GDP expanded 4.9% in the third quarter from a year ago, missing economists’ forecast for a 5.5% expansion.

Korea’s US$35bn Rescue Fund Sells Debt as Airlines Seek Help

A South Korean fund established to prevent major companies from going bankrupt during the Covid-19 pandemic is selling its first bonds, as struggling carriers seek support. The 40trn won (US$35bn) Key Industry Stabilization Fund, managed by Korea Development Bank, plans to take about 200bn won in bids for 3.5-year notes. The bonds are guaranteed by the government.

Oil Declines on Stimulus Doubts as More OPEC+ Supply Looms

Oil fell for a fourth day as an agreement on more US stimulus remained elusive, while OPEC and its allies showed no sign of changing course on plans to pare output cuts in January. Brent crude for December settlement declined by US$0.31 to US$42.62 per barrel.

Source: Affin Hwang Research - 20 Oct 2020