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LGT Navigator: New dispute in the US Congress after Trump's one-sided action

August 10, 2020

Because Republicans and Democrats have so far been unable to agree on another corona aid package, US President Donald Trump has passed a resolution bypassing Congress to increase unemployment benefits. Meanwhile, Joe Biden is expected to announce his pick for vice president this week. Twitter announces interest in the Chinese video platform TikTok. 

Earnings season remains in focus of stock markets

Asian stock markets started the new week without a clear trend. The Shanghai Composite gained almost +0.6%, while the Hang Seng Index (-0.2%) in Hong Kong and the Nikkei (-0.4%) in Tokyo fell. Good economic data from China, which signals an economic recovery, is supporting the markets. However, investors remain cautious after the tensions between China and the United States increased last week. The US President has ordered that the use of the video app TikTok and the chat service WeChat will be banned in the US by mid-month. Both applications are operated by Chinese companies. At the weekend, it became known that Twitter is exploring possibilities to take over the US business of TikTok. Last week Microsoft had already expressed interest in the app.

Trump bypasses Congress

US President Donald Trump signed a resolution last Saturday to increase unemployment benefits by USD 400 per week until December 6th. This after negotiations in Congress on the continuation of a corona aid package failed to produce any results. Trump has ordered the government to pay USD 300, with another USD 100 to be financed by the states. A package of measures expired on July 31, which among other things provided USD 600 per week to job seekers. Republicans and Democrats on both sides are negotiating the conditions for the continuation of the financial aid. However, resistance is forming against Trump's actions. Nancy Pelosi, the Democratic spokeswoman in the House of Representatives, has declared the bypassing of Congress unconstitutional. 

The unemployment rate in the US fell to 10.2% in July, after 11.1% in the previous month. Nevertheless, 16.3 million Americans are still looking for work. This is 10.6 million more than in February before the pandemic started.

Biden's number two

Joe Biden is expected to announce an important decision this week. Thus, the Democratic presidential candidate is expected to announce his pick for vice-president in the coming days. Biden has announced that he will appoint a woman to the position. The decision could be a landmark in the race for the Presidency: With Biden already 77 years old, a second term is unlikely if  he is elected on November 3rd. This is likely to put the number two in the White House in a good position to fight for his succession.

Industrial production recovers

In Germany, export activity is recovering from the corona shock in spring. In June, companies exported +14.9% more than in the previous month, the highest growth rate in around thirty years. Nevertheless, exports are still well below the previous year's level. Companies delivered goods worth EUR 96bn abroad, which represents a nearly -10% decline compared to the previous year. Imports also increased within a month (+7%), although they are still much lower than in the previous year (-10%).

There are also signs of recovery in the European industry. For example, production in Germany rose by +8.9% month-on-month in June, after activity had already expanded in May. However, it will take some time before the setback triggered by the corona crisis is recovered: the Federal Ministry of Economics estimates that industrial production currently stands at 87% of pre-crisis levels. Industrial companies in France (+12.7%) and Spain (+14%) have also boosted activity for the second consecutive month.



Economic Indicators August 10

MEZ Country Indicator Last
03:30 CN Consumer price index (July) -0.1%
07:45 SZ Unemployment (July) 3.2%
10:30 EZ Sentix economic index (August) -18.2
16:00 US Job openings (June) 5.4m

Earnings Calendar August 10

Country Corporate Period
US Barrick Gold Q2


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Source: LGT Bank (Switzerland) Ltd.

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US employment growth remains dynamic at the beginning of the year