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LGT Navigator: US election campaign and hick-hack for economic stimulus package sets the pace

October 9, 2020

The US presidential election campaign remains turbulent. After the organizing committee for the TV presidential debate had announced that the next duel between President Trump and Biden would be carried out by video due to Trump's corona infection, the President unceremoniously cancelled his participation. In current polls, Biden seems to be able to extend his lead. Meanwhile, there is still great uncertainty regarding the US corona stimulus package.

US election campaign and hick-hack for economic stimulus package sets the pace

After US President Donald Trump abruptly broke off negotiations on the long-awaited corona aid package and put separate state aid for airlines, for example, on the table, the Democrats now rejected this plan. The President of the House of Representatives, Nancy Pelosi, said yesterday that such aid should only be discussed as part of a comprehensive aid package. Meanwhile, the parties at least seem to be talking again and on Wall Street, investors have still not given up hope for further US economic stimulus packages. As a result, the Dow Jones Industrial rose by +0.43% to 28 425.51 points and the broad-based S&P 500 even closed +0.8% higher at 3 446.83 points. The latest labor market data from the USA provided little impetus yesterday. These more or less confirmed that the situation remains tense. Last week (as of October 3), 840 000 Americans applied for unemployment benefits for the first time. This is only 9 000 fewer applications than the week before and more than analysts had expected with 820 000. After all, this is the lowest figure since mid-March. The number of current applications fell in the week to September 26 from around 11.8 million to just under 11 million applications.

In Asia, once again no uniform trend could be seen this morning. While the Nikkei index in Tokyo was slightly down before the weekend, the Chinese stock indices recorded solid daily gains. For the start of trading in Europe, however, the futures market only signals an opening just above Thursday's level.

ECB keeps all (remaining) options open

In its minutes of the last interest rate decision in September, published yesterday, the European Central Bank (ECB) emphasized that it would keep all doors open in terms of monetary policy because of the continuing uncertainties in the corona crisis. The ECB would maintain its flexibility to act appropriately in monetary policy and would continue to closely analyze the current economic situation as well as the euro exchange rate, the Brexit negotiations and the US elections. The ECB's next interest rate decision is scheduled for October 29.

Bank of England signals further readiness to act

The British central bank is prepared to extend its support measures to contain the negative impact of a second pandemic wave on the domestic economy. The Bank of England will “use its firepower appropriately, properly and vigorously in response to a second or third wave“, stressed BoE Governor Andrew Bailey. Currently, the risks for the economy are pointing very strongly downwards. In the wake of the corona crisis, the Bank of England has already lowered its key interest rate to a record low of +0.1% and launched an extensive securities purchase program.

SNB Chairman Jordan emphasizes the stability of the Swiss franc

According to the President of the Swiss National Bank (SNB), Thomas Jordan, the price level in Switzerland has never been more stable and thus the stability of the Swiss franc has never been higher than in the last 20 years. Even in the longer term, the franc is extremely stable in value by international standards. According to Jordan, the unprecedented expansion of the central bank money supply in recent years does not pose a particular risk to the stability of the franc's value. The SNB had responded solely to the increase in demand in a crisis phase by increasing the supply of money. Without this expansion of the central bank money supply, the price level would have fallen sharply and the franc would have appreciated even more, the SNB chief said.

Recovery in German foreign trade continues, but loses momentum

German exports rose for the fourth consecutive month in August, confirming a recovery from the corona shock. Compared with the previous month, exports grew by +2.4% more than analysts had forecast (consensus +1.5%). Following the strong recovery in the months before (May: +9.0%, June: +14.9% and July: +4.7%), however, the momentum seems to have clearly slackened. Since the beginning of the year, however, German exports are still -12.7% below the same period of the previous year. Imports also rose much more strongly than forecast compared with the previous month, increasing by +5.8% (consensus +1.4%). The Association of German Exporters (BGA) spoke of “a recovery at a low level“ and the Association of German Chambers of Industry and Commerce (DIHK) expects an “uncomfortable autumn“.


Economic Indicators October 9

MEZ Country Indicator Last
08:00 UK Industrial Production (August, y/y) -7.8%
08:45 FR Industrial Production (August, y/y) -8.3%
10:00 IT Industrial Production (August, y/y) -8.0%

Earnings Calendar October 13

Country Corporate Period
US JPMorgan Chase Q3
US Citigroup Q3
US Johnson & Johnson


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