The Friday Market Minute
- Global stocks mixed as surging coronavirus infections threaten recovery while U.S. lawmakers flirt with a fresh stimulus effort before the election break.
- U.S. coronavirus infections top 7 million, with record daily increases in France, as the autumn resurgence worries heath officials and political leaders around the world.
- Congressional Democrats craft a $2.2 trillion stimulus package, and plan a vote next week, but remain far apart from the $1 trillion Republicans would prefer to spend before the election break.
- Oil prices hold modest gains as traders close out a 2% decline for the week, with U.S. crude hovering just over the $40 per barrel mark.
- U.S. equity futures suggest a mixed open on Wall Street ahead of durable goods orders at 8:30 am Eastern time.
U.S. equity futures slipped lower Friday, while the dollar’s recent rally stabilized and commodity prices edged lower, as investors look to close out a difficult week with optimism linked to a potential stimulus deal from Washington.
Federal Reserve Chairman Jerome Powell reiterated his view that fiscal support is needed from Congress to support the myriad central bank programs that are both propping-up the U.S stock market and providing near-term, yet fading, support for the broader economy.
Powell t told lawmakers on Capitol Hill yesterday that, while American savings rates have increased during the coronavirus pandemic, “the risk is that (people) go through those savings, and they haven’t been able to find employment … Their spending will decline, their ability to stay in their homes will decline.”
“The economy will begin to feel those negative effects,” Powell cautioned.
With those warnings echoing around Washington this week, and coronavirus cases topping the 7 million mark — and daily infections rising to record levels in some European states — House Democrats crafted a $2.2 billion stimulus deal that they hope will find Republican support before the parties break for the November elections.
Outside of housing, which has seen record prices for existing home sales and fourteen year peaks for new home transactions this week, broader swathes of the U.S. economy are starting to show signs of weakness now that government stimulus checks have ceased to arrive.
That’s put pressure on stocks, which are down between 7% and 10% so far this month, while lifting the U.S. dollar to the highest levels since late July.
Overnight weakness in Asia, as well as a sputtering start in Europe, weighed on U.S. equity futures Friday, with Wall Street looking to close out the week with at least some modest gains despite the building domestic political risks and the worryingly rising trend of coronavirus infection rates around the world.
Futures contracts tied to the Dow Jones Industrial Average, however, suggest a 40 point opening bell decline, while those liked to the S&P 500, which is down 7.25% for the month, is priced for an 8 point slide.
Europe’s Stoxx 600 was marked 0.25% lower in the opening hours of trading, even as the euro dipped to a new multi-month low of 1.1640, as infections in France swelled to over 16,000 — the highest daily total on record — and authorities in the United Kingdom warned of the potential of a ‘double pandemic’ later this winter of flu and coronavirus illness that could overwhelm the country’s state-controlled healthcare system.
Away from equities, the U.S. dollar index edged modestly higher, to a late July peak of 94.435 against a basket of six global currencies, while benchmark 10-year U.S. Treasury bond yields fell to 0.659%.
Global oil prices were also looking to avoid a week-long decline, which took U.S. crude below $40 a barrel on Thursday, as investors continue to fret over the strength of world demand in the final months of the year should rising coronavirus infections tip the economy back into recession.
WTI contracts for October delivery, the U.S. benchmark, traded 11 cents higher from their Thursday close in New York at $40.40 per barrel in early European dealing while Brent contracts for November, the global benchmark, were seen 14 cents higher at $42.08 per barrel.
Overnight in Asia, Japan’s Nikkei 225 edged 0.51% higher to close out the week at 23,204.62 points as the yen eased to 105.45 against the firmer greenback, while the region-wide MSCI ex-Japan benchmark attempted to claw back some of the losses its suffered in the biggest weekly decline since March with a 0.4% gain.