(07 October 2020)DAILY MARKET BRIEF 1:US Equities Tumble After Trump Cancels Stimulus Negotiations
Wall Street slumped on Tuesday after President Donald Trump called off talks on further coronavirus stimulus until after the election. Thus, equities reversed the robust gains from Monday and continued their wobble moves. Initially, stocks extended their bullish stance, but Trump’s tweets announcing the abrupt halt of negotiations spoiled the party.
Trump, who is still treated for COVID-19, ordered US Treasury Secretary Steven Mnuchin to stop negotiating with Democrats until after the election, when, according to Trump, he will win and then will approve a fair relief package. Still, his tweets were confusing. After calling off talks, the president urged Congress in a series of tweets to green-light “immediately” the $25 billion stimulus package for airlines and approve other relief packages as well, addressing his messages directly to House Speaker Nancy Pelosi. Trump claims that the Democrats’ $2.4 trillion stimulus bill promoted by Pelosi favors “high crime, Democrat states” and has less to do with COVID.
Trump’s decision and the way he handled it is a bit surprising, considering that it can undermine chances for his reelection.
The S&P 500 closed 1.40% lower, the Dow lost 1.34%, and Nasdaq fell 1.57%.
At the beginning of the session, Federal Reserve Chair Jerome Powell said that the recovery can end up in a downward spiral without government support and if the pandemic is not addressed
effectively.
After Trump’s move, a Fed official said that the delay of the relief means much slower recovery.
Despite everything, Asian stocks are mostly bullish in early trading on Wednesday, recovering from the bearishness triggered by Trump’s tweets.
China’s markets continue to be closed for a holiday. They are closed for the entire week.
In Australia, the ASX/S&P 500 closed 1.25% higher after the government released its budget, which contains billions in spending initiatives and tax cuts.
At the time of writing, Japan’s Nikkei is down 0.08% but is on track to enter the positive territory. Hong Kong’s Hang Seng Index is up 0.83%, and South Korea’s KOSPI has inched up 0.72%.
Nevertheless, Europe is expected to open in the red, with German DAX being the only major index whose futures have edged higher.
