Stocks higher on US stimulus optimism

Stocks higher on US stimulus optimism 150 150 Realm

U.S. stimulus talks remain in focus after President Trump tweeted positive messages, raising hopes that an aid package could be agreed. Investors are also monitoring the growing problem of rising coronavirus cases in Europe as France and Spain register record increases.


Global Macro

  • Consumer credit in the United States declined by $7.22 billion in August 2020 after increasing by $12.25 billion in the previous month, missing market expectations of a $14 billion increase. Total revolving credit declined by $9.4 billion after falling by $0.3 billion in July, whereas non-revolving credit increased $2.2 billion after rising by $14.9 billion. On an annual basis, consumer credit declined by 2.1 percent after rising 4.3 percent in the previous month.
  • Fed officials continued to see the uncertainty surrounding the economic outlook as very elevated, with the path of the economy highly dependent on the course of the virus, minutes from the last September 15–16, 2020 meeting showed. Also, with inflation running persistently below its longer-run goal, the Fed judged that it would be appropriate to aim to achieve inflation moderately above 2 percent for some time. The federal funds rate will likely remain unchanged until labor market conditions had reached levels consistent with maximum employment and inflation had risen to 2 percent although it was on track to run moderately in excess of 2 percent for some time. Regarding fiscal stimulus, the Fed added that absent a new package, growth could decelerate at a faster-than-expected pace in the fourth quarter.
  • Mortgage applications in the United States increased 4.6 percent in the week ended October 2nd, after falling 4.8 percent in the previous week, data from the Mortgage Bankers Association showed. The gauge for refinances jumped 8.2 percent while the purchase index went down 1.5 percent. The average fixed 30-year mortgage rate fell 4 bps to a fresh record low of 3.01 percent.
  • The Halifax house price index in the UK increased 7.3% year-on-year in September of 2020, well above a 5.2% rise in August, and the strongest gain since mid-2016. Still, September 2019 saw political uncertainty weigh on the market. On a monthly basis, house prices increased 1.6 percent, following an upwardly revised 1.7 percent rise. The average price of a property reached £249,870, compared to £245,889 in August. “Across the last three months, we have received more mortgage applications from both first time buyers and homemovers than anytime since 2008. There has been a fundamental shift in demand from buyers brought about by the structural effects of increased home working and a desire for more space, while the stamp duty holiday is incentivising vendors and buyers to close deals at pace before the break ends next March”, Russell Galley, Managing Director, Halifax, said.
  • On Wednesday: European stocks saw a choppy session as investors appeared somewhat clueless about a potential new coronavirus relief plan as they digested a couple of treats from U.S. President Donald Trump. US stocks moved up sharply, reacting to President Donald Trump’s tweet that raised hopes of a smaller aid package sometime soon. After opening on a firm note, stocks kept moving higher as the session progressed, and all the major averages ended with handsome gains.

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