In what seemed an all to obvious conclusion to the Trump/Covid 19 panic, the reigning President bounced back from the infection in no time at all. It appears almost as if he did not have it in the first place with the way he has conducted himself this week. Of course, the conspiracy theorist will question the authenticity of the President's infection, speed of recovery and whether the Lazarus style bounce back will aid his campaign or not. But it seems the President has again done himself no favors during this time due to his actions. First came a unplanned and unpermitted trip, leaving the hospital to drive to wave at some hardline street campaigners, which seemed to be a manipulated show of resilience, but what it in fact showed that his thoughts remained with self-gratification, whilst endangering the security services men around him who were being potentially exposed to the virus. This brought outrage on US soil and somewhat out shone what he was trying to achieve.
Throughout the week he has continued to talk down the severity of the infection whilst highlighting his own metabolic strength, which will of course rightly upset those with family members who have succumbed or are seriously ill with the virus. Early in the week he was back in office underling his intentions of winning the election. With the US enduring the ongoing negotiations on the relief bill for US citizens, which is now sadly being used as a political tool ahead of the election, Trump announced on Tuesday night on Twitter that he was abandoning economic relief talks until after the election in early November. This move brought a sharp panic to the US markets as risk turned to on and Equities took a sharp hit with the S&P 500 falling 100 points to just below 3350. It was an incredibly strange move which was never going to help his populism at street level and was always going to hurt his beloved stock markets, so it was of no surprise that as little as a day later he began backtracking and talking of continued talks between Mnuchin and Pelosi.
Whilst previously in the UK and Brazil we have seen leaders succumb to the virus and emerge with increased populism, this has certainly not been the case as Biden continues to stretch his lead. It now appears that the markets are quite content with this and the news an aid package is still possible as they flipped back to risk off and all US indices reversed the Tuesdays plunge on Wednesday, and now sit on recent highs, buoyed by the fact it's looking increasingly likely we see not only a Biden victory, but a victory with an uncontestable clean sweep majority. If true, this will make the feared prolonged and messy departure of Trump. At this stage, it cannot of course be taken as a given that this will be the outcome, but for now the markets seem keen to buy with many calling for fresh highs in the stock markets ahead of the election.
Obviously, the UK/EU talks over the Brexit divorce remain ongoing, with little in the way of substantial news other than hints. Whilst we now know the UK’s deadline for conclusion of the 15th of October will not be respected by the EU’s Chief negotiator Barnier, as he sticks to the original agreed deadline of the end of the month. The snippets we receive from the key players have been broadly positive without significant detail this week, as it's being hinted that mutual concessions are being discussed and the pound has had an uncharacteristically buoyant week.
One surprise this week is how the markets have broadly ignored the increase in Covid-19 cases across the US, Western Europe and the UK. There has been some significant pick up in country and regional case numbers with major cities like Paris and Madrid locked down. In the UK steps have been taken to halt alcohol sales in Northern England and Scotland. Last weekend saw another governmental blunder as the reported cases significantly jumped on Saturday as a corrective measure due to an error in the use of excel leading to past incorrect data being shared. With winter months drawing in and rising infection there could be a tipping point again where the markets must start considering the implications of rising cases and more broader lock downs. This week The Bank of England’s Andrew Bailey seemed to brush off fears of economic impact of a second wave, and whilst we hope he is correct it does seem somewhat flippant.
The Week Ahead:
Monday – A slow start to the week with it being national holidays in the US and Canada. In the morning we get Japanese Machinery Orders and PPI. In the afternoon we hear from The Bank of England MPC members Haskel and MPC Head Andrew Bailey.
Tuesday – First data of the day is Chinese Trade Balance before German CPI Inflation. From the UK we get some meaningful data in Unemployment, Average Earnings and Claimant Count data. German Zew comes later in the morning before US CPI inflation data.
Wednesday – Japanese and Eurozone Industrial Production in the am. In the US session we get PPI data then a host of Fed speakers in Clarida, Quarles and Caplan. There is also UK MPC member Haldane talking and Lowe from the Reserve Bank of Australia.
Thursday – Australian Employment and Unemployment numbers start the day before Chinese CPI and PPI year on year inflation. In the European session we get French CPI. The US session brings Philly Fed Manufacturing index, US Weekly Unemployment and Fed Speakers Quarles and Kashkari.
Friday – With a quiet Asian session the first data is Eurozone CPI and Trade Balance. IN the US Session we get Retail Sales and University of Michigan Consumer Sentiment. There are IMF meetings all day on Friday with run through to Saturday.
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