Thursday seems to bring further growth to the American stock exchange, where futures on the main indices are climbing up after yesterday's great session. For the Dow Jones index, Wednesday has brought the biggest increases since July. The DJIA gained over 500 points, i.e. less than 2% of S&P 500 increased by 1.7% and Nasdaq by 1.9%.
Yesterday's closing of the three major indices was the highest in four weeks, all in anticipation of new fiscal stimuli. Donald Trump called on Congress to pass a new law to support airlines (hence the strong DJIA growth) and small businesses with a program to protect workers' wages.
Stock market growth may also be driven by Joe Biden's growing advantage in polls, which in turn may mean a larger aid package that the Democrats are trying to negotiate with the Republicans all the time. The Democrats' fiscal support program amounts to USD 2.4 trillion and is much larger than what the opposing party or President Donald Trump offers. Hence, the markets can rejoice because of Biden's growing chances.
In a protocol published on Wednesday, the Fed noted that in the absence of a new package, in the fourth quarter growth may slow down at a faster rate than expected. Hence, changes in the asset purchase program, its size or maturity of the bonds purchased are possible. As the Fed continues to see the uncertainty surrounding the economic outlook as very high due to the pandemic, it said it is ready to use the full range of its tools to support the US economy. Thus, the rate of federal funds is likely to remain unchanged until labour market conditions reach their maximum and inflation rises to 2 percent. In other words, years of low interest rates may await us.
Meanwhile, the EUR/USD exchange rate is still below 1.1800 pending the minutes of the last European Central Bank meeting. ECB President Christine Lagarde told The Wall Street Journal on Tuesday that the central bank is ready to unleash further stimulus to support the eurozone economy, including deeper interest rate cuts in the negative area. Lagarde also warned that production will not return to pre-pandemic levels until the end of 2022.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
