Last week the Dow Jones recorded its highest growth since August, gaining 3.3 percent, while the S&P 500 and Nasdaq grew by 3.8 percent and 4.6 percent respectively, creating its highest growth since July. Today, futures contracts show that this trend may continue and the increases could last for the fourth session in a row.
Markets, on the one hand, will get used to Joe Biden's ability to win the elections and thus to easily and quickly implement an aid package of more than $2 trillion, and on the other hand, they are observing the current pushing between the White House and Congress. According to the latest Washington Post/ABC poll, Biden can count on 54 percent of the votes and Donald Trump on 42 percent. Trump, in turn, called on Congress to pass a simplified bill that would allocate funds from the previous program for companies. Only that there we are talking about billions, not trillions. For the time being, there is no consensus among Democrats and Republicans on a large aid program.
In Europe, although the stock exchange rises are already decreasing, the indices still remain above the Friday closing, and the main topic seems to be the reaction of the governments to the acceleration of the coronavirus spread on our continent. There are already forecasts that the fourth quarter could be worse than the third one and we could enter the first quarter of the new year with great uncertainty. This may stop helping the stock market bulls. A state of emergency has already been imposed in Madrid and other Spanish cities, which will affect daily life and business. The Italians and the British may also soon be announcing new restrictions, because only this way can they limit the transmission of the virus.
It seems, therefore, that the worsening situation in Europe may prompt the European Central Bank to take further action. Christine Lagarde, head of the ECB, will begin her speech at 1:00 p.m. today. There will be possibly making new, more detailed statements about monetary policy, as well as statements about inflation, which could exceed 2% to raise inflation expectations first. The higher they are, the easier it seems to stimulate consumption and economic growth, creating an environment of increasingly negative real interest rates.
On the currency market, it is worth noting the increasing involvement of speculators in long positions on US Dollar index contracts, CFTC data shows. On September 22nd, less than 12 thousand long positions were reported, while on October 6th the number of net long positions increased to the highest level since mid-June (more than 18 thousand).
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.
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