Risk On Amid US Stimulus Hopes

Hopes that a US fiscal stimulus package could be just around the corner, in addition to upbeat US data, is driving demand for riskier assets as trading kicks off in Europe.

Charts (3)

Europe is pointing to a stronger start as optimism from the US spills over. Hopes that a US fiscal stimulus package could be just around the corner, in addition to upbeat US data, is driving demand for riskier assets as trading kicks off in Europe.

US ADP data smashed expectations with 749K new jobs created in the private sector, a significant jump up from the upwardly revised 481K recorded for August. The solid report not only beat forecasts but also bodes well for Friday’s non-farm payroll. Still, this is unlikely to change the overall trend in the market of a slowing rebound. It would take huge additional stimulus and clarity which comes following the US elections to boost stalling growth.

Better late than never
Additional fiscal stimulus could be just around the corner in the US after US Treasury Secretary Steve Mnuchin said that talks are progressing very well. He offered a $1.6 trillion package and said that an understanding could be reached today (Thursday). Signs of upcoming fiscal relief in the world’s largest economy is boosting risk appetite and the risk on trade, supporting stocks as reflected by rising equity markets and US futures and demand for riskier currencies.

WTI over $40 (just)
Hopes of US stimulus is keeping oil steady above $40 after a strong runup overnight. Demand fears have taken the black gold on a wild ride over the past few sessions and across September as a whole. WTI slumped over 5% last month amid fears that resurging covid infections and tighter restrictions to stem the spread of the virus would hit demand again.

R rate in UK falling
In the UK encouraging news regarding the R rate is adding to the improved market mood. The latest study from Imperial College shows that the latest lockdown restrictions are working and the R rate is on its way back down towards the golden figure of 1. This raises the chances that the UK will avoid a economically ravaging national lockdown part 2.

Manufacturing PMIs
Attention will now turn to manufacturing PMI data for further clues over the recovery of the UK economy. Expectations are for a confirmation of the initial 54.3 reading as the pace of expansion remains strong but eases back from the August’s level, which saw the sector expand at its fastest rate in 6 year at 55.2. Manufacturing has led the economic recovery so far. Investors will be keen to see that the strength in the sector is holding up whilst the service sector comes under increasing pressure from local lockdowns and nervous consumers.

FTSE Chart



More from FTSE 100

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.