Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Stocks wobble after Mnuchin pulls plug on Fed stimulus

Published 20/11/2020, 00:58
Updated 20/11/2020, 05:20
© Reuters. FILE PHOTO: Man wearing a face mask is seen inside the Shanghai Stock Exchange building, as the country is hit by a novel coronavirus outbreak, at the Pudong financial district in Shanghai

© Reuters. FILE PHOTO: Man wearing a face mask is seen inside the Shanghai Stock Exchange building, as the country is hit by a novel coronavirus outbreak, at the Pudong financial district in Shanghai

By Swati Pandey

SYDNEY (Reuters) - World financial markets stalled on Friday as news U.S. Treasury was ending emergency loans programmes dealt a blow to economic recovery hopes just as California announced curfews to try and fight surging coronavirus infections.

S&P500 (ESc1) futures slipped 0.5% while Dow futures (1YMc1) fell 0.6%, cancelling out a firmer lead from a strong Wall Street session overnight.

The dollar (=USD) was slightly weaker and the 10-year Treasury yield (US10YT=RR) slipped to the lowest in 10 days at 0.818%.

Eurostoxx futures started almost flat while London's FTSE futures (FFIc1) was up 0.25%

In Asia, Japan's Nikkei (N225) stumbled 0.5% while Australian shares were flat. Chinese shares were little changed while South Korea's KOSPI index (KS11) was a shade firmer.

That left MSCI's broadest index of Asia-Pacific shares excluding Japan (MIAPJ0000PUS) up 0.3%. It is up 1.5% so far this week.

In a letter to U.S. Federal Reserve Chair Jerome Powell, U.S. Treasury Secretary Steven Mnuchin said the $455 billion allocated to Treasury under the CARES Act should be instead available for Congress to reallocate.

"This divide between the Treasury and the Fed risks undermining the unwavering faith that investors have placed on continuous policy support to help the economy weather the pandemic," Singapore-based DBS wrote in a note.

Although the programmes were not used extensively, Fed officials felt their presence reassured financial markets and investors that credit would remain available to help businesses, local agencies and even nonprofits through the pandemic downturn.

Mnuchin's decision added to market anxiety about broader economic growth as data shows the early fast recovery from a historic plunge in the U.S. economy is fading, with more than 10 million who had jobs in January still out of work.

"The Fed has been one of the only sources of stability in Washington and removing its latitude to offer support in a shaky recovery is simply nonsensical," said Isaac Boltansky, director of policy research at Washington-based Compass Point Research & Trading.

"This is a distressing development that injects uncertainty and instability into markets completely unnecessarily. How many times will Washington trip on its shoelaces in response to this crisis?"

Investor sentiment was also hit by data that showed COVID-19 hospitalisations across the United States jumped by nearly 50% in the last two weeks, threatening the recovery of the world's largest economy as cities and states began to impose lockdowns.

California on Thursday imposed a curfew on social gatherings and other non-essential activities in one of the most intrusive of the restrictions being ordered across the country to curb an alarming surge in infections.

All three major U.S. stock indexes, however, got a healthy boost overnight after Senate Democratic Minority Leader Chuck Schumer said Republican Majority Leader Mitch McConnell had agreed to revive talks to craft a new fiscal relief package.

A senior Democratic aide told Reuters there had been a mid-afternoon meeting on Thursday among congressional aides that discussed coronavirus relief and efforts to pass a $1.4 trillion bill to keep government agencies operating beyond Dec. 11 when current funding expires.

The Dow (DJI) rose 0.15%, the S&P 500 (SPX) gained 0.39% and the Nasdaq (IXIC) added 0.87%.

In currencies, the dollar index (=USD) was last at 92.232, edging closer to Thursday's low of 92.236.

The euro was up at $1.1881 (EUR=) while the yen weakened to 103.8 per dollar . The Australian dollar gained to be up 0.2% at $0.7294 .

In commodities, oil prices steadied after losses the previous day, when concerns about coronavirus lockdowns affecting fuel demand weighed on the market. [O/R]

West Texas Intermediate (CLc1) was flat $41.74 a barrel. Brent crude (LCOc1) was up 10 cents at $44.30.

© Reuters. FILE PHOTO: Man wearing a face mask is seen inside the Shanghai Stock Exchange building, as the country is hit by a novel coronavirus outbreak, at the Pudong financial district in Shanghai

Gold was flat with spot prices at 1,867.3 an ounce.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.