Risk Aversion Sends Stocks Lower Sunaks Winter Economic Plan in Focus
Slowing economic recover & rising covid cases drag on sentiment. Can Rishi Sunak's Winter economic plan boost sentiment?
Share this:
The deep sell off on Wall Street is spreading over into Europe, wiping out gains from the previous session. European bourses are a sea of red as risk off dominates amid rising concerns over resurging coronavirus infections and its potential to derail the fragile economic recovery.
Wall Street experienced a sharp decline after a series of warnings from the US Federal Reserve. Federal Chair Jerome Powell reiterated that the US economy still had a long way to go before recovery weighed on sentiment. His comments were supported by Fed Vice Chair Richard Clarida who considers the US economy to be in a “deep hole”.
The Fed sees a strong case for additional fiscal support. However, another rescue package before the November elections is starting to look very unlikely.
Evidence of the slowing economic recovery was evident in yesterday’s PMIs, particularly in Europe where the srtvice sector unexpectedly contracted. With covid cases rising and restrictions tightening the situation is only going to deteriorate over the coming months.
Rishi Sunak to the rescue?
UK Chancellor Rishi Sunak won’t be making a budget this year, instead, he will roll out a winter economic plan to see the UK through the coming month, which are set to be extremely challenging. With the furlough scheme set to end of 31st October, the markets have been concerned with what’s next? The centre piece to Rishi Sunak’s plan, to be announced today, is expected to be a wage support scheme similar to that in Germany. A scheme to subsidise wages of people in part time work, replacing the more expensive £39 billion furlough scheme. This should mean that the 4 million or so people that are neither in employment or out of employment on furlough, won’t necessarily face a cliff edge. This should at least soften the blow to the economy.
UK Chancellor Rishi Sunak won’t be making a budget this year, instead, he will roll out a winter economic plan to see the UK through the coming month, which are set to be extremely challenging. With the furlough scheme set to end of 31st October, the markets have been concerned with what’s next? The centre piece to Rishi Sunak’s plan, to be announced today, is expected to be a wage support scheme similar to that in Germany. A scheme to subsidise wages of people in part time work, replacing the more expensive £39 billion furlough scheme. This should mean that the 4 million or so people that are neither in employment or out of employment on furlough, won’t necessarily face a cliff edge. This should at least soften the blow to the economy.
Whilst the announcement late yesterday helped lift the Pound versus the Euro, sterling has failed to gain ground versus the mighty US Dollar all week, owing to increased safe haven flows into the greenback.
Looking ahead German IFO business sentiment data and US initial jobless claims will be in focus for further clues over the health of these economies
Oil extend losses
Oil process declined on Thursday and are extending losses weighed down today, despite inventories falling by 1.6 million. Concerns that the economic recovery in the US is stalling and concerns that Europe will soon be under tighter lockdown restrictions is dragging on the demand outlook.
FTSE Chart
The deep sell off on Wall Street is spreading over into Europe, wiping out gains from the previous session. European bourses are a sea of red as risk off dominates amid rising concerns over resurging coronavirus infections and its potential to derail the fragile economic recovery.
Wall Street experienced a sharp decline after a series of warnings from the US Federal Reserve. Federal Chair Jerome Powell reiterated that the US economy still had a long way to go before recovery weighed on sentiment. His comments were supported by Fed Vice Chair Richard Clarida who considers the US economy to be in a “deep hole”.
The Fed sees a strong case for additional fiscal support. However, another rescue package before the November elections is starting to look very unlikely.
Evidence of the slowing economic recovery was evident in yesterday’s PMIs, particularly in Europe where the srtvice sector unexpectedly contracted. With covid cases rising and restrictions tightening the situation is only going to deteriorate over the coming months.
Rishi Sunak to the rescue?
UK Chancellor Rishi Sunak won’t be making a budget this year, instead, he will roll out a winter economic plan to see the UK through the coming month, which are set to be extremely challenging. With the furlough scheme set to end of 31st October, the markets have been concerned with what’s next? The centre piece to Rishi Sunak’s plan, to be announced today, is expected to be a wage support scheme similar to that in Germany. A scheme to subsidise wages of people in part time work, replacing the more expensive £39 billion furlough scheme. This should mean that the 4 million or so people that are neither in employment or out of employment on furlough, won’t necessarily face a cliff edge. This should at least soften the blow to the economy.
UK Chancellor Rishi Sunak won’t be making a budget this year, instead, he will roll out a winter economic plan to see the UK through the coming month, which are set to be extremely challenging. With the furlough scheme set to end of 31st October, the markets have been concerned with what’s next? The centre piece to Rishi Sunak’s plan, to be announced today, is expected to be a wage support scheme similar to that in Germany. A scheme to subsidise wages of people in part time work, replacing the more expensive £39 billion furlough scheme. This should mean that the 4 million or so people that are neither in employment or out of employment on furlough, won’t necessarily face a cliff edge. This should at least soften the blow to the economy.
Whilst the announcement late yesterday helped lift the Pound versus the Euro, sterling has failed to gain ground versus the mighty US Dollar all week, owing to increased safe haven flows into the greenback.
Looking ahead German IFO business sentiment data and US initial jobless claims will be in focus for further clues over the health of these economies
Oil extend losses
Oil process declined on Thursday and are extending losses weighed down today, despite inventories falling by 1.6 million. Concerns that the economic recovery in the US is stalling and concerns that Europe will soon be under tighter lockdown restrictions is dragging on the demand outlook.
FTSE Chart
Related tags:
Latest market news
The complete CFD trading experience
Award-winning platforms, competitive spreads, low commissions and dedicated support.
We live and breathe the markets and are dedicated to helping traders realise their ambitions as we continue to set the industry bar.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
EUR/USD, FTSE 100 Forecast: Two trades to watch 1507
EUR/USD rises after weaker US CPI, PPI up next. FTSE 100 falls as weak China GDP data hits miners.
FTSE 100, USD/JPY Forecast: Two trades to watch
FTSE eases modestly despite inflation unexpectedly holding steady. USD/JPY drifts lower ahead of the FOMC rate decision.
EUR/USD, FTSE 100 Forecast: Two trades to watch 21-05-26
EUR/USD slips below 1.16 as weak eurozone data weighs on sentiment. FTSE 100 slips as oil prices rebound and caution returns.
StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation.
StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.