The emphasis was slightly different but the main talking points on Tuesday were unchanged from Monday. Manchester has entered Tier 3 on the Covid scale. Downing Street is waiting for a show of weakness from Brussels. Nancy Pelosi’s deadline for a US stimulus agreement has been shunted 24 hours down the line.
The tragic Covid 19 pandemic appeared under more than one heading. Most obvious in London was the Prime Minister’s announcement that he would impose a Tier 3 lockdown on Manchester despite the objections of local leaders. Over in Europe, the EU’s first offering of jointly-underwritten “Coronabonds” resulted in the sale of €17 billion of 10- and 20-year paper. Remarkably, investors bid for a total of €233 billion, which should ensure the success of subsequent auctions. The euro strengthened by three quarters of a US cent and was on average unchanged.
With Brexit it was more of the same as the UK government smouldered at the EU’s refusal to openly give them an inch. Whilst there is apparently an inclination in Brussels to do just that, they have yet to come up with an exact plan. Meanwhile minister Michael Gove encouraged UK business leaders to “seize the opportunity” of Brexit, likening it to “moving house”. The pound lost a third of a euro cent and was down by the same amount, 0.3%, on average.
$2.2 trillion vs $1.88 trillion
The US House of Representatives is looking for $2.2 trillion of fiscal stimulus. The administration is offering $1.88 trillion and sounds willing to go higher. Senate Speaker Mitch McConnell says he is not prepared to play ball but the other participants remain optimistic that he might.
Investors are optimistic too. They believe the US economy is in a win/win position; either a quick injection of cash now or a bigger stimulus bill in the new year following an inauguration of President Biden. It was another risk-on day in which the USD was the loser and the JPY lagged behind the GBP.
In Any Other Business, the most interesting and upbeat data related to the US property market. Building permits rose by a monthly 5.2% to a 13-year high, and housing starts were up by 1.9%. Permits for single-family homes were also at a 13-year high, underlining the international trend towards moving out of the city into the suburbs.
UK inflation steady
Australian retail sales opened the batting this morning with another monthly decline, this time of 1.5%. They were followed by the UK consumer price data, which left headline inflation unchanged at 0.5%.
After falling 0.4% in August as a result of the Eat Out To Help Out restaurant subsidy, the consumer price index went up by that much in September. The producer price data showed manufacturers’ costs falling at four times the pace of factory gate prices.
Inflation will be back in the headlines after lunch, when Canada is expected to report it at 0.4%. Canadian new house prices appear at the same time, and this evening the US Federal Reserve will publish its Beige Book economic assessment. Australian business confidence comes out tonight.