• Equities halted by US elections, fiscal stimulus stalemate.
  • US retail sales expected to have held up in September.
  • October US consumer sentiment may show signs of deterioration.
  • Covid-19 resurgence buffers Gold support.

US equity futures are little changed while Asian stocks are mixed, with the MSCI Asia Pacific index having posted a new year-to-date high earlier this week. The S&P 500 could still register a third successive weekly advance provided today’sUS session doesn’t erase what’s left of its 0.18 percent gain since last Friday.

US stock benchmarks have consolidated this week as realisation sinks in that investors are being made to wait longer for the next round of fiscal stimulus, which will now most likely be a post-election event. Without clear impetus to climb higher, the upside for global stocks will probably be capped over the next fortnight until we find out who is the winner of the US elections. The downside too appears limited, given the ultra-accommodative monetary policy stance of central banks around the world.

US stocks seem to be viewing the elections through the prism of which political party can deliver the biggest fiscal support. With Democrats having a larger stimulus package proposal on the table and with polls still favouring Joe Biden, markets had been raising their expectations for a ‘blue wave’.

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But of course, the election outcome is far from assured and political risks could still hurt stock bulls if they simply charge recklessly higher.

What is more certain is the US economy’s sheer need for more financial aid, as laid bare by recent data. US weekly jobless claims are at their highest levels since August as they edge back towards the 900,000 mark. Continuous claims remain above 10 million which is still drastically higher than pre-pandemic levels. The jobs recovery is clearly losing its momentumand more government support is desperately needed.

At least equity investors can take comfort from the notion that no matter who wins the upcoming elections, a fresh injection of fiscal stimulus is on the way, it’s just a matter of time.

Although today’s September US retail sales print is expected to show domestic consumption keeping pace with the prior month, it’s the October preliminary reading on consumer sentiment due later Friday that could show larger cracks forming in the world’s leading economy.

Meanwhile, the US earnings season continues, but positive surprises from companies’ third quarter performances are unlikely to hold much sway over global markets given that investors are warier of the US election and its implications on the next round of fiscal stimulus.

Global investors are also attentive to the latest developments surrounding the spread of the virus, as Covid-19 makes a resurgence across Europe and the United States. In this pre-vaccine era, a country’s economic recovery is contingent on how well it can contain the coronavirus, as it is the health response of each country that forms the basis for its economic recovery. As long as major countries continue struggling to keep Covid-19 under control, such conditions make for an economic recovery that will merely hobble along, while ensuring that safe haven assets such as Gold and US Treasuries remain well bid.


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