Equities slide on failed stimulus talks
Aussie labor data beats but AUD drops
Nikkei -0.51% Dax -2.87%
UST 10Y 0.69
Oil $40
Gold $1896/oz
BTCUSD $11364/oz.

Asia and the EU
AU Employment 6.9%

North America Open
USD Philly Fed 8:30
USD Weekly jobless 8:30

Markets were under pressure in Asian and European trade today with Nasdaq futures down more than 2% at one point as investors sentiment soured after it became clear that no US stimulus would be coming before the election next month.

The talks between House Speaker Pelosi and Secretary Mnuchin stalled over the size of the package and the two sides have been unable to come to terms. Even if there was consensus between the White House and the Democrats it was always doubtful that the Republicans in the Senate would pass the plan, but investors held out hope which has been extinguished for now.

Meanwhile, in FX the biggest victim of risk-off flows was Aussie which was hammered both by negative sentiment and by the prospect of further rate cuts. Earlier in the session, Australian employment data surprised to the upside printing a smaller loss in jobs of -29K versus -35K projected, but the news was quickly overshadowed by a speech from RBA Governor Lowe who stated that “it was reasonable to expect further easing would be more impactful.”

The markets quickly started to price in a possible cut to rates of 0.1% and Aussie fell by more than 1% hitting a low of .7070 in the morning London trade. The news shows just how deeply the Australian economy is hit by the coronavirus as tourism and business activity as well as cooler relations with China have all taken their toll on growth.

The statement from Lowe suggests that the RBA would like to guide the currency lower with .7000 level the first natural target of the shorts but given the weakness of the outlook and the prospect of much more significant risk-off flows in global equities its probable that the pair could head towards the .6500 figure by the end of the year.