Equities bid on stimulus hopes
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Equities were higher by nearly 1% and Cable pushed towards the 1.3000 mark as investor sentiment turned positive on the possibility of a stimulus deal in DC and renewed movement on Brexit negotiations.
In Washington House Speaker Nancy Pelosi stated over the weekend she was willing to consider a stimulus package before the election but put a hard deadline of this Tuesday on any possible negotiation noting that any deal past that date would have to wait until after the election.
The news along with President’s Trump’s statement that he would support a big package and would push Republicans in the Senate to support it as well, stoke hopes of a large fiscal spend sooner rather than later, but with only 48 hours to go and both parties still far apart on key issues of aid to states and COVID testing it remains to be seen if a compromise can be worked out. Furthermore, there is far greater institutional resistance to a 2 Trillion dollar package in a Republican-controlled Senate and it is unclear if the Senate majority leader Mitch McConnel would be able to get the votes to ratify the deal even.
President Trump, who trails badly in the polls, is clearly motivated to ger a package done so that he can take the credit in the last waning days of the campaign and close the gap with Joe Biden, but to do so the Republicans would have to appropriate massive federal aid to the blue states badly affected by COVID and its is far from certain the Republicans from the smaller red states would be willing to go along with such a plan. Still, with Democrats making gains across a wide spectrum of states Trump may convince Senate Republicans that they have nothing to lose at this point but their seats and force the deal through in a last-minute effort.
Should that be the case, equities will soar as the prospect of additional aid along with better than expected organic growth already recorded should boost investor sentiment even further but if Tuesday passes without a deal stock will likely begin to flounder as any package will be on hold until a new term of Congress begins.