Home / Business / Equity markets have now seen the “peak of Fed stimulus” unless those two things happen

Equity markets have now seen the “peak of Fed stimulus” unless those two things happen



US Federal Reserve Chairman Jerome Powell said more fiscal stimulus was expected from Congress.

Eric Baradat / Agence France-Presse / Getty Images

It looks set to be a tough day for the markets.

Investors were disappointed with the Federal Reserve’s action – or lack of – late Wednesday as the central bank failed to indicate any new stimulus. The Fed said it plans to keep interest rates near zero until the end of 2023 at the earliest, as President Jerome Powell gave a cautious outlook.

In our call of the day, Lena Komileva, chief economist at G-Plus Economics, said the markets have now witnessed the “Fed’s peak stimulus” barring a government error or market shock.

“The Fed’s new inflation framework has not led to a new political regime, or new action, but to a flatter policy cycle that provides even greater reflationary stimulus against adjusting the economy to a new normal with COVID.” he said.

“This reinforces our view that, barring a new exogenous shock to the economy, or a fiscal policy mistake that fails to bring new support to the recovery beyond the November elections, markets have seen Fed stimulus peak. “Komileva added.

With no signs of further measures from the Fed, AxiCorp market analyst Milan Cutkovic said the spotlight would now be on Congress on a new stimulus package, with further delays that could impact markets.

Attention will now return to the United States Congress, where Democrats and Republicans are still struggling to agree on a stimulus package. Investors are becoming increasingly impatient about the lack of progress and market sentiment could turn sour if there is no deal soon, “he said.

Goldman Sachs
GS,
+ 1.35%

economist David Mericle noted that while Powell said more fiscal stimulus was expected from Congress, there were risks in both directions. Mericle added that a democratic turn in the election would likely mean “further substantial stimulus”, while a failure in negotiations on a new stimulus bill this month and a divided government after the elections “would increase the risk of a slower recovery.” .

Markets

After a slight rise on Wednesday, the Dow Jones Industrial Average
DJIA,
+ 0.13%

it was destined to fall as the future Dow
YM00,
-0.85%

it indicated 0.9%, or 254 points, lower before opening. Nasdaq Futures
NQ00,
-1.97%

slipped 1% and S&P 500 futures
ES00,
-1.25%

they were 1.1% lower as traders reacted to the Fed’s cautious global economic outlook.

European stocks also fell early in trading, with the pan-European Stoxx 600
SXXP,
-0.76%

0.6% down, the German DAX
DAX,
-0.70%

0.6% less and the FTSE 100
UKX,
-0.47%

down by 0.8%. The rise in coronavirus cases in countries across the continent also contributed to the negative sentiment.

The buzz

Snowflake actions
SNOW,
+ 111.60%

It was up 111.6% in Wednesday’s session after the company produced its largest initial public offering of software on record, leaving the company with a market value of approximately $ 70 billion.

The Bank of England is expected to hold interest rates amid mixed signals on the UK’s economic recovery.

Oracle’s database software company
ORCL,
-0.83%

The offer for Chinese-owned video sharing app TikTok has sparked concerns within the Trump administration that it still poses national security risks, according to a Bloomberg report late Wednesday.

Novacyt Anglo-French biotechnology group
ALNOV,
+ 5.76%

posted a profit in the first half, as sales of COVID-19 tests triggered an increase in revenue.

European auto sales fell 18% in August after three months of improvement after the lockdown, raising concerns about the recovery. Renault car manufacturers
RNO,
-1.37%

and Volkswagen
VOTE,
-1.52%

Thursdays were among the strongest falls in the industry.

President Donald Trump said a COVID-19 vaccine could be launched in mid-October, disputing previous comments by the director of the Centers for Disease Control and Prevention, Dr. Robert Redfield, who said a vaccine may not be available to the general public until late. next year.

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Barbados plans to remove Queen Elizabeth as head of state.

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