There is a distinct chill in the air when it comes to markets this morning. Whatever Mnuchin and Powell say, the absence of further stimulus in the run up to a possibly tumultuous American election that may stretch uncertainty till Inauguration day in Jan 2021 is dominating the action in the US. (What kinds confusion might occur as they argue who runs the country..?) The “risks are weighted to the downside” says the Fed. The rising dollar is like a falling barometer telling us a Gale is coming.
The glass is falling…
Here in Europe, the dominant force is the Coronavirus, recession and jobs. It’s not just a UK crisis. Growth has fled. Recession in a sinking European economy will deepen. Even Sweden is admitting rising infections require a response – which will be measured, minimal and left to individuals to enforce. Something must be seriously wrong in France – they are copying Boris with 10 pm bar closings. France admitting England is right? That is serious m*rde. It’s not just stocks. Bond markets are beginning to sag with credit under increasing pressure. It’s a sign confidence is waning.
What more can governments and central banks do? We’ve thrown the kitchen sink at the virus, but the numbers are rising. Central Banks have cut rates to historically lowest levels ever and economic activity is falling… QE Infinity promises liquidity is not an issue – but holders want to sell….