Today is a turning point for the US economy, which needs a boost to avoid the "W-shaped trajectory" feared by investors. This is one of the major issues of this pre-election month.
Financial markets closed the third quarter of 2020 with rather disparate performances, but the balance sheet since the coronavirus crisis broke out is not as catastrophic as feared. Of course, for those who have bet everything on tech stocks, it is even very good. September was a month of setbacks, but this is quite often the case on stock markets.
While Europe watches with some anguish as Covid-19 contamination rates rise again, American parliamentarians are stuck when it comes to the budget. The absence of a new economic support plan is pushing companies to carry out their threats: massive layoffs. This is the case of airlines, whose job cuts are striking since they can be counted in tens of thousands.
Meanwhile, Democrats and Republicans are playing cat and mouse on Capitol Hill. The former have "agreed" to lower their ambitions regarding the support plan, with an envelope estimated at $ 2,200 billion. Yesterday, the White House said it was prepared to go as high as $1,500 billion, but certainly not to "a number starting with a 2". In the meantime, businesses and households are toasting. The end of Donald Trump's term could hardly be more chaotic.
The two clans will manage to get along one day, probably with a new effort on both sides, let's say around $1700 billion. This hope of compromise carried Wall Street yesterday and seems to continue to do so this morning, given the US leading indicators.
Yesterday was published pending home sales data, scoring an increase from 5.9% to 8.8% and against a consensus of 3.1%, surprising investors. This is a leading indicator of the health of the economy because the sale of a house causes a domino effect: renovations, furnishings, bank loan ... This statistic is also interesting in the sense that it is more prospective than sales of existing homes since a sales contract is signed several weeks before the home is counted as sold.
Since June, this statistic has been growing strongly and is still higher than expected, undoubtedly underlining the desire of Americans to benefit from a patch of greenery after lockdowns that may have proved stifling in large cities.
Meanwhile, after a plunge of 14% in early September, oil prices regain some color in the short term. Yesterday, Crude Oil inventories were reported at -2.0M, taking the consensus of 1.0M by surprise, giving a boost to the black gold in session.
However, despite deep reductions in producer supply, barrel prices still lag behind other commodities such as gold, silver or more exotic commodities, palm oil and lumber, compared to 2020. There are two reasons for this. On the one hand, the world economy is facing weak growth in the short term. On the other hand, we are also witnessing a structural change in the global energy mix. This last factor tends to make the demand for oil less and less significant as a barometer of global growth. The health crisis has in fact accelerated a structural trend that is unfavorable to investment in the oil industry, while the economic stimulus plans of the various states are largely focused on energy transition and incentives for renewable energies. This new world order is not for tomorrow, but the more it develops, the more likely it is that this behavior will become entrenched in our way of life, ultimately reducing the demand for crude oil in the long term.
Today on the agenda, we have the September PMI indicators in Europe and then in the United States. The European unemployment rate is also on, as well as several indicators in the United States: Challenger employment survey, household income and spending, unemployment benefit claims, manufacturing ISM and construction spending.