PMIs highlight the need for more aid
We’re seeing a strong fightback in European stocks on Wednesday and the US is seen adding to Tuesday’s gains on the open.
It’s interesting to see risk appetite going full 180 since Monday when panic was spreading around the prospect of stricter restrictions, even lockdowns, in the final months of the year. The situation hasn’t exactly improved in the last 48 hours; in fact, PMIs from across Europe this morning only cement fears around the economic toll of the rising Covid numbers and restrictions that inevitably follow.
Resilience in the manufacturing sector is being more than offset by inactivity in services, with the composite number slipping far more than expected and only barely remaining in growth territory. The economic recovery was better than expected but short-lived and the next few months aren’t going to get any better. Another recession may be on the cards.
The only upside as far as markets are concerned is that more stimulus won’t be far behind. This was certainly the message on Tuesday from Fed Chair Jerome Powell and Treasury Secretary Steve Mnuchin, although the fiscal side of the equation is proving problematic and may not come until after the election. A lot of damage can occur in the interim.
Perhaps that will put more pressure on the Fed to use its powers and newly agreed framework to shore up the economy in the coming months. The central bank has already done an extraordinary job in doing so since March but with the economy likely to struggle in the months ahead, additional support may be warranted and that has been generous to the stock market in the past.
For a look at all of today’s economic events, check out our economic calendar.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.