Macro Roundup (Oct 14)

SHANGHAI, Oct 14 (SMM) — This is a roundup of global macroeconomic news last night and what is expected today.

The US dollar strengthened on Tuesday as investors turned cautious after a Johnson & Johnson COVID-19 study was paused and as hopes dimmed that a fiscal stimulus package could be reached before the presidential election.

Major equity averages were lower, partly due to a decline in J&J shares after the company paused its study due to an unexplained illness in a participant, dampening optimism about a vaccine. Eli Lilly also said its clinical trial for a COVID-19 antibody treatment was paused.

US consumer prices rose 0.2% in September, matching expectations, for a fourth straight monthly climb, though the pace has slowed amid considerable slack in the economy as it slowly recovers from a nadir caused by coronavirus shutdowns.

The dollar index rose 0.528% against a basket of other currencies, putting it on track for its biggest daily percentage gain in three weeks. The US currency’s safe-haven appeal has been curbed by growing expectations that a win by former US Vice President Joe Biden on Nov. 3 would bring large stimulus for the pandemic-hit economy, bolstering the stock market and investor risk appetite.

Oil prices rebounded on Tuesday, supported by robust economic data from China that offset returning supply in other regions but gains were capped by forecasts for a slow recovery in global oil demand as coronavirus cases rise.

China, the world’s top crude oil importer, took in 11.8 million barrels per day (bpd) of oil in September, up 5.5% from August and up 17.5% from a year earlier, but still below the record high level of 12.94 mln bpd in June, customs data showed.

Gold fell as much as 1.9% on Tuesday, hitting below $1,900 an ounce, as the dollar rallied on an impasse over US stimulus and as investors latched onto a slightly less stark economic report card from the International Monetary Fund.

“The stagnation in Washington over the next stimulus package continues to pressure assets like gold that were relying on the weakness in dollar for the next wave of support,” said David Meger, director of metals trading at High Ridge Futures.

“The IMF and other agencies like U.S Federal Reserve have also noted that recovery has taken place a little quicker than they originally anticipated, so that would lead us to believe that there could be a need of lesser stimulus worldwide.”

On Wall Street, stocks fell on Tuesday, snapping a four-day winning streak. The Dow Jones Industrial Average slid 157.71 points, or 0.6%, while the S&P 500 declined 0.6%. The Nasdaq Composite was the relative outperformer, dipping 0.1%.

The decline came amid a number of macro headwinds. Eli Lilly said Tuesday afternoon that it would pause its trial of a coronavirus antibody treatment, news that followed Johnson & Johnson’s earlier announcement that it halted its vaccine trial after an “adverse event” was reported. Additionally, hopes for near-term stimulus have faded as Democrats and Republicans remain at odds.

The White House recently proposed $1.8 trillion for an aid package, which House Speaker Nancy Pelosi said “falls significantly short” of what is needed. On Tuesday, Senate Majority Leader Mitch McConnell said that the Senate will vote on a limited stimulus bill later this month, which will be “targeted relief for American workers, including new funding” for Paycheck Protection Program small business loans.

Earnings season kicked off on Tuesday with both JPMorgan Chase and Citigroup reporting better-than-expected results. Bank of America, Goldman Sachs and Wells Fargo are on deck Wednesday, with all three expected to report results before the market opens.

UnitedHealth will also report Wednesday morning, while United Airlines will report after the bell. On Tuesday, Delta reported a wider-than-expected loss for the most recent quarter, including a 75% decline in revenue, as the industry continues to take a hit from Covid-19.

China reported strong trade data in September as most business activity resumed in the world’s second-largest economy, following what was apparently the worst of the coronavirus pandemic.

For September, China’s imports surged 13.2% in US dollar terms, according to official customs data on Tuesday. Exports rose 9.9% from a year ago — close to analysts’ expectations of 10%,.

Germany’s ZEW survey of economic sentiment fell by more than expected in October as the coronavirus pandemic, fractious Brexit negotiations and the US election spiked uncertainty for Europe’s largest economy.

China’s Xi is set to deliver a speech in Shenzhen on Wednesday, according to state media reports. That comes as the Shenzhen Special Economic Zone celebrates the 40th anniversary of its establishment.

State media outlet Xinhua reported Sunday that the country “unveiled a new comprehensive reform plan for Shenzhen,” giving local authorities there a “more direct and greater say in business” in areas such as carrying out market-based economic reforms.