Daily Market Color

Equities Fall as Stimulus Negotiations Continue

Equities turned lower for a third consecutive day as stimulus negotiations continue
After promising that Congress will pass a bill before the end of the year, House Speaker Nancy Pelosi scheduled another call with Treasury Secretary Steven Mnuchin.  Though major bipartisan disagreements remain, Mnuchin says the White House is willing to compromise on national virus testing.  Despite the developments, stocks closed lower — the S&P 500 and DJIA falling 0.2% and 0.1%.  Treasury yields and swap rates closed moderately higher — the 10-year rising less than a bp.  UST yields are trading 1-2 bps higher this morning.
US retail sales rose 1.9% in September
The figure rose for a fifth month in a row, blowing past economist expectations after only rising by 0.6% in August.  Retail sales have consistently risen since May after falling a record 14.7% in April.  Despite only adding 661,000 jobs in September, the gains outweighed the effects of expired unemployment benefits, pushing the figure past the 0.7% forecast.
FX Friday
Heading into Friday, investors continued their US dollar spree, raising the dollar index to its best level in 2 weeks, hitting 93.904 during Thursday’s early US trading sessions. A recent spike in coronavirus cases coupled with the lack US stimulus progress have reinforced the flight to the haven dollar.
In the UK, sterling levels continues to wane, coming down substantially lower from Monday’s high of 1.3074, hitting a low of 1.2887 at the time of publication. The continuing Brexit concerns between the EU and Britain continue to cast doubts whether a trade deal will occur before the end of the year. With little time left in the year, investors seem to have accepted that if a deal does occur, it will be a lightweight version of what either side is looking for.
On the other side of the globe, the yen was the only G-10 currency to gain against the dollar, with reports of a rise in covid-19 cases worldwide and dwindling investor hopes of a US fiscal stimulus getting done before the election. Some generally disappointing US bank earnings reported as well as a surprise uptick in US weekly jobless claims helped the yen maintain its levels between 105.04-105.51 over the last 3 days.

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