- Brexit negotiations stuck
- US budget and stimulus deals in limbo as well
- -0.30% -0.19%
- UST 0.93
There has been no progress in either Brexit talks or on the US stimulus bill leaving markets moribund in Asian and early European trade as equities were mixed and currencies were as well.
The price action was muted across the board with stock index futures showing a schism as and were off by more than 30 basis points while held on to small gains. The high tech trade which may as well be called the work from home trade continues to perform much better than the “Main Street” trade in the equity market as traders await the stimulus bill that would help physical businesses devastated by the pandemic but lawmakers in DC continue to dawdle.
There was some excitement yesterday that Majority Leader McConnell would announce the new bi-partisan bill of about $900B sparking hopes of passage before the year end, but so far the leader said only that he was studying it. Furthermore US lawmakers are at standstill on a simple appropriations bill that would ensure that the government runs until the end of the year so the prospects of stimulus bill passage are less clear today than they were yesterday.
Still the political pressure on lawmakers to do something is enormous as the pandemic rages all across the US and a new series of lockdowns is almost certain to slow down business activity from already low levels. So far the markets remain sanguine about a stimulus deal during the lame duck session, but the longer the delay the greater the chance of market selloff as much of the good news is priced in.
In FX land was lower by 30 pips as prospects of a Brexit deal look slim. The two parties are hung up on regulatory issues with the EU adamant that it does not want to allow the UK the possibility of regulatory arbitrage while enjoying favorable trade conditions. The UK for its part insists on sovereignty in its regulatory affairs and that conflict appears to be irresolvable for now.
Although talks are supposed to hit their deadline on Wednesday there is now speculation of extension and that is leaving sterling trade calm for now.