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China GDP, Stimulus & Brexit Drama, OPEC+ Meeting – What’s up in Markets

imageEconomy10 hours ago (Oct 19, 2020 06:44AM ET)

(C) Reuters.

By Geoffrey Smith — China’s economy continued to recover in the third quarter. 48 hours to reach a deal on U.S. fiscal stimulus, and a big meeting in Vienna between OPEC and its allies. Here’s what you need to know in financial markets on Monday, October 19th.

1. China’s economy continued recovery in Q3

China remained the only major economy in the world set to grow this year. Official statistics released overnight showed {{ecl-868||gross domestic product }}grew 2.7% in the third quarter and was up 4.9% from a year earlier.

While the quarterly growth was a sharp slowdown from an upwardly-revised 11.7% expansion in the three months through June, and fell short of consensus forecasts of 3.2%, the quarter nonetheless finished on a relatively strong note, with September data for retail sales and industrial production both posting their strongest month since the pandemic struck.

The Chinese numbers dominate an otherwise empty data calendar on Monday, with the NAHB housing market index the only other indicator of note due, at 10 AM ET (1400 GMT).

2. Pelosi gives 48-hour deadline for stimulus package

The political theater around a U.S. fiscal stimulus package continues, with House Speaker Nancy Pelosi saying at the weekend she’s still optimistic that a deal can be reached before the elections on November 3.

Pelosi set a deadline of Tuesday evening for a deal, something that leaves little time to bridge what appear to be still-wide differences.

Senate Majority Leader Mitch McConnell said at the weekend that the GOP-controlled upper chamber will hold votes on individual measures, a strategy that still aims to avoid signing up for the House Democrats’ plans to funnel money to state and local governments.

President Trump, who still trails rival Joe Biden by around nine points according to most recent polls, meanwhile claimed to support a larger stimulus package than that proposed by Pelosi.

3. Stocks set to open higher; Big Blue earnings due later

U.S. stock markets are set to open higher, with hopes that the latest deadline pressure will focus minds to get support out to struggling businesses and households.

By 6:25 AM ET, Dow 30 futures were up 179 points, or 0.6%, while S&P 500 Futures were up 0.7% and NASDAQ Futures were up 1.0%.

Oilfield services company Halliburton (NYSE:HAL) and air-conditioning specialist Lennox (NYSE:LII) lead a relatively quiet start to the week for earnings, while IBM will be the top-billing after the closing bell later.

4. Hopes for Brexit deal lift sterling

Sterling rose back above $1.30 on hopes that the U.K. and EU will still find a way to break the deadlock on their talks over future trading arrangements, once the post-Brexit transition period ends on December 31.

The U.K.’s House of Lords is expected to heavily amend the controversial Internal Market Bill which is due to start being debated this week, removing or watering down the key clauses that amount to a breach of the Withdrawal Agreement that governs the transition process.

The Withdrawal Agreement, in which the two sides pledged not to allow the erection of a ‘hard’ border on the island of Ireland, was also supposed to be the foundation of any future trading arrangement. Prime Minister Boris Johnson championed the agreement last year as an “oven-ready” deal, but he and his party now want to scrap it.

5. OPEC+ to review output deal

OPEC and its allies meet in Vienna to review the state of their existing deal on withholding oil supplies from the world market.

The bloc is expected to stick – at least in principle – to its schedule of restoring nearly 2 million barrels of oil a day to world markets from the start of next year. At present, it’s keeping back some 7 million b/d, in an effort to whittle down some of the stockpiles that accumulated when the pandemic caused demand to collapse earlier in the year.

However, the fragility of the economic recovery – at least outside of China – has prompted speculation that the bloc may postpone the planned increase in output. Some expect the final communique from the meeting to express a degree of flexibility if market conditions demand it.

U.S. crude futures were down 0.6% at $40.86 a barrel, while Brent was down 0.6% at $42.65.

China GDP, Stimulus & Brexit Drama, OPEC+ Meeting – What’s up in Markets

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