Stimulus package looks less likely, Biden picks Harris, and inflation data due.
U.S. stocks turned sharply lower before the close yesterday after Senate Majority Leader Mitch McConnell said stimulus talks are at a stalemate. The comments damaged expectations among investors that a compromise would eventually be reached on a new — desperately needed — package. Adding to concerns over the outlook for the U.S. economy is analysis showing that executive actions announced by President Donald Trump on tax could be challenged and those on evictions could be almost completely ineffective.
Democratic presidential nominee Joe Biden picked Senator Kamala Harris to be his running mate for November’s election. Harris, a former two-time attorney general for California, dropped out of the race for the Democratic nomination in December. She will face Mike Pence in the only scheduled vice-presidential debate on Oct. 7. President Trump, who donated to Harris’ campaigns in California in 2011 and 2013, called her the “meanest” and “most horrible” senator. Jeffrey Gundlach predicted Trump will win the election, saying Harris is a “little too charismatic.”
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Economists expect the pace of price rises in the U.S. to have ticked slightly higher in July due to the recovery in energy prices. The headline number is seen at 0.7% while core inflation may ease to 1.1% when the data is published at 8:30 a.m. In an effort to adjust its stimulus measures, the Federal Reserve announced a 50 bps cut to the interest rate on its Municipal Liquidity Facility after the program only made one loan since it was announced in April. Elsewhere in economy news, this morning the U.K. reported a 20.4% plunge in gross domestic product, the largest contraction since records began in 1955.
Global equity markets are not showing any signs of a hangover from yesterday’s drop into the close in U.S. markets. Overnight the MSCI Asia Pacific Index rose 0.2% while Japan’s Topix index closed 1.23% higher. In Europe, the Stoxx 600 Index was 0.3% higher at 5:50 a.m. with banks the best performers. S&P 500 futures pointed to a bounce at the open, the 10-year Treasury yield was at 0.666% and oil gained.
After inflation numbers, commodities dominate today’s economic data with crude oil inventories at 10:30 a.m. and the latest WASDE report at 12:00 p.m. The monthly OPEC oil market report is also due today. Boston Fed President Eric Rosengren, Dallas Fed President Robert Kaplan and San Francisco Fed President Mary Daly all speak later. At 1:00 p.m., the Treasury is selling $38 billion of 10-year notes before giving the July budget statement at 2:00 p.m. Cisco Systems Inc. and Lyft Inc. are among the companies reporting results.