The stock markets have now experienced the “peak of the Fed stimulus” unless these two things happen


It seems like a tough day for the markets.

Investors were disappointed by the Federal Reserve’s action – or the lack of it – on Wednesday evening, with the central bank failing to indicate a further stimulus. The Fed has said it plans to keep interest rates near zero until the end of 2023 at the earliest, with President Jerome Powell giving a cautious outlook.

In our call of the dayLena Komileva, chief economist at G-Plus Economics, said the markets had now experienced “the Fed’s stimulus peak”, barring government error or market shock.“The Fed’s new inflation framework has not led to a new political regime, nor to new action, but to a flatter policy cycle that still provides greater stimulus to reflation against the adjustment of the ‘economy to a new normal with COVID,’ she said.

“This reinforces our view that, barring a further exogenous shock to the economy, or a fiscal policy error that fails to provide further support for the recovery beyond the November elections , the markets experienced the peak of the Fed’s stimulus, ”Komileva added.

With no signs of further action from the Fed, AxiCorp market analyst Milan Cutkovic said the spotlight would now be on Congress on a new stimulus package, with further delays likely. to have an impact on the markets.

“The focus will now return to the US Congress, where Democrats and Republicans are still struggling to agree on a stimulus package. Investors are increasingly impatient with the lack of progress, and market sentiment could deteriorate if there is no deal soon, ”he said.

Goldman Sachs GS,
+ 1,35%
economist David Mericle noted that while Powell said more congressional fiscal stimulus was expected, there were risks both ways. Mericle added that a Democratic sweep in the election would likely mean “another substantial stimulus”, while a failed negotiations on a new stimulus bill this month and a divided government after the election “would increase the risk. of a slower recovery ”.

The steps

After rising slightly on Wednesday, the Dow Jones Industrial Average DJIA,
+ 0,13%
was on the verge of going down as Dow YM00 futures,
Pointed 0.9%, or 254 points, lower before the opening. Nasdaq NQ00 Futures,
slipped by 1% and the S&P 500 ES00 futures,
fell 1.1% as traders reacted to the Fed’s cautious global economic outlook.

European equities also fell early in the session, with the pan-European Stoxx 600 SXXP,
0.6% down, the German DAX DAX,
0.6% lower, and the FTSE 100 UKX,
decrease of 0.8%. The rise in coronavirus cases in countries on the continent has also contributed to negative sentiment.

The buzz

Actions de Snowflake SNOW,
+ 111,60%
jumped 111.6% in Wednesday’s session, after the company produced the largest initial software public offering on record, leaving the company with a market value of around $ 70 billion.

The Bank of England is expected to hold interest rates amid mixed signals about the UK’s economic recovery.

Oracle database software company ORCL,
The offer for the Chinese-owned TikTok video-sharing app raised concerns within the Trump administration that it still posed national security risks, according to a Bloomberg report on Wednesday evening.

Anglo-French biotech group Novacyt ALNOV,
+ 5,27%
reached a profit in the first half, as sales of COVID-19 tests triggered an increase in revenue.

European car sales fell 18% in August after three months of improvement after the lockdown, raising concerns about the recovery. Car manufacturers Renault RNO,
and Volkswagen VOW,
were among the biggest drops in the industry on Thursday.

President Donald Trump has said that a COVID-19 vaccine could be rolled out from mid-October, challenging earlier comments from Centers for Disease Control and Prevention director Dr Robert Redfield, who said a vaccine may not be available to the general public for a long time. next year.

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