Shares and economic trends influenced by Coronavirus and the US presidential election

Lagarde: “The new containment measures will have an impact on the economic recovery”

Last night Wall Street has marked strong purchases, with the Dow Jones up 1.7% and the Nasdaq up 2.3%. Positive signs came from German factories, but the EU markets’ reaction was weak. US President Donald Trump’s hospital release let both world shares and economic trends breathe again: Asian stock exchanges have risen led by Wall Street, while Europe has slightly retreated after the eve purchases. Milan has marked a drop of 0.17% after a positive start, Paris -0.2%, London -0.5% and Frankfurt -0.2%. In any case, there are some doubts about Donald Trump’s health condition and the possible risk of an outbreak at the highest levels of the American Government.

This is the doubt: now that Trump’s clinical picture is getting better, what will be the effect of his hospitalisation on next month’s election? The Wall Street day has closed with a sharp rise in the evening, thanks also to an increasing possibility of an agreement between Democrats and Republicans for a new aid plan: Trump’s illness would have accelerated the sense of “urgency” of new interventions. In the latest polls Joe Biden holds a clear advantage in view of the imminent presidential election. The surveys have been helpful to investors because they have reduced the fears of a controversial election with possible legal consequences in case the results will not be known immediately. According to the Reuters/Ipsos survey, following the news of Trump’s illness, the Democratic candidate would have an advantage of 10 percentage points.

According to investors, Biden’s election could mean higher taxes and more rules for Wall Street, but it could facilitate the approval of more economic stimulus in order to fight the crisis. Instead, the euro has opened just above 1.17 dollars while the risk inclination towards markets has begun to catch on. The European currency has changed in 1.1784 dollars and 124.52 yen. Dollar/yen has dropped to 105.65. In Germany there are glimmers of industrial economic recovery thanks to the exports that have driven the orders from German factories in August. According to the Federal Statistical Office, orders have risen 4.5% as compared to 2.8% estimated (-2.2% on an annual basis and adjusted for calendar effects).

The growing demands from abroad (+6.5%), mainly from the euro area, has made the leap possible. The spread between BTP and Bund has opened at 131 points, unchanged compared to yesterday’s closing, with the Italian 10-year bond yield at 0.80%. Today we are waiting for Lane (ECB) and Powell’s (Fed) speeches. The second wave of the Coronavirus pandemic represents a risk for the Eurozone rebound. During the “CEO Summit” of the Wall Street Journal, President of the ECB, Christine Lagarde, has sounded the alarm. “We fear that the containment measures that have been taken by the authorities will have an impact on the recovery, which instead of the V-shape we all longed for and hoped for, could develop a second arm of the V a little bit shakier”, highlighted the number one of the Eurotower.

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