The events of the ending week reflect the influence of external factors on financial markets


The first one is the expectations of the COVID-19 second wave and the media attention to this topic due to the British authorities’ decision to impose restrictions on visits to public pubs. Personally, I believe that there is no second wave in EU but only a local worsening of the pandemic.

Another problem has become urgent this week – the need for new measures to support the American economy. Jerome Powell has already begun talking about this. The Democrats and Republicans in Congress cannot implement them because of political contradictions and the struggle on the eve of the presidential elections.

On Thursday, Nancy Pelosi, speaker of the lower house, said she would offer a $ 2.4 trillion assistance package to businesses and Americans. Whether it will be implemented or not, but so far, this news supports the major markets significantly. Pelosi promised to submit the document to Congress next week.

In any case, the market has already shown the need for additional liquidity through a powerful sell-off of company shares on Monday and Wednesday. In fact, traders are blackmailing the Fed, Congress and the President, pointing out that they can keep the market from further collapse.

This desire turned out to be so strong that investors ignored another weak data on the number of jobless claims, which rose above the forecast of 866K in September to 870K. I can say that despite a pessimistic opening of the week, the market calmed down a little and even tried to stabilize. But I would like to draw your attention that it is too early to talk about any stabilization. Everything can change at any moment.

Friday’s focus was on the publication of data on basic orders for durable goods. It was expected that in August, they added only 1.2% against an increase of 2.6% in the previous period under review, and the volume will grow by 1.5% against 11.4% in July.

Thoughts and conclusions:

I want to note that this week turned out to be difficult. However, it revealed that new economic incentives could be the basis for a reversal in the market and a change in a downtrend to an uptrend. In case of a favorable Congress decision, they can become the basis for the termination of the stock markets corrections and prevent further strengthening of the dollar.

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By Maksim FXbro