Friday’s headlines were dominated by the news that President Trump and Melania tested positive for Covid-19.
The announcement put major pressure on US index futures when it was released and it weighed on European equity sentiment. Stocks in Europe pulled back some of their losses toward the close of business. The FTSE 100 managed to post a small gain, but the big eurozone indices ended the session mixed.
Traders were worried for Donald Trump seeing as he is 74 years old, and that he is overweight, so that puts him at a higher risk. As the trading session progressed, the fear factor faded. The US leader was admitted to the Walter Reed medical centre and he is being treated with Remdesivir. It is understood that Mr Trump is making good progress, but he is not out of the woods yet. Donald Trump is reported to be on a steroid and it is understood that he might be released today.
US politicians have yet to reach a deal on the proposed Covid-19 relief package. The Democrats are pushing for a package of $2.2 trillion, while the Republicans are interested in a scheme worth $1.6 trillion. Nancy Pelosi of the Democrats has been in contact with the Treasury Secretary, Steven Mnuchin, recently. The stimulus package talks are likely to remain in focus. Over the weekend, President Trump called upon both sides to reach an agreement. It is clear the US leader wants to pump out positive headlines going into the last few weeks of the presidential election. Yesterday, Pelosi said that progress was being made in relation to a package.
The Nikkei 225 has rebounded from Friday and the Hang Seng is up after being closed for two days at the end of last week. Hopes in relation to Trump’s health and a US relief package is lifting sentiment.
The US non-farm payrolls report took a back seat to the Trump health story. The headline figure showed that 661,000 jobs were added, which undershot the 850,000 consensus estimate, and it was a big drop-off from the 1.48 million that was registered in August. The unemployment rate fell from 8.4% to 7.9%. The participation rate cooled to 61.4% from 61.7% and there are concerns that some people are so disenfranchised with the labour market, they are no longer seeking new employment. Average earnings, on a yearly basis, came in at 4.7%, and that was unchanged on the month. Overall it was a mixed update. The fall in the unemployment rate is encouraging, but it is worrying that there was a large decline in the number of new of jobs created as it indicates the recovery in cooling.
The US dollar index finished higher on Friday as traders were in risk-off mode. In the past few months, the greenback has attracted safe-haven flows, so the uncertainty surrounding the President Trump’s health situation pushed up the currency. The dollar was coming from a relatively low base as it fell for the first few days of last week. The dollar’s uptrend for the last month in still intact.
Gold lost a little ground on Friday, but it still managed to close above the $1,900 mark. The asset has traditionally been a safe haven play, but the US dollar has started to play that role too, so the upward move in the greenback has held back the metal. While gold holds above the $1,900 mark the broader upward move should continue.
Oil suffered on Friday as the broad risk-off mood hit the energy. Not only were health concerns a factor in the decline, but oversupply worries were an issue too. Earlier in the week OPEC reported that September production was 160,000 barrels per day higher on the month. Output from Libya and Iran were blamed for the rise in production.
Between 8.15am (UK time) and 9.30am (UK time) the major economies will post their services PMI reports for September. Spain, Italy, France, Germany and the UK will publish reports, and economists are expecting 46.3, 46.6, 47.5, 49.1 and 55 respectively. It is worth noting that last week the manufacturing data from the big economies of Europe all showed improvements on the month.
Eurozone retail sales for August are tipped to be 2%, which would be a big improvement on the -1.3% posted in July. The reading will be announced at 10am (UK time).
The final reading of the US non-manufacturing PMI report for September is expected to be 54.6. Shortly after, the ISM non-manufacturing report will be posted, and the consensus estimate is 56, which would be a drop from the 56.9 posted in August.
EUR/USD – has been moving lower since early September and while it holds below the 50-day moving average at 1.1801, the bearish move should continue, and it might find support at 1.1524, the 100-day moving average. If the wider bullish trend continues, it should target 1.2000.
GBP/USD – is in a downtrend and if the negative move continues it might encounter support at 1.2480. A rebound could run into resistance at 1.3033, the 50-day moving average.
EUR/GBP – has been driving lower since mid-September and a break below 0.9000 might put 0.8864 on the radar. A rebound might run into resistance at 0.9157.
USD/JPY – while it holds below the 50-day moving average at 105.74, the broader bearish move is likely to remain intact. 104.00 might act as support. A break above 105.74, could see it target 106.59, the 100-day moving average.