The Opening Belle

October 02, 2020 • Estimated Reading Time: 6 minutes

A softer risk tone overnight quickly evolved to genuine risk off on the news that President Trump had tested positive for Covid-19.

Markets in China, Hong Kong, Taiwan, India and South Korea are all shut for holidays.

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Objections from top Republicans are likely to doom the House Democrats’ plan in the Senate. Senate Majority Leader Mitch McConnell has called the $2.2 trillion price tag “outlandish,” although Democrats have reduced the cost of their proposal by over a trillion dollars since May. The House vote was 214-207.

No Republican voted for the Democratic plan, although 18 Democrats voted no, many of them moderates from swing districts who have been urging Pelosi to bring a bipartisan proposal to the House floor.

“Today’s package is another partisan exercise that will never become law,” Representative Abigail Spanberger, one of the Democrats who voted no, said.

Republican President Donald Trump’s negotiating team has suggested a $1.6 trillion response, and the White House on Thursday dismissed Democrats’ $2.2 trillion plan as not serious.

McConnell also gave further comments to Fox;

 McConnell on Fox: I'd like to get another rescue package. I think there is more that needs to be done for the economy, but it is important to remember we now already have a debt the size of our economy for the first time since World War II.  This has got to stop— Chad Pergram (@ChadPergram) October 1, 2020 

 McConnell on Fox on coronavirus pkg: What the Spkr did, even after coming down a full trillion dollars is throw everything you could imagine into the package including tax cuts for rich people in CA & NY and free health care for illegal  immigrants. That..is not appropriate.— Chad Pergram (@ChadPergram) October 1, 2020 

Yesterday's data showed that U.S. consumer spending is starting to slow.

U.S. Personal Spending MoM

Personal incomes also fell.

U.S. Personal Income MoM

The personal savings rate is also declining (although still elevated by historical standards)

United States Personal Savings Rate MoM

None of this is especially surprising since unemployment benefits expired at the end of July, but it highlights the need for further support in the coming months.

 đź‡şđź‡¸ ~26.5 million Americans claiming benefits.

Easy to forget just how bonkers that number is.

It’s more than the entire population of Australia (~25m). https://t.co/q8w9mJScRC— PiQ (@PriapusIQ) October 1, 2020 

As policymakers seem unable/unwilling to agree on more support ahead of the election, there is a big risk that the U.S. economy could lose further momentum.

Equities seemed unmoved on that news, holding onto moderate gains after a choppy trading session.

They began to drift lower after news that the president and first lady needed to self quarantine;  

U.S. futures fell sharply when Trump confirmed that they had both tested positive;

 Tonight, @FLOTUS and I tested positive for COVID-19. We will begin our quarantine and recovery process immediately. We will get through this TOGETHER!— Donald J. Trump (@realDonaldTrump) October 2, 2020 

White House physician says the Trumps "both remain well at this time, and they plan to remain at home within the White House".

This Bloomberg story (from May) lays out all of the scenarios.

If the president becomes incapacitated, then power can be easily transferred to VP Pence.

If Pence also tests positive, then things could get messy.

 đź‡şđź‡¸đź¦  Worth a read..

What Happens If the President Tests Positive for Coronavirus - Bloomberg https://t.co/D2GFlfdQmt— PiQ (@PriapusIQ) October 2, 2020 

Via @newsquawk

This news will probably overshadow everything else, but we have European inflation data this morning, with continued disinflation a risk for the EZ, plus NFPs and U.S. factory orders this afternoon.