Markets edgy after Trump threat over stimulus

Singapore — Stock futures wobbled and commodities fell on Wednesday after US President Donald Trump threw a last-minute spanner into pandemic relief plans, though Asian equities rose as traders looked through fears about an infectious new coronavirus strain.

In a video posted on Twitter, Trump said a stimulus bill, agreed after months of wrangling in Congress, was “a disgrace” and that he wanted to increase “ridiculously low” $600 cheques for individuals to $2,000.

The possibility of a delay to such long-awaited and hard-fought spending plans sent S&P 500 futures down as far as 1% below the index’s Tuesday close, though they recovered to sit about 0.3% below the close.

FTSE futures fell 0.2% and EuroStoxx 50 futures fell 0.1%, while oil futures dropped 1.5% to re-test lows from Monday when coronavirus worries drove a sharp sell-off.

Treasuries also caught a bid, with 10-year US Treasury futures up two ticks in the Asia session and the yield on US 10-year government bonds down one basis point.

“Personally we think the president will sign the bill at the last possible moment,” said Andrew Brenner, head of international fixed income at NatAlliance, in an e-mailed note after Trump’s message. “But the true reality star will wait until the end,” he said. “It may go down to the last moment.”

Some traders said Trump’s push for higher stimulus could lead to a spending increase.

The bill could be amended if congressional leadership wants to do so. If it does not, Trump’s choices are to sign the bill into law, veto it, or do nothing and let it become law.

The stimulus funds are needed as the US recovery stalls and hospitals struggle to cope with a nationwide spike in infections at the same time as an even more contagious variant of the coronavirus spreads quickly in England.

The US dollar clung to Tuesday’s gains in thin trade, though signs that a small virus outbreak in Sydney could be contained gave the Australian dollar a small boost.

Asia’s stock markets posted broad, if patchy, gains as investors focused on domestic economic strengths.

MSCI’s broadest index of Asia-Pacific shares outside Japan snapped three days of declines with a 0.6% rise, led by jump in electric vehicle stocks in South Korea and China after LG Electronics announced a production deal.

Tech and health-care stocks pushed Japan’s Nikkei 0.3% higher and Australian shares rose 0.7%, though volumes were pretty light.

With a handful of trading days left in 2020, investors are still on edge over whether Britain and the EU can agree on a post-Brexit trade deal and over what if any consequences the new virus strain will have for vaccinations.

ITV’s political editor said in a late-night tweet that separate sources had raised the possibility of Britain and the EU striking a trade deal on Wednesday.

Sterling climbed above $1.3400 in Asia and was last at $1.3406 and 90.88 pence bought a euro. The dollar index was flat at 90.465.

Brent crude futures dropped 1.5% to $49.34 a barrel and US crude futures fell 1.5% to $46.33.

Gold nursed losses after the dollar’s gains on Tuesday and was mostly steady at $1,864 an ounce.

Reuters