August 26, 2020

Germany Extends Jobs Program

Germany Extends Jobs Program

U.S. stocks hit another record high yesterday. Investors are feeling comfortable in holding riskier assets as they see the virus numbers coming down, as pharma companies inch closer to developing a potential vaccine for coronavirus. At the beginning of yesterday’s session, all three major U.S. indices hit a record high, but then the sentiment started to shift, for there was some disappointment in the U.S. consumer confidence data. Remember, this particular number explains consumer thinking, and the data confirmed that Americans are not fully there yet. There is still a lack of confidence as they believe that the path of recovery is going to be long and full of obstacles.

However, the U.S. housing data, the New Homes sales number, did print an optimistic reading, and there was also an echo of this in the manufacturing reading in Richmond. This helped the U.S. stock market to recover their losses. But, the Dow Jones, the lagging index among all the U.S. stock indices failed to close in positive territory. It fell by 0.21%. The S&P 500 closed with a gain of 0.36%, and the Nasdaq index scored another 95 points and advanced by 0.82%.

Jackson Hole

The U.S. stock futures are trading lower today as traders are taking a somewhat cautious approach ahead of the Federal Reserve’s monetary policy review at Jackson Hole. It is expected that the Fed will not deviate much from its original position, but investors want to know how the Fed feels about the current economic recovery. If the majority view is that the path of healing is still long and economic recovery is fragile, then investors are likely to continue to support the riskier assets. However, if the Fed believes that the economic recovery is robust, then we may see some sell-off in the U.S. equity markets.

Germany Extends Jobs Benefit

Over in Europe, Germany, the biggest economy of the Eurozone, has extended the job benefit program in order to save millions of jobs. Angela Merkel’s coalition has agreed to apply another extension, which will take the current job benefit program until the end of 2021. Initially, this job benefit program was intended for only 12 months, and because of this job number, the unemployment rate in Germany is still remarkably low. The purpose is to help companies get back on their feet and not let Germans suffer from the current pandemic. The policy is designed to bring a full recovery back in Germany.

No Change In The UK

As for the U.K., the job benefit program—the furlough scheme is going to expire at the end of October. This is going to trigger millions and millions of job losses in the U.K. The unemployment rate is likely to go through the roof. Having said that, we do not see much fear among currency traders as they are still pushing the Sterling higher. There is no reason for the currency to be that strong, as the U.K. has no plans yet for Brexit, and millions of job losses are going to take place in a matter of a few months. 

U.S. Gulf Coast And Oil

In the commodity space, we are seeing decent gains for the oil prices as half of the refineries in the U.S. Gulf coast are shut due to Hurricane Laura. Remember, half of the U.S. crude oil production comes from the Gulf coast. Currently, half of this production is offline because the major refineries are shut. This helped the U.S. crude oil prices yesterday. The fact is that Hurricane season is nothing new for U.S. crude oil producers as it wasn’t long ago when they faced the impact of Hurricane Harvey, which had a serious influence on the U.S. crude inventory data. However, this time around the situation is a little different because of the pandemic compounding the damage.

Nearly half a million barrel oil production is offline, and this number isn’t that significant to create a major spike in oil prices.