US stimulus impasse overshadows drop in jobless claims

Agence France-Presse

Posted at Aug 13 2020 10:06 PM

LONDON - Equities on both sides of the Atlantic failed to get much of a boost out of improving US jobless claims as investors fretted over US lawmakers' failure to find common ground on an economic rescue package.

Wall Street opened mixed, with the Dow sliding 0.4 percent, despite data showing new weekly claims for unemployment benefits fell below one million for the first time since the coronavirus pandemic struck in March.

The 963,000 seasonally adjusted initial claims filed in the week ended August 8 came in below expectations.

"However, the failure for US lawmakers to deliver an expected new fiscal relief package continues to foster some caution, and US-China tensions remain," said analysts at Charles Schwab brokerage.

Europe's main stock markets were all lower in mid-afternoon trading.

While Wall Street saw sharp gains Wednesday after a forecast-busting jump in US inflation that indicated the key consumer sector was revving up again, stalled stimulus talks in Washington have dampened the mood.

Traders have been betting on US lawmakers eventually agreeing on a new pandemic recovery deal despite long-running animosity between Democrats and Republicans.

Both sides are blaming each other for the lack of movement, with Treasury Secretary Steven Mnuchin saying Wednesday that House Leader Nancy Pelosi would not budge unless a Democrat demand for spending of at least $2 trillion is met.

That is well down from the $3.5 trillion initially proposed by Democrats but Republicans say they are unwilling to shift from their $1-trillion plan.

There is also a focus on this weekend's US-China talks to review their trade pact signed in January.

There have been concerns that rising tensions between the superpowers could scupper the agreement, which ended, or at least called a truce, in a painful and long-running trade war that battered the global economy.

But top officials on both sides have expressed confidence the deal will be kept in place and analysts said there was little desire from either side to scrap it.

"From the US perspective, imposing more trade taxes on US companies in the middle of a pandemic would generally be considered a bad thing for the stock market," said Stephen Innes at AxiCorp.

"After touting the stock market's miraculous recovery... (US President Donald) Trump would be vehemently against anything that would trigger a drop in stocks," he added.

"From China's perspective, (President) Xi probably wants to keep US relations on good terms, given the strong likelihood of a change in the US administration with Democrats polling well."

Earlier in Asia, investors had struggled to maintain momentum following a strong start.

Tokyo ended up 1.9 percent as a recent drop in the safe-haven yen boosted exporters, while Singapore and Manila also added more than one percent. Seoul, Taipei, Jakarta and Wellington were also higher.

But Hong Kong dipped 0.1 percent, Sydney fell 0.7 percent and Manila shed 0.4 percent

Oil prices edged lower, as the International Energy Agency cut its 2020 forecast for global oil demand to 91.9 million barrels per day, the first downgrade in a number of months.

"By December 2021, global oil consumption will still be two percent lower than at the end of 2019," the IEA said.