Equities mixed as US stimulus talks drag, UK reimposes quarantine

HONG KONG (AFP) – Stocks were mixed yesterday following a broadly healthy week but investors are increasingly worried about the stalemate in Washington over a new United States (US) stimulus while European markets were hit by fresh British quarantine rules.

Hopes that Democrats and Republicans would cast aside their mutual animosity to stump up much-needed cash for struggling Americans have been key to supporting equities for weeks.

But they were dealt a blow on Thursday when senators broke up for a summer recess, saying they would not return until early next month, while both sides continued to trade accusations over who was to blame for the impasse.

Democrats have called on Republicans and the White House to double their USD1 trillion offer, having reduced their own proposal to USD2 trillion from an initial USD3.5 trillion.

Senator Leader Mitch McConnell accused his opponents of pushing for several socialist measures to be introduced into the new bill, describing their tactics as “throwing spaghetti at the wall to see what sticks”.

The expectation remains that an agreement will at some point be found, particularly with an election just over two months away and millions of Americans in financial crisis.

A currency trader walks by the screen showing the Korea Composite Stock Price Index (KOSPI) at the foreign exchange dealing room in Seoul. PHOTO: AP

“Congress’ political grandstanding delay is posing some risk for the global recovery,” said Stephen Innes at AxiCorp.

“Still, there is no chance of this deal not going through… It is a matter of whether it is USD1.5 trillion or USD2 trillion, where bigger would be better.”

Tokyo closed 0.2 per cent higher and Shanghai ended more than one per cent up. Sydney rose 0.6 per cent and Mumbai put on 0.5 per cent, while Jakarta is also in positive territory.
But Hong Kong slipped 0.2 per cent, Seoul fell more than one per cent, Manila eased 0.3 per cent and Bangkok shed 0.6 per cent.

London and Paris fell more than one per cent while Frankfurt was also sharply lower, with travel firms taking a hit after the United Kingdom (UK) government re-imposed a quarantine for travellers from France and the Netherlands, prompting Paris to quickly announce a “reciprocal measure”.

Traders had a weak lead from Wall Street, where the stimulus struggle trumped better-than-expected data showing fewer than a million people claimed jobless benefits last week for the first time since the pandemic struck in March.

“US jobless (figures) have begun to decline again, suggesting the US labour market is starting to improve, notwithstanding the economic impact from the containment measures introduced to combat the COVID-19 outbreak,” said Rodrigo Catril at National Australia Bank.

But he warned, “Ironically, an improving labour market may ease the pressure on US politicians to come up with a new stimulus plan.”

There were also concerns that the US economy could suffer “significant damage” because of delays in passing any relief plan, Michael Hewson of CMC Markets warned.

In a sign of the battle governments could have in rebooting their economies, data out of China showed consumers were still reluctant to go out spending, with retail sales falling last month despite forecasts of a small increase.

While the drop was shallower than in June, Innes said it showed that it was “going to take more than stimulus and deep discounts on luxury products to get people shopping again”.

At the same time, industrial production continued to grow, suggesting the economy’s recovery is being supported by the manufacturing sector.

Investors will be keeping a close eye on talks at the weekend between China and the US that will review the trade pact signed in January, though expectations are for the deal to be kept in place, despite increasing tensions between Washington and Beijing.