President Trump has single-handedly punctured the stock market, after firing off a tweet that ended negotiations over more Covid-19 fiscal support measures.
“Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to Covid-19,” US President Donald Trump tweeted from his personal account.
“We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their request, and looking to the future of our Country.
“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”
Immediately after Trump’s announcement, the stock market’s major bourses, the Dow and the Nasdaq, plummeted around 1 per cent.
The Dow after the President's tweet saying no COVID relief talks until after the election pic.twitter.com/Ypnzyc52Vs— Michael Del Moro (@MikeDelMoro) October 6, 2020
In response to Trump’s tweet, House Speaker Nancy Pelosi said Trump had “showed his true colours,” and was “putting himself first at the expense of the country.”
“He shows his contempt for science, his disdain for our heroes… and he refuses to put money in workers’ pockets, unless his name is printed on the check,” she said in a statement.
“Clearly, the White House is in complete disarray.”
All three major indices were down around 1.5 per cent at close, with tech companies doubly hit by a House report calling for anti-trust measures to restrain the power of tech giants.
Congress has been negotiating another economic stimulus bill for some time, but reached a stalemate over the exact amount of the proposed bill. So far, Congress has passed around US$3 trillion in economic stimulus.
Earlier this month, the US Federal Reserve flagged more stimulus was needed given the outlook of the US economy looked “highly uncertain”.
"It will take a while to get back to the levels of economic activity and employment that prevailed at the beginning of this year," Federal Chair Jerome Powell told reporters. "My sense is that more fiscal support is likely to be needed."
The US unemployment rate is just below 9 per cent, or the equivalent of around 11 million Americans, and small businesses in particular continue to struggle, Powell said.
What’s happened to the ASX this morning?
Though the SPI200 Futures contract was down before markets opened, the benchmark S&P/ASX 200 (^AXJO) now seems largely unaffected by the dip in the US. The local bourse lost around 0.21 per cent just before 10:30am AEDT, but has recovered to remain flat at 10:40am AEDT.
The all ordinaries was also flat at 10:40 AEDT.
According to Westpac economists, headlines on US fiscal negotiations had been encouraging, so markets were “wrongfooted” by Trump’s announcement.
“The upbeat equity mood was punctured by a Trump tweet declaring an end to negotiations over fiscal support ’until after the election’,” Westpac economists said.
Energy and materials were down 0.26 per cent and 1.39 per cent respectively, but tech, financials, healthcare and consumer staples and discretionary were in the green.
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