21.10.202011:28 Forex Analysis & Reviews: Stock indices in the US are rising in expectation of economic stimulus package

Yesterday, the US stock exchanges closed higher in anticipation of reaching an agreement regarding the new stimulus package for companies and households in the United States.

Therefore, the S&P 500 rose by 0.47% and partially recouped its losses acquired earlier. This index declined by 1.6% on Monday amid investor concerns about the lack of progress in the negotiations in the government. The Dow Jones Industrial Average also grow by 0.4% and the Nasdaq Composite by 0.33%.

How did this happen? The answer lies in the House Speaker of Congress, Nancy Pelosi. She made it clear that the White House must come to a compromise with the Democrats by Tuesday evening, so that a new stimulus package will be adopted before the US elections. In view of this, US Treasury Secretary, Steven Mnuchin, successfully resolved some disagreements over this matter, but could not say much about the most controversial issues. To completely close them, a certain transaction must take place. This is extremely necessary, given the tense situation with the pandemic. Today, the economy needs global support, and the markets need a positive outlook. But unfortunately, the time is not working in their favor.

The conflicting information about the progress of the negotiations has recently provoked fluctuations in the markets every time, so the long-awaited adoption of the new state support program could lead to a sharp rise in quotes.

In addition, investors are actively monitoring the rising cases of COVID-19 in America and Europe. The restrictions are tightened in a number of countries (England and France), although a complete shutdown of enterprises is not yet considered. After all, even the most humane governments seek to protect the economy from the most devastating and global consequences of the pandemic. Experts are confident that a new total quarantine will not happen, since there is a big difference between today's spot quarantine and the mass closure of enterprises in March.

Meanwhile, some sectors of the US economy not only did not yield to the overall negative trend, but even exceeded the expected positive forecasts. Here, the number of building permits in the US in September increased (compared to August) and amounted to 1.553 million. This figure even slightly exceeded analysts' expectations, which indicates the ongoing recovery of one of the most important sectors of the economy.

Generally, the US economy is recovering quite well from the pandemic, but new COVID-19 cases do not contribute to this. In addition, many market participants are fully focused on the presidential elections; however, analysts assume that the elections will not have a strong impact on world markets in the longer term.

We should recall the situation during the previous elections, and if we assume the scenario of retaining the post of the current US President, the situation will turn out to be the same over time.

On the other hand, we have here different stock indices from the US and Asia-Pacific. First, the shares of DJIA-owned Travelers rose 5.6%, while the company's third-quarter net income more than doubled. At the same time, IBM shares declined 6.5%, together with its revenue.

At the same time, shares of pharmaceutical company Moderna grew by 0.5%. Company representatives said that they will be able to issue a permit to sell the vaccine against COVID-19 in December. So far, they are awaiting positive results from the clinical trial.

Pan-European Stoxx Europe 600 fell 0.35%, while Logitech rose 16% after the company reported a sharp increase in sales due to demand for computing equipment during the telecom boom.

Meanwhile, UBS shares rose 5.28% and its net income doubled on the back of higher trading volumes.

Following the US indices, the main stock indices of the Asia-Pacific region (APR) also picked up positive dynamics. Based on the trading data, they mainly grow this morning following the US stock exchanges.

Here, the index of the Shanghai Stock Exchange Shanghai Composite fell by 0.35% and reached 3316.35 points. The Shenzhen Stock Exchange and Shenzhen Composite also fell by 1.09% and stopped at 2254.46 points, while the Hong Kong Hang Seng Index rose by 0.73%. (24747.93 points). At the same time, South Korean KOSPI rose by 0.36% and was fixed at around 2366.91. In turn, Australian S&P/ASX 200 rose by 0.11% and reached 6191.7 points, and Japanese Nikkei 225 rose by 0.39% to 23658.64 points.

All of these are due to the encouraging news from the United States. Yesterday's trading closed with growth of 0.5%, in hope for an early agreement on economic stimulus support for the economy and data on the number of new buildings in the country.