Stimulus Saga, Yuan Jump and U.K. Slump – What’s up in Markets

The fighting over a new fiscal support package continues, with stock futures rising in anticipation of a deal again. AMD is in talks to buy Xilinx (NASDAQ:XLNX) for $30 billion. China’s currency jumps by the most in four years as the Golden Week holiday ends. The U.K. slows down and oil prices come off highs after rising 10% this week. Here’s what you need to know in financial markets on Friday, October 9th.

1. Stimulus saga drags on

The Trump administration backtracked on the President’s decision to end talks on a broad stimulus package, adding yet another layer of uncertainty to the fate of talks over federal aid for the economy.

Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi spoke again on Thursday but it remained unclear what progress, if any, they had made toward a deal. Pelosi had effectively killed an administration initiative for a series of slimmed-down standalone bills earlier in the day by tying them to support for other spending, notably at state and local government level.

Uncertainty continues to reign over the next presidential debates, after President Trump refused to take part in a virtual debate, while his campaign manager Bill Stepien (who also has the Covid-19 virus) urged the second debate to be pushed back a week so that it can be held in person.

Trump also told Fox’s Sean Hannity he’s considering holding a rally in Florida at the weekend and another in Pennsylvania, two key battleground states where he trails rival Joe Biden in the polls.

2. Yuan hits two-year high

China’s currency leaped by the most in four years as the country’s financial markets reopened after the Golden Week holiday.

The yuan pushed as far as 6.6929 to the dollar in the more freely traded offshore market, its highest since April 2019, on a combination of upbeat sentiment about the domestic economy plus – according to some analysts – the prospect of a win for Biden in November and a more conciliatory policy between the two countries thereafter. That thesis is doubted by many who feel that the consensus in the U.S. against China has hardened to a point where a change of administration won’t change much.

The official Chinese composite purchasing managers index eased slightly this month, but the active internal travel market during the key holiday week – over 600 million trips were made by Chinese during the festival – have reinforced impressions that the economy is recovering well from the Covid-19 hit in February and March.

3 Stocks rise on stimulus hopes; AMD-Xilinx eyed

U.S. stock markets are set to close the week at their highest level in over a week, supported by fresh hopes for a stimulus package.

By 6:25 AM ET (1025 GMT), Dow 30 futures were up 126 points or 0.4%, while S&P 500 Futures were up by a similar amount and NASDAQ Futures were up by 0.3%.

Stocks likely to be in focus on Friday include Advanced Micro Devices (NASDAQ:AMD), which was down 4.6% in premarket on reports that it’s in advanced talks to buy rival chipmaker Xilinx for a pricey-looking $30 billion. Xilinx stock was up over 17% in premarket.

Also in the news is AT&T (NYSE:T) stock, as reports suggest that its Warner Media business is set to announce a big wave of layoffs.

4 U.K. economy slows; virus spreads again

The U.K. economy slowed markedly in August, according to data released earlier Friday. Manufacturing, industrial and construction output all rose, but by much less than expected, and at a reduced rate from July’s more vigorous rebound.

The news comes as the government of Boris Johnson grapples with a fresh surge in coronavirus cases that has led it to impose a series of partial local lockdown measures, chiefly in the north of the country. Those measure are causing increasing trouble for Johnson both inside his party and amid the broader public.

The pound, however, shrugged off the news, holding steady against the dollar at $1.2904 by 6:30 AM ET.

5 Oil slips on signs of OPEC discipline weakening

Crude oil prices retreated from their highest in over two weeks, a rise driven by Hurricane Delta forcing the overwhelming majority of production in the Gulf of Mexico to shut down.

A widening strike in Norway is also threatening to take a quarter of the country’s oil and gas output offline, at least temporarily.

However, prices came under pressure after a Platts report showed that output discipline in Russia and some African OPEC member states failed to improve in September.

By 6:30, U.S. crude futures were down 1.0% at $40.76 a barrel, while Brent futures were down 0.9% at $42.96 a barrel.

Baker Hughes’ rig count and the CFTC’s data on speculative positioning later round off a week that has seen prices rise nearly 10%.