Asian stocks set for muted open amid US stimulus talks

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(Oct 21): Asian stocks looked poised to track modest U.S. gains Wednesday as lawmakers continued to haggle over an aid package to bolster the economic recovery. The dollar held losses.

Futures were little changed in Japan, as were shares in Australia. S&P 500 edged higher after the benchmark bounced back from Monday’s selloff as House Speaker Nancy Pelosi continued to negotiate with the White House on a deal near US$2 trillion. Tech shares mostly shook off the U.S. Justice Department’s decision to sue Google for allegedly abusing its power. Netflix Inc. plunged in late trading after it added fewer subscribers than predicted in the third quarter and issued a forecast that missed Wall Street estimates.

Elsewhere, Treasuries slumped, along with government bonds in Europe. Oil retreated.

In the latest developments, Pelosi said Tuesday she’s hopeful for a stimulus agreement this week, which would be crucial to getting a bill passed by Election Day, although Senate Majority Leader Mitch McConnell has warned the White House against a bigger Pelosi-led deal before Nov. 3. The administration’s offer is now US$1.88 trillion, White House Chief of Staff Mark Meadows said on CNBC. Pelosi has pushed for US$2.2 trillion along with a number of requirements for how the money should be deployed.

A rally built on stimulus hopes has investors weighing the chances of striking a deal against speculation that the looming election will prove too much of a hurdle to overcome. Yet with Federal Reserve policy makers urging for more fiscal support to complement unprecedented monetary aid, many in the market may be willing to let Pelosi’s deadline come and go.

“Equity markets are under some pressure following limited advances in stimulus talks,” Sebastien Galy, a senior macro strategist at Nordea Investment Funds SA, said in a note. “The odds of a deal being low, tells us much about the battle between hope and the reality of an economy still under severe shock but recovering.”

Amid a resurgence in coronavirus cases, European Central Bank President Christine Lagarde said the unexpectedly early pickup in infections is a “clear risk” to the economic outlook in the region. Europe’s leaders have intensified efforts to slow the contagion, reviving lockdowns in some areas after piecemeal curbs made little impact. New cases hit daily records in Germany and the Netherlands.

Here are some key events this week:

  • Brexit trade talks are likely to continue at least into next week if the U.K. and EU fail to reach an agreement.
  • The final presidential debate before the U.S. election, between President Donald Trump and former Vice President Joe Biden, will be live from Nashville, Tennessee on Thursday.

Here are some of the main market moves:

Stocks

  • S&P 500 futures rose 0.4% as of 8:01 a.m. in Tokyo. The S&P 500 Index gained 0.5%.
  • Nikkei 225 futures were flat.
  • Australia’s S&P/ASX 200 Index rose 0.1%.
  • Hong Kong’s Hang Seng Index futures rose 0.2% earlier.

Currencies

  • The yen was little changed at 105.48 per dollar.
  • The offshore yuan traded at 6.6622 per dollar.
  • The Bloomberg Dollar Spot Index was flat after falling 0.3%.
  • The euro was at US$1.1826.
  • The British pound was at US$1.2950.

Bonds

  • The yield on 10-year Treasuries increased almost two basis points to 0.79%.
  • Australia’s 10-year bond yield held at 0.76%.

Commodities

  • West Texas Intermediate crude fell 1% to US$41.26 a barrel.
  • Gold added 0.2% to US$1,910.05 an ounce.