The second presidential debates held on Thursday was more orderly than the first, but the contents were broadly the same - mutual attacks and undermines against each other. Financial markets are leaning in favor of Biden widening the lead. As a result, optimism is strengthening on Friday: US futures trimmed early decline, Europe halts losing streak, USD is on the defensive. But it doesn't look like full-fledged rally.
The current pre-election situation is unique in that the presumed net effect of the programs of both candidates is positive for stocks and negative for the greenback. Trump will continue to fight for low taxes and business-positive reforms; Biden will focus on income redistribution (higher taxes for the rich and corporations), which, however, is offset by higher government borrowing and spending. In 2016, it was different - then it was difficult to predict what Trump's campaign promises would turn out to be.
Therefore, despite pre-election anxiety (which the dollar feeds on), the main trend in USD is downward and IMO, long positions in USD should be in essence a bet on temporary upward rebound. I would not be in a hurry to get short on USD in the medium term, because elections are on the way and we should see some additional upside in USD offering better entries, but if you are ready to dismiss the turbulence, shorting USD right away makes sense.
Turning out focus to eco data, solid figures on US initial and continuing jobless claims released on Thursday offered good support for sentiments on Friday:
Initial claims - down to 787K, the forecast was 860K;
Continuing claims - down to 8.37M, the forecast was 9.5M.
Existing home sales in the US are also impressive, which MoM figures suggest robust growth (including due to the low base effect):
+ 9.4% MoM gain in September, the data showed on Thursday, which is well above expectations of 5.0%.
Earlier, we also discussed quite rapid inflation in the used car market in the United States (an indicator of increased demand), which may indicate a shift in consumer habits after covid (gravitating from renting (the so-called sharing economy) to own property). This can become a new full-fledged trend in consumption not only in the United States, and I recommend that you adopt this idea in the stock picking process.
PMI in Germany and France indicated similar trends - manufacturing continues to develop a positive momentum, services are again suffering from lockdowns. Manufacturing PMI improved and service sector PMI worsened.
Retail sales in the UK, a key component of consumption, rose for the fifth straight month. Now they are 5.5% above pre-crisis levels, which speaks of impressive resilience of consumer spending in England. Monthly sales growth in September amounted to 1.5%, in annual terms they increased by 4.7%. Pound is likely to extend this upside on back of this data, fueled also by resurgence of orderly Brexit hopes.
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