The market continues with a slightly optimistic risk
sentiment after yesterday's events, especially the return of President Trump to
However, the possible effects of contagion are still entirely
Talks about reaching an agreement on the fiscal stimulus package continue between Democrats and Republicans.
The market seems to be leaning towards a possible positive outcome, even if
only at minimal levels. It is more a desire than a conviction; the uncertainty
is high in this sense, especially if we take into consideration that both
parties are immersed in the electoral period.
The result in the stock markets is reflected in a
lateral movement, with alternate days of losses and advances without any of the
leading indices being able to break in any direction.
TECH100 failed to break above the 11,500 zone after several failed attempts in recent weeks.
Stock indices need confirmation of more significant stimulus from governments, more specifically in the United States, to resume their upward path.
New cases, new lockdowns
The uncertainty about the evolution of the pandemic with a new lockdown in major cities around the world needs financial support to return to normality.
The Central Banks have previously stated that in the field of monetary policy, they can do little more. The sole exception is the ECB, as we could see in the future some adjustment in its asset purchase policy if the European economic situation does not advance, or the results are uneven, as President Lagarde commented today.
As a result of the improvement in risk sentiment, North American treasuries have suffered a substantial price drop. This is a rebound in yields, which in the case of the 10-year bond, has reached almost 10 bps.
This movement leads us to anticipate a potential fixed
income bubble that may increase as the financing needs of governments are more
significant as a result of the spending caused by their fiscal policies. It
would be especially relevant in the case of the United States and especially if
the Democrats won the elections.
Tnote10 has suffered a drop
in price of more than 50 points since yesterday, and technically it is already
below the 100-day SMA line that opens its way to the support located at 138.50,
below which losses could precipitate towards the 137.70- 138.00 zone.
With an almost unlimited bond purchase QE program by
the Federal Reserve, a turnaround in US bonds is unlikely, but we could see significant
corrections from current levels if market sentiment improves and implement new
fiscal stimulus packages.