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Why Investors Shouldn't Count On Another Stimulus Package

2020-10-20T16:21:56.569Z


Although negotiations for new stimulus packages are ongoing, there is reason to believe that the subsidies will not arrive anytime soon.


Trump: Pelosi is not interested in passing stimulus 4:06

London (CNN Business) -

The prospect of US lawmakers producing another big stimulus package ahead of the election has plagued investors for months.

But there are good reasons to think that additional relief will not come soon.

The Dow Jones closed down 1.4% on Monday as the 48-hour clock on stimulus talks imposed by House Speaker Nancy Pelosi ticked off without a breakthrough.

The S&P 500 lost 1.6% and the Nasdaq lost 1.7%.

  • Nancy Pelosi sets a 48-hour deadline to approve a stimulus agreement before the election

Trump: Pelosi is not interested in passing stimulus 4:06

Pelosi is pressing the Trump administration to reach a deal Tuesday night because the House and Senate will not be able to pass a bill before Election Day on Nov. 3 if talks drag on.

Pelosi has been negotiating with Treasury Secretary Steven Mnuchin for months, and the two sides are moving closer to a deal.

But that doesn't mean there will be enough votes in the Senate for another big stimulus package.

Democrats have been pushing for an aid bill worth more than $ 2 trillion.

But that is simply too much money for Senate Republicans, who favor a much smaller plan that includes about $ 500 billion in aid.

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Republicans' response to the stimulus package

Sen. John Thune of South Dakota, the Republican responsible for gathering votes from his colleagues, said that even if a large stimulus package passed in the House, it would be difficult to find enough votes to cross the 60-vote threshold to promote legislation in the Senate.

"I mean, I think we're going to have a hard time finding 13 votes for anything that's very big," Thune said, a reference to how at least 13 Republicans would have to sign with the 47-member Democratic group.

Republican Senator Ron Johnson of Wisconsin raised his hands when asked about a $ 2 trillion neighborhood settlement, saying it's simply "too high."

Economic recovery will be slow

Federal Reserve Chairman Jerome Powell has asked lawmakers to approve additional stimulus, warning that America's economic recovery has a long way to go.

Investors can expect more volatility as negotiators in Washington make one last push for a potential deal.

Sebastien Galy, a senior macro strategist at Nordea Asset Management, said equity markets are under pressure due to limited progress in talks and the risk of Senate Republicans rejecting a deal.

"The odds of a deal being low, this tells us a lot about the battle between hope and reality in an economy that is still in severe shock but on the mend," he said in a research note.

If the negotiations fail, a short-lived stock sell-off is likely, according to Jeffrey Halley, a senior market analyst at Oanda.

With the US presidential debate ... and COVID-19 rapidly rising in Europe ... a sustained rally in stocks from here will be challenging, even if a US stimulus package arrives last. minute, ”he said in a research note.

Unemployment benefit claims grow in the US 0:51

UBS propels itself through the pandemic

UBS is returning billions of dollars to shareholders and reporting a huge increase in profits even as the pandemic continues to devastate the global economy, reported my colleague Hanna Ziady.

The world's largest wealth manager said in a statement Tuesday that third-quarter net earnings nearly doubled to $ 2.1 billion compared to the same period last year.

The strong result was supported by a boost to business income at its investment banking division amid choppy markets and the sale of a majority stake in its fund distribution platform Fondcenter.

The bank also increased revenue at its core wealth management division, which posted record earnings in Asia and the United States.

The bank's shares rose 2.8% on Tuesday.

UBS is setting aside $ 2.5 billion to return to shareholders next year in the form of dividends and share buybacks.

It also plans to pay the second installment of its 2019 dividend next month, after regulators asked European banks to delay payments to shareholders in the face of the pandemic.

A second wave of coronavirus cases now threatens to derail Europe's fragile recovery heading into the last quarter of the year.

That could put pressure on lenders, who have already set aside billions of dollars to cover bad debt as they prepare for one of the worst global recessions on record.

UBS acknowledged that recent increases in coronavirus cases in Europe "create new uncertainty" and make "reliable predictions" difficult.

But the bank said most of its credit exposures are "high quality" and expects credit losses in the fourth quarter to remain "notably lower" than in the first half of the year.

UBS posted credit losses of $ 89 million in the third quarter, a significant reduction from the $ 272 million recorded between April and June.

ConocoPhillips bets on fracking

Despite the pessimism in the oil industry and the specter of a blue wave in Washington, ConocoPhillips is doubling crude by making a major acquisition.

Conoco announced on Monday a total $ 9.7 billion acquisition of Concho Resources, a fully focused fracker on the Permian Basin, the massive West Texas oil field at the heart of the shale revolution.

The companies said the deal will make the new Conoco the largest independent oil and gas company in the United States, with daily production exceeding 1.5 million barrels.

But it will also make Conoco even more exposed to the same forces that have moved rapidly against fossil fuels, reports my colleague Matt Egan.

"It's a bit of a counter move to double down on oil and gas at a time when it's unpopular with the investment community," said Pavel Molchanov, energy analyst at Raymond James.

The industry could also become unpopular in Washington depending on what happens in next month's election.

If the Democrats sweep the White House and Congress, new regulations targeting fossil fuels could be on the way.

Joe Biden has proposed banning new oil and gas permits on public lands and waters.

Biden has also unveiled a $ 1.7 trillion climate plan focused on clean energy and has set a net zero emissions goal by 2050 at the latest.

Economic stimulus

Source: cnnespanol

All news articles on 2020-10-20

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