Markets were mixed throughout the day before strengthening sharply at the close of trading. The biggest driver behind today’s sell-off was President Donald Trump, who said his team had instructed him not to negotiate a stimulus package after his election. This has unsettled markets and indicated that there will be no relief loans for the foreseeable future.
“Thus, this down-cycle cannot be fully cured merely through the application of economic stimulus,” Howard Marks, the co-founder of Oaktree Capital Management, the largest investor in distressed securities worldwide, wrote on a report published Tuesday on the economy and markets as a whole.
In a speech, Federal Reserve Chairman Jerome Powell warned that too little stimulus would lead to more economic risk. Monetary policy will remain accommodative for the foreseeable future, he said in his speech.
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On the vaccine front, the US Food and Drug Administration said it would approve a vaccine as soon as possible and would not bow to political pressure to quickly distribute it. The FDA added that it needed more information on the safety and efficacy of the vaccines before they were approved by the FDA. Political uncertainty took a back seat after President Donald Trump was released from hospital after being treated for a coronavirus.
That timetable could ease fears that the vaccine could be approved before election day next month.
German factory orders in August exceeded expectations and underscored the ongoing economic recovery. QE is still a better tool than rate cuts, “he said. The ECB is ready to take further stimulus measures if necessary, but not at the expense of inflation.
The International Monetary Fund says more government spending on infrastructure projects will help boost growth in the post-coronavirus environment.
Global growth optimism is rising amid renewed hopes for a global economic recovery after a strong first half. Chinese markets remain closed for the holidays, but the UK government says it expects growth to continue at its current rate of 2.5% this year and 3% in 2018. GDP growth in the second quarter of 2016 was stronger than expected, suggesting a sustained recovery for both economies.
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