The Wednesday Market Minute

  • Global stocks mixed as markets react to contradictory statements on stimulus from President Donald Trump.
  • Hours after ordering White House officials to stop negotiating with Democrats, Trump suggested he would sign a ‘stand alone’ bill to support airlines and small businesses.
  • White House economic adviser Larry Kudlow tells CNBC a piecemeal agreement on stimulus is a “low probability event”.
  • The U.S. dollar edges higher amid the stimulus uncertainty, made more complicated by the President’s coronavirus diagnosis, while benchmark 10-year Treasury yields hold at 0.764%.
  • Oil prices eases as the Energy Department trims near-term demand forecasts and Hurricane Delta slows to a category 3 storm as it heads towards the crude production areas of the Louisiana coast.
  • U.S. equity futures suggest a firmer open on Wall Street, with a 240 point gain priced for the Dow Jones Industrial Average.

U.S. equity futures powered ahead Wednesday, while the dollar inched higher against its global peers, as markets reacted to a U-turn on stimulus talks from President Donald Trump that could signal a breakthrough in talks from lawmakers in Washington.

Dow Futures Gain on Trump Stimulus U-Turn; Dollar Grinds Higher As Markets Eye Talks in Washington

© TheStreet
Dow Futures Gain on Trump Stimulus U-Turn; Dollar Grinds Higher As Markets Eye Talks in Washington

Just hours after ordering his White House staff — many of whom remain in self-isolation following the his coronavirus infection last week — to cease negotiating with Democratic lawmakers to try and bridge a $600 billion gap between rival stimulus bills, Trump Tweeted his willingness to sign a ‘stand alone’ agreement that would provide paycheck protection to small businesses and $25 billion in support to U.S. airlines.

While a smaller, more targeted bill is something House Speaker Nancy Pelosi has advocated for in the past, it’s difficult to tell at this stage in the election campaign, with just four weeks

By Mike Dolan

LONDON, Oct 2 (Reuters)Central banks may not be out of ammunition just yet but parts of their strategic policy rethinks related to inequality and fairness raise questions about the extent they should use it.

Ever since the last financial crisis 12 years ago, investors have fretted about a moment when central banks – having floored borrowing rates to zero or below and ballooned their balance sheets – would simply run out of ways to support increasingly indebted economies and panic-prone markets.

The massive monetary response to this year’s pandemic shock to date showed there’s plenty still in the armoury. Policymakers insist they have more firepower if needed and both the Federal Reserve and European Central Bank are now loosening long-term inflation or employment goals as additional policy guidance.

But with borrowing rates already so low, and with a reluctance to go deeply negative for fear of undermining banking systems, ever-more purchases of government bonds and other assets is the only practical tool left to meet the rising list of increasingly more vague goals in any fresh downturn.

While that’s still useful to cap interest bills on exploding government debt or to support credit markets, it also risks exaggerating wealth inequality – something economists partly blame for putting central banks in this cul-de-sac to start off with.

The emphasis last month in the Fed’s strategic policy review on monitoring inequality in its pursuit of an enhanced full employment goal is getting more attention as a result.

Bastien Drut, strategist at Amundi-owned CPR Asset Management, argues that working to reduce inequality aims to give the Fed more policy room over time by helping re-establish better relationships between employment, wages and inflation.

“One of the problems posed by rising inequalities is that it contributes to the fall

(Bloomberg) — The rescue of troubled U.K. restaurant chain PizzaExpress is bringing a windfall to some.


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Hedge funds that bought credit insurance are receiving a payout Thursday from an auction to settle credit-default swaps. The initial auction set the value of the payout just shy of 100%, amounting to compensation of $142 million.

A panel representing CDS traders ruled last month that PizzaExpress contracts will pay after the company missed interest payments on its debt.

PizzaExpress is cutting rents and closing 73 of the chain’s U.K. restaurants, putting 1,100 jobs at risk. Bondholders are likely to take ownership of the majority of the business while the chain’s private-equity owner, Hony, will keep the Chinese operations.

Read more: PizzaExpress Creditors Approve Closures, 1,100 Jobs at Risk

Credit swaps are commonly used by hedge funds and investment firms to bet on companies running into trouble and to hedge exposure. A spokesman for PizzaExpress declined to comment on the CDS auction.

chart: Price of PizzaExpress credit protection has risen over time

© Bloomberg
Price of PizzaExpress credit protection has risen over time

PizzaExpress’s blue-fronted restaurants are a familiar sight in Britain’s town centers. But its business has come under strain from shifting consumer habits pressuring the retail and leisure sectors. The company was already struggling under its debt before the coronavirus pandemic forced it to close restaurants in March.

PizzaExpress’s credit swaps reference the company’s senior unsecured notes which are currently quoted at less than 5 pence on the pound, according to data compiled by Bloomberg.

(Updates with final auction level in headline and second paragraph.)

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