Stocks Push Higher as White House Offers $916bn Stimulus
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- Stimulus brings optimism in US stock futures
- A relief package with unemployment benefits
- European indexes trading to the upside
Stimulus brings optimism in US stock futures
Renewed hopes for a stimulus bill added to the optimism in US stock futures on Tuesday. Which led to a rise in Asian equities on Wednesday as the US dollar slipped with Treasuries. Therefore, stocks closed higher on Tuesday, led by the tech-heavy Nasdaq Composite which climbed 62 points, or 0.50%. Dow Jones Industrial Average closed higher by 104 points, or 0.35% while the S&P500 was up 10 points, or 0.28%.
The uplifted mood in the markets was inspired by Treasury Secretary Steven Mnuchin who proposed a new $916 billion relief package. On the receiving end, House Speaker Nancy Pelosi argued that some parts of the proposal are “unacceptable” and halted the negotiation process. The package promises to send a $600 direct payment to most Americans while at the same time remove a $300 weekly unemployment benefit.
The proposal by Treasury Secretary Mnuchin has been reviewed and supported by President Trump. And it was offered to House Speaker Pelosi late Tuesday afternoon, around 5 pm, which provided some boost to US futures. The Covid-19 fiscal stimulus by the Trump administration comes at a time when the US has surpassed 15 million confirmed coronavirus infections. And also just a few days before the year-end holiday breaks arrive.
Efforts to reach an agreement on a stimulus package to aid the US economy were widely abandoned by the White House since last month’s election. Thus the revival of the negotiations was welcomed by investors. And they remain hopeful that the bill can pass in time before the holidays as the Covid-19 pandemic is still surging across the US.
A relief package with unemployment benefits
Mr. Mnuchin’s proposal is an attempt to reengage Capitol Hill. Because a bipartisan group of senators has crafted a $908 billion plan with bigger unemployment benefits. In its plan, the bipartisan group of lawmakers is pushing for $288bn into small business aid, $180bn to unemployment benefits, and $160bn to state and local governments, as the largest measures by cost.
The White House, on the other hand, wants to slash the unemployment funding from $180bn to $40bn with a $600 cheque per adult. Six Democratic lawmakers, one of them Sen. Bernie Sanders, insisted the Covid-19 relief package to include $1,200 per adult, plus $500 per child. In case no deal is reached by the end of the year, the two sides will come back to the negotiation table and construct a broader deal under President-elect Joe Biden’s administration.
European indexes trading to the upside
Across the Atlantic, European indexes are trading to the upside in the first hours of the European open. The German DAX is leading the way, up over 1.00%, followed by the UK’s FTSE100, up about 0.90%, while the French CAC40 is up a bit over 0.50%.
The key events coming up by the end of the week include a Thursday European Central Bank policy decision and a press conference by the ECB President Christine Lagarde. Market participants expect the central bank will increase its pandemic bond-buying program by an additional €500bn while keeping the interest rate at current low levels.