The US market. Global equity incentives

11 months ago

Quotes at 10:25 (NY)

S&P 500 Index: 2974 (+1.7%)
Nasdaq Composite Index: 9356 (+1.9%)

S&P 500 Online Chart

External background: German DAX +0.6%; Japanese Nikkei +0.8%; Chinese Shanghai Composite -0.5%.

American stock indices are adding more than 1.5% at the beginning of Wednesday’s trading. The focus is on global economic stimulus.

On Tuesday the S&P 500 lost about 1%. Stat News published an opinion questioning the positive results of coronavirus drug tests developed by Moderna.

The index went above the resistance of 2950 points. The technical picture became more positive. However, the news background is changing very strongly now and the risks of pullback from 2950-3000 points are quite high.

American incentives

On Tuesday, Fed Chief of Staff Jerome Powell and Treasury Secretary Stephen Mnuchin addressed the Senate. They explained the program to support the U.S. economy.

Mr. Mnuchin said that the Ministry of Finance is ready to increase the amount of money provided by the Fed as a guarantee for lending programs. According to Powell, the main programs of the Fed will start working till the end of May or in the first week of June. The head of the Federal Reserve pointed out to the need for non-limit stimulation of the economy until the current shock is overcome.

On Wednesday, 21:00 MSK, the minutes of the April meeting of the Fed will be published. “Minutes” is rather a look into the past, but it will be possible to get useful information about the list of available instruments of the Federal Reserve.

According to the basic forecast of the Committee for the Responsible Federal Budget, by the end of fiscal year 2020, the U.S. budget deficit will increase from $984 billion to $3.8 trillion. The ratio of public debt to GDP has already reached 116% compared to 107% at the end of 2019.

The situation with the U.S. public debt is not yet too worrying for market participants. Moreover, fiscal and monetary measures to support the economy contributed to a noticeable recovery of the American stock market.

Incentives outside the US

Earlier this week, France and Germany launched an initiative to create a fund for the recovery of the European economy. The estimated amount is 500 billion euros of budget funds.

The Bank of Japan will hold an emergency meeting on monetary policy on Friday. The regulator intends to approve a new lending program to support business.

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