US stocks are expected to recover some of Tuesday's losses, which came as President Trump called off stimulus talks with the Democrats.
The jolt in the markets was short-lived, with Trump later suggesting that a less abitious collection of short-term measures would be preferable, which would tie the US over until after the election. While not ideal, the measures would shore up investor confidence and provide a temporary buffer with businesses and households, but I'm not sure the Democrats will back a piecemeal approach.
Of course, this could all be an elaborate attempt to draw more concessions from the Democrats and bring them closer to the $1.5 trillion package that the Republican's are pushing for. I'm not sure it will work though; in doing what he has, the President has, willingly or accidentally, allowed the finger of blame to be pointed his way, regardless of whether the breakdown is actually his fault or if it was just heading that way, anyway.
With only weeks to go until the election and the polls significantly favouring Biden, the President may also just be taking bigger gambles in an attempt to swing them back in his favour late in the day. Which should make the coming weeks more interesting as he looks to close the gap and secure the second term that, this time last year, looked a foregone conclusion.
In the midst of all of this, it's almost easy to forget that the vice-Presidential debate takes place on Wednesday. Ordinarily, this wouldn't really be viewed as such a major event, but these are far from normal times. Given Trump's health and the likelihood of Biden being a one-term President, this takes on much more added importance. The Fed minutes will also be of interest but under the circumstances, perhaps less so than normal.
Oil pares gains but short-term bullish factors remain
Oil's rebound has been strong but the collapse of stimulus talks in the US has triggered some profit taking, pulling WTI more than 3% of yesterday's peak. Obviously, anything that threatens the US economy in the final quarter of the year and leads to a spike in permanent unemployment is a negative for oil prices but it does come at a time of short-term bullishness for crude.
The strikes in Norway and the imminent arrival of Hurricane Delta in the Gulf of Mexico means more forced outages, providing temporary support for oil prices. The length of the strikes and severity of the damage suffered will determine just how sustainable the rebound in prices will be.
Gold slides as risk-appetite takes a hit
Gold is slightly higher today after falling more than 2% on Tuesday, in the aftermath of Trump's tweet. A traditional safe haven but now aligned more with riskier instruments, gold has been recovering from its mid-September sell-off but yesterday wiped out the efforts of the five days that preceded it.
I'm not convinced the dollar rebound is complete and, by extension, that the gold correction is over either. From its peak, gold fell more than 10% but this is still well above the levels it traded at earlier in the summer and the dollar still feels like it has some upside left in it. Longer term, I remain bullish gold but yesterday has only further convinced me that a little more downside may still be on the cards.