Stimulating fear

Posted by: Paul Donovan

27 Jul 2020

Daily update

  • US Senate Republicans are due to return to the fiscal stimulus issue, as extended unemployment benefits expire in four days. The risk is that if these benefits are allowed to expire, fear of the economic consequences of unemployment will increase amongst people who have jobs. That may slow the pace at which savings accumulated during lockdown are spent.
  • US durable goods orders are due. The expectation is that savings which are spent will be focused on consumer durable goods – but that the consumer will react faster than production. The data includes investment goods, but home working will distort this. Companies can invest less if staff provide their own equipment when working (e.g. recording a morning audio comment using a personal laptop).
  • Eurozone M3 money supply is due. It is only mildly interesting as investors know money supply is rising to match money demand and do not care too much about the details. The German ifo business confidence opinion poll is due. It is hard to believe survey evidence, however.
  • The interminably tedious UK-EU divorce process has another round of "intensive" talks starting today. Using the word "intensive" is designed to give the impression that something is happening. Markets will not be fooled.

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