By Michael Every of Rabobank
The markets have started a new week of trading in risk off mode (when this note was heading to press) amid fading expectations that the US Congress will pass another fiscal package. With just 8 days left until the presidential election, both sides may not have a sufficient incentive to reach an agreement. Even if there is no deal in the coming days, a fiscal stimulus is still likely to be agreed after the election to support businesses and households as the US is struggling to contain the coronavirus pandemic. In fact, President Trump’s chief of staff openly admitted that the US is “not going to control” the pandemic and instead will focus on “proper mitigation factors”, such as vaccines and treatments. Former Vice President Biden strongly criticized the Trump administration saying that “they’ve given up on their basic duty to protect the American people.” The US recorded a record daily number of new cases of 85,000.
Meanwhile, the WHO has warned that some countries in the northern hemisphere are facing a “dangerous moment.” This assessment applies to a number of EU countries, where political leaders are trying to protect their citizens by using various restrictions to flatten the coronavirus curve. Spain declared a state of emergency and imposed a curfew. Italy has tightened restrictions as well after new infections rose to a record high of 21,273 on Sunday. France reported record new infections for the fourth consecutive day. Last week the French government announced an extension of the curfew to 54 départements, covering some 2/3 of the country.
While these restrictions are not yet as tight as in...