I’ll guess we’ll have another day of news headlines like “Mnuchin and Pelosi spoke on the phone for 45 minutes”, “Trump wants a big deal, wants a higher stock market”, “Trump says Blue states can eat dirt and Pelosi is negotiating in bad faith”, “Pelosi says no carve outs, wants only big deal”, “Meadows said progress made on airline bailout.” All enough to have your head spin, along with the S&P futures. Either way, whatever money will be spent, and it will be a lot, should not be viewed as stimulus, it remains all about filling holes and buying time. In fact, with respect to some households, their bank accounts will be higher than if they were working. If inflation then follows because the government ends up spending about $5 Trillion on bailouts this year in large part financed by the Fed, that it will unfortunately eat into that higher savings.
China’s private sector focused Caixin services PMI for September rose to 54.8 from 54 and that was .5 pt better than expected. Caixin said “Growth was supported by a marked rise in total new business, though new export work continued to decline. Nonetheless, the sustained rise in overall client demand led firms to expand their payrolls for the 2nd month in a row amid increased capacity pressures. Companies also retained a positive outlook regarding activity over the year ahead, with business confidence improving since August.” Bottom line, with China’s economy very much open and the virus spread pretty much over, movie theaters are at 90% of previous levels and domestic travel is at 80% to name two close company activities. In our social life moving back to what we remember it to be pre Covid, the Chinese people are getting closer to it. With Chinese stocks back open, the Shanghai comp was higher by 1.7% as it played catch up. The H share though that has been open all week, was unchanged for a 2nd day. The offshore yuan continues to rip higher vs the US dollar with a .6% move up today to a level last seen in April 2019. Because of their behavior in response to Covid, Asian economies will have suffered less, both health wise and economically, and will be the first to recapture the GDP that was lost.
OFFSHORE YUAN (lower equals higher)

The economic data out of Europe was all from August and thus not that fresh. The UK economy grew 2.4% from July but that was half the estimate as industrial production and on the manufacturing side, was well below expectations. France also said its IP figure was light but on the other hand, Italy reported a much better figure with a 7.7% m/o/m jump vs the estimate of up just 1.4%. The production of consumer goods was the particular bright side. Versus last year overall production is down only .3%.