Investing.com – Asian stocks were mostly up on Wednesday morning, recovering after U.S. President Donald Trump decided to end his administration’s COVID-19 stimulus talks until after the U.S. election.
President Trump’s decision came as a surprise to the markets, with U.S. stocks sharply down on the news. The U.S. fall spread to Asian markets on opening, with most major indices down on the previous close. Markets had risen yesterday on news that the president was out of hospital, and that House of Representatives Speaker Nancy Pelosi was in discussions with Treasury Secretary Steven Mnuchin over the shape of the relief package.
President Trump delivered his news by tweet, saying: “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”
Trump’s decision came as a shock to many, especially as the president’s handling of the coronavirus pandemic is considered a major drag on his reelection chances. His news also comes at a time when many of his inner circle have also contracted the virus, along with several federal Republican senators and representatives.
Markets globally reacted poorly to the president’s unilateral decision: “The market rally thus far had really been driven by this unprecedented stimulus from both central banks and governments globally and a large part of that was from the U.S.,” said Emily Weis, a macro strategist at State Street Corp (NYSE:STT)., to Bloomberg TV. The timeline on more American fiscal stimulus “has now been pushed further back.”
Just hours before the president’s tweet cancelling the stimulus discussions, Federal Reserve Chairman Jerome Powell had been speaking at the National Association for Business Economics (NABE) conference, where he addressed the need for government support:
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses – Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy and holding back wage growth, by contrast, the risks of overdoing it seem, for now, to be smaller.”
China’s markets are closed for a holiday.
The Australian ASX 200 was up 0.87% by 11:28 PM ET (3:28 AM GMT). This was brought about by the previous day’s release of the government’s budget. The new budget contains billions of dollars in domestic tax cuts and spending initiatives, leading to the consumer sector driving the rise in stocks this morning.
Investors are waiting on European Central Bank (ECB) President Christine Lagarde and Powell, who are both due to deliver speeches later in the day. Both institutions will release the minutes from their respective September meetings.