Markets mixed as recovery fears offset US fiscal stimulus hopes

Tom Belger
·Finance and policy reporter
·2-min read
WASHINGTON, DC - SEPTEMBER 24: U.S. Treasury Secretary Steven Mnuchin waves as he arrives for a Senate Banking Committee hearing on Capitol Hill on September 24, 2020 in Washington, DC. Mnuchin and Federal Reserve Board Chairman Jerome Powell are testifying about the CARES Act and the economic effects of the coronavirus (COVID-19) pandemic. (Photo by Drew Angerer/Getty Images)
US Treasury Secretary Steven Mnuchin as hopes grow of US fiscal stimulus. Photo: Drew Angerer/Getty Images

European stocks had a mixed trading day on Friday, with hopes of fiscal stimulus, strong housing data and a tech rally in the US offset by fears over flagging European economic recovery.

Britain’s FTSE 100 (^FTSE) closed up 0.3%, but the Europe-wide Stoxx 600 (^Stoxx) shed 0.3%, France’s CAC 40 (^FCHI) lost 0.7% and Germany’s DAX (^GDAXI) dropped 1.1%.

Concerns are rising over mounting infection rates and new restrictions in parts of Europe including France and Britain, and there was some disappointment UK government stimulus did not go further on Thursday.

The EU's health commissioner Stella Kyriakides warned on Thursday of a potential "twindemic" of COVID-19 and the flu over the winter, Reuters reports. She also warned of a worrying rise in cases since August on the continent, with some countries seeing higher infection rates than March, only partly explained by higher testing.

But investors also welcomed more promising signs of government stimulus in the world’s largest economy, which had pushed up stocks in the US on Thursday and Friday. Democrats in the US House of Representatives are reported to be working on a $2.2tn (£1.8bn) stimulus package, with a potential vote next week.

Calls for more fiscal action this week by US Federal Reserve policymakers appear to be boosting momentum, after formal cross-party talks between leaders broke down without a deal in early August.

READ MORE: UK government borrowing at highest in decades

Democrat speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin both signalled they were keen to get back to the negotiating table. “The question will be whether the public willingness of both sides to talk to each other will translate into actual talks,” wrote Deutsche Bank analysts in a note on Friday.

The analysts noted a $2.2tn package would be “far more than Senate Republicans have said they are comfortable with, but is closer to the $1.5tn plan the President has shown support for.”

Stocks were trading higher on Wall Street as European markets closed, after rising on Thursday as housing data and a fresh tech rally also boosted stocks. The S&P 500 (^GSPC) gained 0.4%, the Dow (^DJI) gained 0.2% and tech-heavy Nasdaq (^IXIC) gained 1%.

Asian stocks had also been mixed overnight. Japan’s Nikkei (^N225) gained 0.5%, Hong Kong’s Hang Seng (^HSI) slid 0.3%, China’s Shanghai Composite (000001.SS) lost 0.1%, and the KOSPI (^KOSPI) in South Korea gained 0.3%.