Good Morning,

Rishi Sunak is stuck between a rock and a hard place, as he contemplates what to do with the furlough scheme come the end of October. Data for Q2 out yesterday showed that we’re in the deepest recession on record, but data next quarter is going to show that we’ve grow faster than any other quarter on record – because it’s all relative. The quarter Rishi really needs to worry about is Q4, because that’s the one that economy, for the most part, has to go it alone. The risk Mr. Sunak is going to have is that the money pumped in to date, though eye watering in size, might become a  waste if the economy dives again because unemployment soars, growth stalls and that in turn fuels more unemployment. The alternative is that he extends the scheme, which he’s being urged to do by business leaders and trade unions, which will cost even more for a longer period. The predicament is much like America’s covid infection predicament; they lifted the measures too quickly and now it looks like they might have to go through worse pain than had they just stuck it out.

Another area he might have to pay attention to is stamp duty and what happens when his temporary rise of the stamp duty threshold comes to an end in in March next year. Property prices are on the up and transaction flow is greater than anyone had predicted, which has led some to worry that taking out the support risks the market faltering towards a possible crash It wouldn’t be the stamp duty withdrawal in isolation that affects it, but if it comes with a combination of bans putting down more restrictive lending criteria along with falling wages amongst first time buyers. Market forecasts (educated guesses) are that  prices will be rising for the next three months, but then will be falling this time next year. This loops back to the above, where people need to be spending and to spend they need confidence. A person’s house value is a great influencer of their overall financial confidence s rising, or at least steady, prices are going to be an important part of the Chancellor’s plans.

In Europe, with the majority of the continent on holiday, the main news is around infection numbers. Italy has ordered people traveling from Greece, Malta, Croatia and Spain to take a covid test before they’re allowed back into the country, as numbers in those countries are on the rise and they’re particularly popular destinations for Italian holidaymakers.
A German medical institute has rolled back on its assessment that a vaccine would be ready by the autumn. The Robert Koch institute released a paper yesterday saying that they believed one would be available, but swiftly removed it and gave a half-baked excuse as to why it was published in the first place. Ven f they do believe that to be the case, concerns will be raised over people thinking a vaccine is around the corner and not taking the necessary precautions in the interim.

Trump has confirmed that the US economy is doing much better than all of Europe’s – which must therefore be true. He said that though they had to turn off the economy, they’ve turned it back on and it’s beyond a V shape. The remarks come as the election campaign starts to heat up, following Joe Biden’s selectin of running mate Kamala Harris. Until now, Joe Biden’s strategy was to sit back and let Trump lose the election by himself. Now though, the criticism of Trump is direct and unashamed, with the two of them saying that Trump has ‘left the US in tatters’. The gloves are off now then and it’s going to be a few months of vitriol ahead – we can’t wait!

The US is still no closer to getting a congressionally approved relief deal in place. Steve Mnuchin has told the Democrats he’s happy to meet again, but that the White House’s stance isn’t going to change on the negotiations. We’re now two weeks passed the expiry of a lot of the previous stimulus measures and with Trumps executive orders only putting a sticking plaster, at best, over the hole that’s been left, we wouldn’t be surprised if we saw people taking to the streets to demand more gets done.

Elsewhere New Zealand has reported 13 new coronavirus cases, bringing the total to 36 active cases. The authorities there are taking a tough stance on quarantining and preferring not to rely on people self-isolating and have instead got specific quarantine facilities. Wider lockdowns have started too, with Auckland now shutdown until Friday, but it’s likely to be extended at some point tomorrow. The 100+ day run of being covid free may have come to an end, but it seems like they’re working hard to get it back that way

Today: Data is pretty light, unlike the rain. We’ll keep an eye on German inflation and US jobless numbers, but don’t expect anything particularly out f the norm from the market.

Be well.

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