Good morning,

One positive to come out of the fiasco that was the presidential debate is that we could be getting closer to a further stimulus deal being struck in the US. It’s probably a coincidence that the two sides are suddenly closer to doing a deal than they have been for the last two months. However the divide between the parties is still about $700bn, with the Republican proposals coming to about $1.5trn , whilst Democrats say that nothing less than a $2.2trn bailout will be enough to get through the winter months. There was set to be a vote on the Democratic package yesterday, but that has been delayed to today, in the hope that they can bridge the gap and get something passed before everyone heads home in the next week or two to start election campaigning in their home states.

Getting something over the line would be a welcome boost for stock markets, who have found themselves at an inflection point, where Main Street hasn’t picked back up enough to justify Wall Street’s valuations, so another round of ‘free money’ to the American consumer would plug the gap – for the time being at least. Fed members have warned that, even with more stimulus, asset prices remain vulnerable to any significant worsening n the pandemic and have also extended their bans on share buy backs and dividend caps for banks, as they want to ensure there is enough capital adequacy to weather a worsening of the storm. The move caps 34 banks to not being able to pay a higher dividend than they did in the second quarter and they’ll also find themselves undertaking another set of stress tests before the year is out, to make sure that their loan losses to date haven’t significantly weakened their ability to manage further defaults.

The CEO of US pharma company Moderna has said that a realistic timeline for their vaccine is late Q1, early Q2 for approval and distribution. Speaking to the FT, Stephane Bancel said that the firm wouldn’t be looking for early approvals until at least the end of November, as the FDA regulations require them to have at least half of the study’s participants assessed for two months following the vaccination and with the final injections done last Friday, the 25th November is the earliest they could make this application.  This will put a pin in the president’s persistence that a vaccine will be available this side of the election and distributed this year, despite him saying on Tuesday night that he has “spoken to the companies and we can have it a lot sooner”.

In Europe: The likely incoming financial services chief has said that the EU will cut ties with the City of London if necessary and urged firms to prepare for a multitude of scenarios because “it will not be business as usual” come the 1st of January. UK clearing houses have been granted temporary market access to the EU so that they can continue their business and ensure that it’s not total chaos come the New Year, but a further warning around other business streams is a reminder to many (especially the UK government) that there needs to be a lot of thought put behind how firms will service a European client base from the UK – and vice versa – post Brexit. Planning for scenarios that may or may not happen is an incredibly expensive and time consuming scenario for financial services firms of all sizes, as we know all too well, and even at this 11th hour, some clarity by the end of October could potentially save tens, hundreds or even thousands of millions of pounds in fees, applications and capital allocations being spent unnecessarily .

Still, we’re looking like we might be starting to think with our heads on this one, as the fishing rights position has started to thaw. It’s been reported that the UK has offered a three-year transition period by where quotas for EU vessels fishing in UK waters would be slowly phased down. The government have kept quiet over the proposal, but haven’t denied it, whilst the EU have said that fisheries is now unlikely to be a deal breaker, though there are still plenty more areas to find agreement on. The Guardian has the story.

Staying with the UK government: Boris has said that he won’t hesitate to put more lockdown measures in place at short notice if the situation requires it. Mr Johnson’s tone was a defiant one, as he sought to quash the dissenters within his party that are concerned that the economic damage being done far outweighs the public health consequences. There is a little bit of hope in terms of the spread of the virus though, as results of a large public health study published this morning. The study shows that infections are rising, but that the pace of growth may actually be slowing down slightly.

In Spain: Madrid is set to be locked down, with more than four million residents not to be allowed to leave the city other than under exceptional circumstances. The move comes as data show Madrid is responsible for more than a third of Spain’s total cases with 735 per 100,000 people. This is setting up a large political fight as it’s deemed that the central government are overriding the moves made by regional authorities.

Overnight we’ve seen markets boosted slightly by the prospect of a US deal, though trading on the Tokyo stock exchange was halted after suffering a system error, meaning a whole day without trading on major markets. This is the longest shutdown in twenty years and is unfortunately timed, as the first day of a new quarter is usually a high-volume trading day. The exchange isn’t yet sure that it will be back and open by tomorrow.

Being the first day of the month, we’ve got a lot of data coming our way over the course of today’s sessions. Starting with manufacturing numbers from across Europe, which are expected to be inline with last month, if not a little higher, as the recovery slows down but still moves in the right direction. The Afternoon session sees some US unemployment numbers as well as their manufacturing activity through PMI and ISM releases. The big one would be a vote to pass more stimulus though, which is an outsider, but both sides will be keen to try and score some points with voters so we wouldn’t write it off.

Have a great day

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