The Nasdaq Index has performed strongly in recent months, driven up by robust performance from technology shares; over September, however, the index fell by 5.2% as investors took profits, worried by the possibility of a second wave of Covid-19 infection and by uncertainties over the impending Presidential election.
- The Vix Index rose to its highest level since June
- The relationship between the US and China remained tense
- The unemployment rate fell into single figures for the first time since March
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The Nasdaq Index has performed strongly in recent months, driven up by robust performance from technology shares; over September, however, the index fell by 5.2% as investors took profits, worried by the possibility of a second wave of Covid-19 infection and by uncertainties over the impending Presidential election. The Dow Jones Industrial Average Index fell by 2.3% during September, while the S&P 500 Index declined by 3.9%. The Vix Index – which gauges volatility in US markets – rose to its highest level since June as the date of the election moved closer.
“The Fed intends to keep its key federal funds rate near zero until the recovery is ‘far along”
The US economy has recovered most of the losses caused by lockdown, according to credit ratings agency Fitch; looking ahead, however, growth is expected to slow in the fourth quarter of the year. The Federal Reserve (Fed) intends to keep its key federal funds rate near zero until the recovery is “far along”, but also urged Congress to do its part to support the economy. The US budget deficit had surged above US$3 trillion by the end of August, driven up by government spending to mitigate the Covid-19 crisis. The rate of unemployment fell to 8.4% in August, returning to single figures for the first time since March. The economy added 1.4 million new jobs, although an increase in government hiring was attributed to temporary hiring for the 2020 US Census.
The Fed may decide to extend curbs on dividend payments and share buybacks by leading banks. Ahead of fresh stress tests, the Fed also plans to publish individual test results for each of the 33 banks involved, instead of releasing aggregated results.
The World Trade Organisation (WTO) ruled that the imposition of tariffs on Chinese goods by the US in 2018 were "inconsistent” with international trade regulations. The decision to impose tariffs prompted an escalating trade dispute that has yet to be resolved. The US rejected the WTO’s ruling, insisting it must be allowed to “defend itself against unfair trade practices”. In contrast, China welcomed the ruling and called on the US to “take real actions … to safeguard the multilateral trading system”. Later in the month, President Donald Trump redoubled his criticisms towards China over the coronavirus pandemic. In response, China’s President Xi observed: “Countries may engage in competition, but such competition should be positive and healthy … major countries should act like major countries”.
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