02 October 2020 by jbchevrel
The European session started on a risk-off melody, after President Trump tweeted that he tested positive for COVID, a few hours after confirmation that top adviser Hope Hicks, who traveled with him earlier this week, had tested positive. The positive test means the president will need to cancel in-person events in the coming weeks, possibly including the Oct 15 debate against Joe Biden. The latter tested negative for COVID today, but is still in the incubation period. S&P futures rallied almost a percent on the back of that last news, and CDX tightened -1bp. Thus, we are back roughly at yesterday’s closing prices. Also worth noting, we have had the last US Employment Report before November’s election. US job gains slowed in September and many Americans quit looking for work. NFP increased +661k following an upwardly revised +1.49M in August, while the expectation was for +859k. No vaccine, fading fiscal support. That’s for the negatives. On the positives, the unemployment rate fell by more than expected, dropping -0.5% to 7.9%, compared to median expectation of 8.2%. The mitigant here being that the labor-force participation rate declined -0.3% to 61.4%. With the expiration of PPP and airline industry programs, coupled with rising cases, the picture may be about to get worse.