Markets Bounce as Trump seems better
ISM on deck
Nikkei1 1.23% Dax 0.47%
UST 10Y 0.717 (SPTL)
Oil $38 (OIL)
Gold $1894/oz (GLD)
BTCUSD $10705 (BITCOMP)

Asia and the EU
EUR PMI 48.5

North America Open
USD ISM Non-Manufacturing 10:00

Markets were up in Asian and early European trade encouraged by the fact that President Trump’s COVID infection appeared to be under control and the US would not need to consider the transfer of power under the 25th Amendment.

President Trump remained at the Walter Reed hospital receiving treatment for his infection which included a variety of drugs that suggested his case moderate in its nature. Doctors suggested that the President may be released from the hospital as early as today but given the volatile nature of the COVID infection, many medical experts noted that the next few days may be the most critical and that it would be best for the President to remain under the 24-hour care of the staff.

For now, however, Trump appears to have weathered the worst of the virus, and markets were relieved that the US would not have to endure any vacuum of leadership, although given the nature of the disease the situation remains fluid and the President’s condition could deteriorate.

With the immediate political risk receding, the focus is likely to turn to economic matters with ISM Non-Manufacturing data the key event risk of the day. Friday’s NFP report showed what has been obvious for weeks – namely that the strong V-shaped rebound off last spring COVID-induced collapse has clearly run out of momentum. While jobs increased by 661K that was considerably worse than 900K expected and more importantly the rate of change turned negative indicating that the strongest part of the rebound is behind us.

Today’s ISM data is likely to confirm the stall in the recovery with markets anticipating a print of 56.3 versus 56.9 the month prior. More importantly, if the new orders component slips below the 50 boom/bust line the markets are likely to react negatively and could unwind much of the overnight rally as it becomes more obvious by the day that COVID induced economic slowdown is nowhere near from being over.