- US stocks opened with strong gains amid hopes of additional US fiscal stimulus.
- Fresh coronavirus jitters might keep a lid on the optimism and cap the upside.
Major US stock indices opened with strong gains on Tuesday and recovered a part of the previous day’s sharp intraday pullback. Hopes that US lawmakers will reach an agreement on additional stimulus boosted investors’ confidence, which, in turn, drove some flows towards perceived riskier assets, including equities.
The impasse over the next round of fiscal stimulus has been weighing on investor sentiment for months, especially the expiration of the CARES Act at the end of July. House Democrats have passed two additional relief bills that were rejected by the Republican-controlled Senate. The latest from House Democrats was worth $2.2 trillion, while the US President Donald Trump has increased his offer for an aid package of $1.8 trillion.
House Speaker Nancy Pelosi said on Monday that the gap between the two sides was narrowing. Pelosi and the US Treasury Secretary Steve Mnuchin are set to talk further this Tuesday, or a self-imposed deadline for a deal in principle to enable lawmakers to pass a plan ahead of the November 3 presidential election. Nevertheless, developments surrounding the US fiscal stimulus will continue to play a key role in driving the broader market risk sentiment.
Meanwhile, concerns that a steep rise in new coronavirus cases could lead to renewed lockdown measures and prove detrimental for the already fragile global economic recovery might keep a lid on any strong gains. This, in turn, warrants some caution for aggressive bullish traders amid the uncertain US political situation.
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