The political problems between the US and China continue. Yesterday, President Trump announced that TikTok has to find a buyer within a month or it will have to close its US operations.

The US technology stocks continue to dominate the positive sentiment on the US equity market and are driving Asian stocks higher this morning.

A number of Federal Reserve officials has warned about the negative economic impact if the US Congress does not reach a deal on the continued fiscal expansion. The negotiations continue between the Republicans and the Democrats, but the two parties are still far from reaching a deal even though there is some progress. President Trump is considering an executive order to prolong the unemployment benefits.

Infections are slowing down in the US, but are still at a high level. Some of the world’s largest asset managers such as PIMCO and Axa are increasing their exposure to Italy by increasing their purchases of Italian government bonds according to a Bloomberg article. This is driven by the ECB and the purchase programmes as well as the agreement reached on the EU recovery fund. The spread between 10Y Italy and Germany is close to pre-coronavirus levels, but given the negative yield for most core- and semi-core EU countries, there is still yield pick-up to be found in Italy and Spain.

Otherwise, focus is on the ongoing negotiations on the next US stimulus bill, which do not seem to move forward. Many Americans are currently experiencing a significant negative income shock, as the temporarily higher unemployment benefits have expired. Risk is that it results in a setback in the recovery.

The problem is not only disagreements between the Republicans and the Democrats but also that the Republicans have a different take on how big the next package should be and what should be included. Apparently, the White House is looking into whether President Donald Trump can extend the benefits without passing legislation in Congress.