HONG KONG (AFP): Asian markets fluctuated Wednesday (Oct 7) as traders weighed Donald Trump's decision to call off talks on a much-needed stimulus against expectations a rescue package will eventually be passed by whoever wins next month's election.
The shock move came just as US lawmakers appeared to be making some progress in months-long haggling and sent Wall Street plunging, reversing gains that had been fuelled by hopes for a breakthrough to help the beleaguered economy.
Just hours earlier, Federal Reserve boss Jerome Powell had warned that failure to reach an agreement would cause "unnecessary hardship" for Americans, while analysts said it would have a major impact on the crucial consumer sector that is the major driver of growth.
The president accused Democratic House Leader Nancy Pelosi of negotiating in bad faith and said he had asked Senate Majority Leader Mitch McConnell to instead focus on confirming his appointed judge to an opening on the Supreme Court.
"Nancy Pelosi is asking for US$2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to Covid-19," he tweeted, citing an incorrect figure for the Democrats' latest proposal.
"We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their request, and looking to the future of our Country."
He added that after the election, which he said he would win,"we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business".
Emily Weis, a strategist at State Street Corp., told Bloomberg TV: "The market rally thus far had really been driven by this unprecedented stimulus from both central banks and governments globally and a large part of that was from the US."
The timeline on more American fiscal stimulus "has now been pushed further back".
Earlier Tuesday, Powell had repeated his oft-made call for a new stimulus to go alongside the trillions in financial support pledged by the Fed, which along with other central banks' largesse has been a key driver of market rallies.
"Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses," Powell said. "Even if policy actions ultimately prove to be greater than needed, they will not go to waste."
Still, while Asian markets fell immediately after opening, many recovered and were mixed in morning trade.
Tokyo, Singapore, Manila and Jakarta were in the red but Hong Kong rose 0.6 per cent, Seoul added 0.2 per cent and Sydney put on 0.8 per cent, helped by a huge tax-cutting budget by the Australian government late Tuesday.
There were also gains Taipei and Wellington.
With Joe Biden polling well ahead in national and battleground states, markets have been pricing in the likelihood he will take the White House, with Democrats possibly winning both houses of Congress.
Analysts said such a scenario could see a much bigger stimulus passed, albeit not until after January's inauguration.
Edward Moya at OANDA said: "Trump's decision only delays fiscal stimulus and will likely be met with some further accommodation by the Fed.
"Fiscal stimulus will happen, and Wall Street is still counting on a blue wave (of Democrats winning across the board) that will deliver a huge spending plan that will keep the risky assets supported all of next year."
Oil prices tumbled after Trump's announcement, with investors worried about the impact on Americans' demand, while data showing a jump in US stockpiles added to the concerns.