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Gold eases from 2-week high as U.S. Treasury yields climb

· Gold fell on Tuesday as Treasury yields climbed, although the metal held above the key $1,900 support level on growing expectations that U.S. lawmakers would agree on new stimulus legislation to blunt the economic impact of the coronavirus.

· Spot gold fell 0.6% to $1,901.89 per ounce, having risen to its highest level since Sept. 21 at $1,920.71. U.S. gold futures settled 0.6% lower at $1,908.80.

· Federal Reserve Chair Jerome Powell warned the U.S. economic recovery remains far from complete and could still slip into a downward spiral if the coronavirus is not effectively controlled and growth sustained.

· “Gold prices have softened as the dollar has benefited following Fed Chair Powell’s comments that too little fiscal support would lead to a weak recovery,” said Standard Chartered analyst Suki Cooper.

“Tactical positioning remains relatively light ahead of the U.S. election, however prices are likely to toy with $1,900/oz in coming sessions given the wide range for support and resistance levels.”

· Elsewhere, silver shed 1.9% to $23.88 per ounce, platinum declined 3.5% to $865.26 while palladium rose 0.1% to $2,364.95.

· Prospects for more aid for Americans struggling through the COVID-19 pandemic and U.S. airlines seeking to avert a wave of layoffs crumbled on Tuesday when President Donald Trump ended negotiations with Congress over a large coronavirus bill.

· Despite Trump’s move, markets are still expecting stimulus and a sizable one if Democrats sweep

Whoever wins the presidential election is likely to seek an infrastructure program next year, but if Democrats win the presidency and Congress, the program could be bigger and come faster.

The pile of new debt from such a program is one of the issues the bond market has been grappling with this week, as former vice president Joe Biden has risen in the polls against President Donald Trump. Treasury yields were at a 4-month high, and the 10-year yield rose to as high as 0.78%, breaking a range it had been in for weeks.

Separately, the market has been expecting a stimulus package of $1.5 trillion or more aimed at helping businesses, the unemployed and state and local governments, hurt by the coronavirus and economic shutdowns.

But Trump raised doubts about that fiscal package when he said talks with Democrats are off until after the election. The administration had offered a package of $1.6 trillion, but House Speaker Nancy Pelosi has been seeking $2.2 trillion.

Strategists said the trend seems to be for higher yields, but yet to be seen is whether the market will continue to push rates higher on expectations for fiscal spending. If the economic data weakens and the economy looks like it will struggle without stimulus, that could drive yields lower.

Biden is expected to push for trillions for a big infrastructure package to jump start the economy as soon as he takes office, if he were to win. If the Senate also flips to a Democratic majority, that would give him immediate Congressional support to push a direct spending program.

· Fed Chair Powell calls for more help from Congress, says there’s a low risk of ‘overdoing it’

Federal Reserve Chairman Jerome Powell called Tuesday for continued aggressive fiscal and monetary stimulus for an economic recovery that he said still has “a long way to go.”

Noting progress made in job creation, goods consumption and business formation, among other areas, Powell said that now would be the wrong time for policymakers to take their foot off the gas.

Doing so, he said, could “lead to a weak recovery, creating unnecessary hardship for households and businesses” and thwart a rebound that thus far has progressed more quickly than expected.

· Fed's Mester says ending stimulus talks will mean ‘much slower’ recovery - CNBC

U.S. President Donald Trump's announcement that no further stimulus talks will happen until after the November election will mean a "much slower" recovery for the U.S. economy from the coronavirus crisis, Cleveland Federal Reserve Bank President Loretta Mester told CNBC in an interview.

“Certainly, you know, the recovery will continue without it, I think, but it’s going to be a much slower recovery and it’s disappointing that we didn’t get a package done,” Mester said in the interview.

· U.S. trade deficit jumps to largest in 14 years in August

The U.S. trade deficit surged in August to the largest in 14 years with imports climbing again, suggesting that trade could be a drag on economic growth in the third quarter.

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $67.1 billion in August, up $3.7 billion from $63.4 billion in July, revised.

· New pandemic wave could delay euro zone rebound, Lagarde says

A second wave of the coronavirus pandemic risks delaying the euro zone’s economic recovery, European Central Bank President Christine Lagarde said on Tuesday.

“We now fear that the containment measures that have to be taken by authorities will have an impact on this recovery, so instead of that V shape that we all long for and hope for, we fear that it might have that second arm of the V a little bit more shaky,” she told the Wall Street Journal CEO Council in a pre-recorded conversation.

· Rising levels of pandemic fatigue are being seen in Europe, WHO warns

Rising levels of “Covid-19 fatigue” are being seen in Europe, the regional director of the World Health Organization said Tuesday.

Hans Kluge said that the “huge sacrifices” made to contain the coronavirus had come “at an extraordinary cost, which has exhausted all of us, regardless of where we live, or what we do.”

· Pence-Harris VP debate to draw outsized attention after Trump's coronavirus diagnosis

Vice President Mike Pence’s sole face-off against Senator Kamala Harris, Democrat Joe Biden’s running mate, on Wednesday in Salt Lake City comes as the Trump campaign reels from a COVID-19 outbreak that has infected not only the Republican president but several in his inner circle.

The pressure on Pence, who often toils in Trump’s deep shadow, is great. Trump trails Biden by 10 percentage points nationally, according to a new Reuters/Ipsos poll, with voters faulting what they viewed as the president’s carelessness about the pandemic.

Pence needs to show the public he is ready to step in as president if the situation requires, while also defending the Trump administration’s handling of a 7-month-old health crisis that has killed nearly 210,000 Americans.

· Biden says October 15 presidential debate should not take place if Trump still has COVID

· China in talks with WHO over assessing its COVID-19 vaccines for global use

China is in talks to have its locally-produced COVID-19 vaccines assessed by the World Health Organization, as a step toward making them available for international use, a WHO official said on Tuesday

· Bank of Spain warns crisis might be deeper than worst-case scenario

Bank of Spain governor Pablo Hernandez de Cos on Tuesday warned

Spain, one of the worst-affected nations with more than 32,000 deaths and more than 800,000 cases, is heading for its worst economic performance on record in 2020, with an expected contraction of 10.5% or 12.6%, according to the Bank of Spain.

· Malaysia to impose targeted lockdowns to halt infections surge

Malaysia’s Prime Minister Muhyiddin Yassin on Tuesday said targeted lockdowns would be imposed in areas with high rates of coronavirus infections, as the country grapples with a sharp spike in cases over the past two weeks.

· IMF warns of a ‘long ascent’ to pre-crisis levels, but will soon upgrade its GDP forecasts

The economic crisis of 2020 may not have been as bad as the International Monetary Fund originally thought, but the path ahead will be a “difficult climb,” Kristalina Georgieva, the Fund’s managing director, said Tuesday.

The IMF projected in June a contraction of 4.9% in global GDP (gross domestic product) this year. However, the global economy has ended up performing better than the Fund’s expectations in the second and third quarters. This is expected to lead to “a small upward revision” to its growth forecasts which are due to be presented next week.

· COVID aid could bring years of austerity, charities warn IMF

Five hundred of the world’s leading charities and social groups have sent a letter to the International Monetary Fund warning that its support programmes, which have had to be ramped up to cope with COVID-19, were condemning many countries to years of austerity.

The concern raised before the IMF and World Bank annual meetings next week said current programmes would see 80 countries required to implement austerity worth on average 3.8% of their annual economic output between 2021 and 2023.

· Germany urges quick implementation of EU recovery funds as infections rise

Rising coronavirus infections across Europe are underlining the need to implement the agreed 750 billion euros of EU recovery funds quickly, German Finance Minister Olaf Scholz said on Tuesday ahead of talks with fellow finance ministers of the bloc.

· EU wants a trade deal with Britain, but cannot exclude 'no-deal' - Sefcovic

The European Union wants a trade deal with Britain, but, as time is running out to reach one, the bloc cannot exclude that it will be impossible to reach agreement before the end of the year, European Commission Vice President Maros Sefcovic said.

Speaking to the European Parliament, Sefcovic said the EU’s chief negotiator Michel Barnier and his team had the EU’s full support.

· UK to EU: We need to know by October 15 if trade deal is possible

· BOJ Kuroda says Asia's economic downturn moderate vs other regions

Asia’s economic conditions remain severe but the downturn in growth has been moderate compared with that of other regions, Bank of Japan Governor Haruhiko Kuroda said on Wednesday.