Details Cookies
United Kingdom
Important margin product information

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Eyeing jobless claims, Aus deficit and geopolitics Eyeing jobless claims, Aus deficit and geopolitics Eyeing jobless claims, Aus deficit and geopolitics

Eyeing jobless claims, Aus deficit and geopolitics

Equities 7 minutes to read

Summary: Asian stocks rounding of Thursday’s trade with a cautious tone and indices across the region trade mixed. This amidst the ongoing combative stance upheld by Washington and Beijing as the US/China relationship visibly continues the slow burn deterioration, with acrimonious rhetoric on the rise as US election campaigns heat up. Although with the liquidity driven narrative intact, it seems only a matter of time before the relentless dip buyers step in again.

The mounting virus death toll in the US, deaths hit their highest level since May 29, also weighing as investors deliberate virus concerns with fresh fiscal support and ongoing central bank accommodation. This ahead of a deluge of quarterly earnings tonight, with reports from Twitter, Southwest Airlines, American Airlines, Blackstone Group, Roche, Intel, Unilever, Canadian Pacific, Hyundai and Mattel. Alongside US jobless claims data, subject to a degree of upside risk as the rampant virus and paused reopening’s/reimposed restrictions has likely led to stalling jobs rebound and increased job losses.

The mounting US/China tensions form part of an ongoing long-term structural separation between the two superpowers, to which COVID-19 has acted as an accelerant. The post-pandemic blame game only serving to re-ignite pre-existing hostilities. The ideological differences and political fragmentations that drove the original US/SINO confrontations are on full display and the tectonic shifts like, the East/West divide, Splinternet, and supply chain relocations we talked about when trade tensions first emerged are now coming to fruition. The phase 1 trade deal was a face saving agreement and is largely smoke and mirrors, a deal in name only. The purchase commitments were always ambitious even prior to the pandemic denting global growth and collapsing demand. The disentanglement between the two nations will be ongoing for many years to come. But this presents a dilemma for investors, the left tail risks are high but the headlines are noise, hence often times the initial move is faded. The slow burn is very hard for risk assets to trade unless we get clearly defined developments. However, the structural separation remains a ticking bomb and the risk of a definitive breakdown is highly asymmetric, particularly as US consumers (the voter base) begin to turn their backs on China. The upcoming election then provides increased impetus to elevate the geopolitical frictions if they play to US voter support, which is as ever a rolling calculus.

In Australia, all eyes were on the July Economic and Financial Update (JEFU) and the COVID-19 induced wartime deficit revealed by treasury today.

Federal Budget: Data suggests the federal budget was $85.8 billion in deficit (4.3% of GDP) over the past year (2019/20). The Government expects a $184.5 billion deficit (9.7% of GDP) in the current year – the highest in 75 years or since WW2.

Upside risk to these forecasts are significant given an inordinate degree of uncertainty remains as it relates to the virus itself altering the validity of forecasting metrics, alongside a flattening recovery curve that may disappoint treasury expectations, unknown impacts on consumer and business behaviour, labour market dislocations and the need for more fiscal spending. Unemployment is likely to remain high for a prolonged period, and continued, targeted income support vital to combat the demand hit. Although retail spending has remained resilient, it is too early to take this data and extrapolate it forward. In addition, the lift in retail spending should not be confused with what has been a big hit to household incomes and household consumption expenditure. A large part of the retail spend has likely been repurposed from other consumption sectors. Retail sales account for around a third of overall consumption which is more than 50% of final demand, and early access to superannuation has been a real wildcard. The impact of this scheme on discretionary spending is difficult to forecast, but it is likely that the retail spend tapers in tandem with stimulus measures.

These factors are not only relevant domestically, but globally, and will weigh on the trajectory of the local recovery. This means the forecasts are subject to an abnormal amount of uncertainty in being based off assumptions that could change very quickly and likely some “guess-timates”. More than in any other time, there is a wide range of economic probabilities (ruled to a large extent by the virus) that may come to fruition. And if the underlying assumptions change, the estimates will change.

Economy: The economy is estimated to have contracted 0.25% in 2019/20 and is expected to contract 2.5% this year (2020/21), with the sharpest fall in the June quarter. The unemployment rateis forecast to peak around 9.25% in the December quarter 2020, but could remain above 10%, with “true” unemployment closer to 15% in April, falling to 11% in June.

Although COVID-19 has blown a hole in Australia’s budget, the spend is necessary to bridge the gap between recession and the post-pandemic normal, whilst averting the worst-case depression. There was no alternative, and without the fiscal support, the economy would be in a far worse position. Although on a relative basis most of Australia has fared better than many other countries in suppressing the virus, we are far from the conclusion of the COVID-19 induced shock. A vaccine is likely a long way off, and the Australian economy faces significant hurdles with ongoing dislocations in the labour market, the virus resurgence in Melbourne that has already had a dampening effect on confidence and the blowback from the global slowdown weighing on the recovery curve. The tensions with China, Australia’s biggest trading partner, also remain on the backburner, ever-present, serving another blow for the hard hit education and tourism industries, which have been service export growth areas as the world inches away from reliance on fossil fuels and bulk commodities. A clear incentive to reshape Australia’s climate change policies and invest in renewables, where the country already has a significant comparative advantage – we can address both climate crisis and economic crisis through a focus on renewables and sustainable rebuild of the economy that serves future generations, as well as the current.

To maintain the trajectory of the recovery and avoid the “double dip recession”, confidence amongst businesses and consumers is critical in upholding investment and spending and re-asserting a self-sustaining trajectory for inclusive economic growth. The economy did not enter this crisis from a position of strength and in order to reinvigorate investment and productivity, reform is much needed. The government must maintain this stance in their future assessment of the “war time” fiscal deficits, rather than fixating on surpluses.

With the transmission of monetary policy now somewhat limited when it comes to reinvigorating economic growth, the baton must be passed to fiscal support. Utilising Australia’s balance sheet capacity and low borrowing costs in reviving investment, productivity and confidence, alongside returning the labour market to potential. The cost of borrowing at the effective lower bound is not a hindrance to businesses or consumers, the uncertainties surrounding the economy and the virus are the primary issues. To which the answer is fiscal, with monetary policy playing second fiddle.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.