After a rather dull day in the European markets, the main indices have closed where they began!

The FTSE 100 ended 3 points lower at 5946. Rolls-Royce gained 4%, continuing its recent recovery from 17-year lows, along with mining companies and UK retailers such as Ocado and Kingfisher.

But losers including the oil companies, tracking the lower crude price.

France’s CAC lost 0.3%, with Spain’s IBEX and Germany’s DAX flat -- as investors tried to judge the prospects for any US stimulus moves.

David Madden of CMC Markets says:

Dealers in this part of the world are a little downbeat on the back of yesterday’s news that President Trump announced an end to the negotiations in relation to the coronavirus relief package.

Today, the US leader called on politicians to push for a unique bailout for the airline industry. The overall stimulus discussions will recommence after the presidential election but there was talk that Republicans and Democrats might work together on individual areas that they agree upon, so it is possible we could see a mini-version of stimulus programme.

Goodbye Davos, Hello Lucerne!

The World Economic Forum has announced that next year’s Annual Meeting will take place in Lucerne-Bürgenstock, Switzerland, from 18 to 21 May.

That’s four months later than originally planned, and about a kilometre lower than usual too. WEF has rescheduled due to the pandemic, so world leaders, business chiefs, economists, celebrities and journalists won’t make their usual January pilgrimage to the ski resort of Davos.

WEF says the Lucerne event will be based on the theme of “The Great Reset”. It hopes global leaders will come together to design a common recovery path, and rebuild “a more cohesive and sustainable society”.

But it also cautions...

The meeting will take place as long as all conditions are in place to guarantee the health and safety of participants and the host community.

Stocks have opened higher in New York, despite the ending of negotiations over a stimulus deal.

The Dow Jones industrial average has jumped 328 points, or 1.18%, to 28,101 points, which recovers a lot of yesterday’s late drop.

Larry Kudlow’s suggestion that Donald Trump is keen to agree targeted help for airlines and small businesses (see earlier post) may have calmed nerves.

As the president tweeted overnight, he would sign off $25bn for Airline Payroll Support and $135bn for the Paycheck Protection Program for Small Business.

That, though, is only a fraction of the $2.2trn support which the Democrats are pushing for. So there is still uncertainty about how events will play out.

Will Walker-Arnott, Senior Investment Manager at Charles Stanley, forecasts more volatility ahead:

“President Trump’s tweet-storm cutting off talks of a fiscal stimulus until after the US election has left markets yet again uncertain, increasing volatility.

Pressure is mounting to deliver additional aid to struggling Americans and businesses, and to also sustain the economic recovery of the country. Though Trump has indicated he may be willing to approve some aid for airlines and small businesses using money left over from the previous stimulus, the pressure is only set to increase ahead of winter.

The Federal Reserve chair, Jerome Powell, and President Trump currently seem to be on completely different wave lengths, so we can expect some increased volatility until monetary and fiscal policy work together to build a stronger and faster recovery.”

One of Donald Trump’s top economic advisors has hit the TV stations to insist that the president would sign a bill with targeted help for parts of the US economy.

Larry Kudlow, director of the United States National Economic Council, told CNBC that the US still faces an emergency situation, although “less so in recent weeks and months”.

The data is getting better and better, I think there is a V-shaped recovery.

Kudlow then argued that that specific areas of the economy need help - but that the recovery doesn’t depend on a ‘massive’ new package (despite warnings from economists that growth could stall without one...).

Kudlow singles out airlines and small businesses, saying the White House is keen to extend more support (by extending the Paycheck Protection Program which forgives loans, if SME spend it on keeping workers employed).

Kudlow says that with four weeks to the election, and a Supreme Court seat to fill, there’s no time to agree a big stimulus (although Nancy Pelosi and Steven Mnuchin have been talking for some time....)

What President Trump was saying yesterday is, alright, we are too far apart for a gigantic bill.

It’s too close to the election. Not enough time to get stuff done at this stage of the game.

But, Kudlow adds, Trump signalled last night that he would sign a stand-alone bill that would provide key assistance to airlines, and to the small businesses payment protection plan.

Plus:

On the demand side... the president would provide thousand dollar [$1,200] direct mail economic impact checks to keep thing going.

It’s like an insurance policy.

Sky News is reporting that the UK’s 10pm curfew is forcing pub chain Greene King to close some outlets, putting hundreds of jobs at risk.

Here’s the details:

One of Britain’s biggest pub operators is preparing to close dozens of venues and cut hundreds of jobs following a slump in trade exacerbated by the government’s 10pm hospitality industry curfew.

Sky News has learnt that Greene King on Wednesday started a consultation with 800 employees about a redundancy process.

Sources close to the company, which has an estate of almost 1,700 managed pubs and 1,000 tenanted venues across Britain, said it would seek to redeploy affected staff wherever possible despite the continuing COVID-19 crisis.

In total, 79 of Greene King’s pubs and restaurants will close, with roughly one-third of the closures expected to be permanent.

We reported last week that sales at pub, bar and restaurant chains plunged by a third in the days after the early closure was imposed - a very significant impact on the industry.

UK house prices continue to shrug off the pandemic, and have surged at their fastest pace in four years.

Mortgage provider Halifax has reported that house prices in September were 7.3% higher than a year ago, the strongest growth since June 2016.

They rose by 1.6% during the month alone, lifted by the current stamp duty holiday and desk-bound workers trying to move to larger houses or leafier areas.

Russell Galley, managing director at Halifax, says the lender is fielding more mortgage applications than at any time since the financial crisis.

Context is important with the annual comparison, as September 2019 saw political uncertainty weigh on the market.

“Few would dispute that the performance of the housing market has been extremely strong since lockdown restrictions began to ease in May. Across the last three months, we have received more mortgage applications from both first time buyers and homemovers than anytime since 2008.

The Bank of England reported last week that total mortgage approvals hit a 12-year high in August. Here’s the full story:

Shares in Tesco have jumped 2.3% this morning, meaning it is jostling with Ocado and Taylor Wimpey for the top spot on the FTSE 100 leaderboard.

Investors are cheered that Tesco is hiking its interim dividend by over 20%, from 2.65p to 3.2p per share. This will see around £314m returned to investors (see note 7 in today’s results)

It’s taken the move because pre-tax profits jumped 28% in the first half of the financial year, to £551m. Tesco says its board felt paying the dividend was the right thing to do.

But if it can afford to reward shareholders, should it also return the financial aid provided by the government? The FT’s Jonathan Eley thinks there will be pressure to hand back the business rate relief which Tesco benefitted from.

That relief was worth £249m in the six months from March to August, or a large proportion of the dividend payout....

Although Tesco’s statutory pre-tax profits did jump, adjusted profits dropped 17% due to the cost of Covid-19.

Chris Daly, CEO at the Chartered Institute of Marketing, says:

“Tesco’s lockdown retail sales have come at a cost. The supermarket’s UK wide footprint allowed it to adapt quickly to meet the needs of consumers, who have shifted their buying habits towards a one-stop weekly shop. But the price of its investment in meeting customer demand is a lack of profit in the short term.

What’s not clear is whether Tesco will be able to maintain customer loyalty at a time when its competitors are innovating; an issue reflected in its share price. Discount supermarkets such as Aldi are diversifying their online strategies to cater for a long-term shift in consumer behaviour, introducing services such as “click and collect”, that, up to now, had been the preserve of the Big Four.

As we enter the Christmas period, and with the prospect of further lockdowns impacting our ability to shop, Tesco’s marketers will need to work hard to leverage its 100 year old heritage and prove that the supermarket isn’t just pandemic proof, but is leading the future of the weekly shop.

German factory output has taken an unexpected drop last month, suggesting that the recovery in Europe’s largest economy may have slowed.

Industrial output across Germany fell by 0.2% in August, startling economists who expected a rise of 1.5%.

That follows gains of 1.4% in July -- so this may indicate the post-lockdown boom has weakened.

Germany’s economy ministry tried to sound upbeat, saying:

“Since the easing of lockdown measures in April, there has been an ongoing recovery since May, even if there was a slight decline in August.”

But economists Carsten Brzeski of ING fears that German industry lost further steam over the summer. And that’s a bad sign for the winter (even though factory orders did rise in September), he writes:

In fact, assessing this kind of backward-looking data is currently like looking at pictures of a great summer holiday, the economic prospects for the final quarter resemble the current view out of the window at 8am in the morning: grey and rainy.

While yesterday’s industrial orders data gave hope that the manufacturing rebound could last into the final quarter, new restrictions on the back of an increasing number of new infections don’t bode well for the service sector.

The fact that fewer activities can be organised outside should also leave its mark on consumption and services. Winter is coming.

Deutsche Bank told clients this morning that Trump’s decision to halt stimulus package talks is a shock.

Particularly as America’s top central banker has been pushing for more fiscal support, fearing that the recovery could falter.

A major new package might not come for months now, depending how November’s election plays out. Deutsche told clients:

President Trump once again took control of the headlines yesterday when he tweeted late in the US session that he had instructed White House negotiators to stop further US stimulus discussions with Congressional Democrats until after the election. He argued that Speaker Pelosi was not arguing in “good faith” and that he wants Congress to focus on the Supreme Court nomination of Judge Barrett instead. This came as a surprise after relatively positive headlines from Pelosi and Treasury Secretary Mnuchin earlier in the week, and also represented a reversal in tone given comments late Monday from White House Chief of Staff Meadows, who said “There are a lot of people that continue to hurt, are waiting on stimulus, and the President’s committed to getting a deal done…He wants to make sure we move expeditiously, but also in a fiscally responsible manner.”

The tweet also came just a few hours after Fed Chair Powell’s speech at the NABE’s annual meeting. While not much new information was proffered, Powell made one of his plainest cases for fiscal stimulus yet, saying “the risks of policy intervention are still asymmetric”, and that “the risks of overdoing it seems, for now, to be smaller” compared with the risks of offering too little support. If the current polling at both the national and state level holds, and former Vice President Biden were to win the election in November, fiscal stimulus may indeed come but will have to wait until Q1 of next year when a new government is seated.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Any investors who thought Donald Trump’s departure from Walter Reed medical center would bring some calm had a rude shock last night.

Fresh from whipping off his mask on the Truman balcony, the president ripped up hopes that a new stimulus package could be agreed in the next few weeks.

Instead, Trump is now planning to wait until he’s won (he hopes) November’s election - a move that appears to scupper the ongoing negotiations on Capitol Hill.

He tweeted:

“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business,”

Trump is also urging Congress to agree a second round of $1,200 stimulus checks. That would provide help for struggling Americans, but certainly isn’t the wide-ranging $2.2trn package which Democrat Nancy Pelosi has been pushing for.

Before Trump’s move, hopes were building that Pelosi and Treasury secretary Steven Mnuchin were getting closer to an agreement.

So the news Wall Street, sending the Dow Jones industrial average reeling by 1.3% by the close.

House speaker Nancy Pelosi hit back hard, saying Trump was “putting himself first at the expense of the country”, concluding:

“The White House is in complete disarray.”

Stephen Innes, Chief Global Markets Strategist at axi, says Trump is trying to regain control of the election narrative, at the cost of a ‘major’ stimulus package now.

Clearly, the President is looking to turn the tables and take back control of the election narrative and put the ball back in the Democrats’ court with his standalone $1,200 stimulus check suggestion via Twitter.

Major fiscal stimulus is off the table until after the election. The most that markets can expect before then is income support for individuals that would be positive for risk sentiment at the margin. Income support should not however be conflated with expectations for the post-election stimulus that relies on a Democratic sweep of Congress.

Disappointment about Trump’s move has hit the oil price - US crude has sagged by 1.5% to just over $40.

European markets are also expected to dip into the red, as investors brace for weeks of US political drama:

The agenda

• 7am BST: German industrial production for August
• 8.30am BST: Halifax’s UK house price survey for September
• 12pm BST: US mortgage application fogures
• 3.30pm BST: EIA weekly US crude oil stocks