Here’s how Goldman says the S&P 500 would respond to more US-China tariffs and why the November election result is important

Fresh hopes for another incentive package and signs that the spread of pandemic may be slow are set to boost shares on Tuesday. President Donald Trump signed executive orders over the weekend, postponing tax cuts and extending unemployment benefits, but investors hope talks on a larger rescue package would resume.

Sentiment gained further impetus as Trump suggested he considered a capital gains cut and a tax cut for “middle-income” earners.

Bubble tensions between the US and China, re-governed by a dispute over video-sharing app TikTok and further escalated by sanctions in Hong Kong, have apparently taken a back seat.

In us call of the day, Goldman Sachs analysts mapped the expected responses of key assets to various trade war scenarios, including more rates. The estimates are based on analysis of seven tariff announcements targeting China in 2019, three of which will intensify and four reduce the tariff risk.

They said an unexpected $ 10 billion increase in US tariffs on China would lead to an estimated 1.2% decline in the S&P 500 and a 2.2% decline in Chinese shares, while the US dollar 0.7% would rise against the yuan. The 1.2% decline in the S&P 500 was large compared to the tariff threat itself, they said, because a $ 10 billion increase in US tariffs would only account for 0.5% of corporate profits.

The disproportionate response was down to the perceived threat of Chinese recurrence and broader risks to trade policy. Conversely, a $ 30 billion reduction in tariff revenue would lead to an estimated 4% increase in the S&P 500.

Analysts Dominic Wilson and Vickie Chang said the estimates could be used to benchmark the potential impact of a presidency Joe Biden against a second term of Trump.

“A second Trump term could probably provide some perspective of continued, and perhaps heightened, fears of continued tariff increases, particularly given the decline in US-China relations over the past few months,” he said. seine se.

While it is unlikely that a Biden presidency will improve the outlook for the broader US-China relationship, it is less likely that a new administration will consider tariff threats as the ‘weapon of choice’ and instead favor a more multilateral approach. , “she added.

Goldman said the estimated impact was solely due to trade policy alone, but also said that differences in trade policy under Biden could reduce the pressure on U.S. equities from possible changes in corporate taxes.

The map

This chart from Fundstrat Global Advisors shows that daily cases in the US continue from week to week, with yesterday being the lowest Monday in six weeks, and the lowest total since June 29th.

Source: COVID-19 Tracking Project and Fundstrat.

The tweet

Insider compared the portion size between KFC foods in the US and those in the UK

The brands

The Dow Jones Industrial Average DJIA,
+ 1.30%
closed 357.96 points, or 1.3%, higher on Monday – the seventh straight day of index gains – and was set to resume gains on Tuesday. Dow futures YM00,
+ 1.05%
were up 1% in early trading, implying a rise of 278 points at the open. The S&P 500 SPX,
+ 0.27%
was set to add to its own seven-day winning streak, as futures were 0.6% higher, while Nasdaq futures NQ00,
+ 0.04%
also showed 0.4% higher. European equities rose early on Tuesday, in hopes of boosting US sentiment and slowing the spread of viruses, with the pan-European Stoxx 600 SXXP,
+ 1.86%
rising 1.7%.

The buzz

Trump said his executive orders of coronavirus aid led to gains Monday through Monday, at a news conference disrupted by a shooting outside the White House.

Russia has registered the first Covid-19 vaccine in the world, President Vladimir Putin said on Tuesday, raising concerns about security in the West over the rapid clinical evaluations.

Uber UBER,
and Lift LIFT,
+ 2.84%
should classify their drivers as employees instead of as contractors because of a new state law, a California judge ruled Monday. The ruling threatens the business models of the driving companies, both of which have indicated they intend to make an appeal.

Car sales in China rose for a fourth straight month in July, climbing 16.4%, led by strong demand for commercial cars and government stimulus.

Japanese conglomerate SoftBank SFTBY,
+ 0.92%
posted a profit of $ 12 billion in the first quarter, and tied back from a loss of $ 9 billion half year – the worst results in the company’s history.

Employment in the UK fell by 220,000 in the three months to June, the biggest quarter since 2009, and the number of working hours fell to a record low.

New Zealand’s largest city Auckland will be shut down from noon on Wednesday after four new cases of coronavirus emerged.

Random reads

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