Investors bracing for busy week ahead

26 October, 2020

With eight days remaining to the US presidential election, global equity markets have kicked off the week on the back foot. Fiscal stimulus had been the dominant topic over the past few days and the chances of passing any kind of package ahead of next week is declining, while coronavirus infections hit records in the US and several European countries.

US political drama will continue to be the major market moving factor for the upcoming week and probably beyond. So far betting odds continue to show Biden in the lead with a 66% chance of winning the election, according to RealClearPolitics. However, chances of a blue wave have dropped to 50% suggesting a more volatile market reaction to the result on 3 November. Markets still seem positioned for a Democratic sweep, given how infrastructure and renewable energy stocks have surged over the past four months relative to sectors dependent on a Republican win such as energy, financial and defense stocks.

Currency traders also share a similar belief, with the Dollar lower against most major peers year-to-date, and expecting the inverse correlation between the Greenback and risk assets to continue to hold over the foreseeable future.

Investors should be prepared for more noise across asset classes as we approach Election Day, especially if Trump manages to tighten the race with a few days remaining.

Away from politics, it is a big week for earnings. Tech giants Apple, Amazon, Alphabet and Facebook are among the 186 companies due to announce third quarter results this week. If positive earnings surprises continue to hold at around 84%, that could provide a further boost to large cap stocks, but if virus infections hit new records this should cap the gains.

Monetary policy meetings are also on the radar of investors this week with the Bank of Canada Wednesday, and European Central Bank and Bank of Japan both announcing decisions on Thursday. Deflation has become a major threat in Europe and despite the ECB increasing the size of its Pandemic Emergency Asset Purchase Program (PEPP) to €1.35 trillion from €750 billion, economic activity in the Eurozone appears to stall, according to the latest service PMI’s. The absence of a cohesive fiscal response is making the job harder for the ECB, and while challenges continue to mount from rising Covid infections, a Brexit trade deal and the risk of a double dip recession, the central bank is expected to pave the way for more stimulus. However, this won’t likely come before December.

The Bank of Japan is also expected to keep policy unchanged on Thursday, but the downgrade in economic forecasts will be crucial for the Yen and Japan’s equities.


Source  
Stock investors remain bullish despite negative headlines3 Dec, 2020  

The S&P 500 registered a new record high on Wednesday, rising 0.2% as the rotation to economically sensitive stocks continued into the first week of December.

OPEC+ to re-attempt breaking deadlock today3 Dec, 2020  

Oil prices are keeping the faith that OPEC+ will come good on staving its supplies from global markets, even as the alliance tries to keep it together amid an internal squabble...

Awaiting new drivers3 Dec, 2020  

US stock markets have opened up lower on the day as investors struggle to find fresh catalysts to extend their buying of stocks. The latest ADP private payrolls report just...


Asian stocks taking a break amid broader rally2 Dec, 2020  

Asian equities are edging lower on Wednesday, unable to keep pace with the new record highs posted by the S&P 500 and the Nasdaq 100 indices overnight.

Taking stock: Equity bulls wishing for mo' of November1 Dec, 2020  

US stocks fell on Monday, with the dip capping the end of an otherwise spectacular November for equities. The S&P 500 posted a 10.75 percent advance in November...

Cooling Commodity: Brent Oil wary of OPEC+ shock30 Nov, 2020  

Oil prices are starting the new week by trimming more of their November gains, amid reports that OPEC+ members are struggling to agree whether or not to delay...


Risk sentiment on thinning ice27 Nov, 2020  

Asian stocks are mixed while US and European equity futures are slightly lower, as risk appetite attempts to overcome concerns over the efficacy of AstraZeneca...

Key levels beckon for Dollar index, Gold, Pound26 Nov, 2020  

Unlike the heady performances in global equity markets, the FX complex has put in a relatively stoic performance, refusing to get too carried away by...

Risk-On Train Gathers Momentum25 Nov, 2020  

Risk-on remains the name of the game as investors across the globe soak up all the good news! A raft of positive vaccine developments, better-than-expected...