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Hopes of Reaching a Brexit Deal

News • 29th Oct, 20

 
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US and European futures rebounded from the worst of Wednesday’s declines, though Asian shares retreated as rising Coronavirus infections and tougher lockdowns added to worries about the economic hit from the pandemic.

Losses were more modest across Asia than in the American session, with shares in Australia faring worst and those in China rising. S&P 500 contracts climbed about 1% after the benchmark lost 3.50% Wednesday — its biggest drop since June. European futures also gained. The Dollar gave back some of its overnight advance and 10-year Treasury yields held around 0.78%. Oil was steady after tumbling more than 5% on concern rising infections will sap demand.

In China, nearly 1,000 firms are releasing third-quarter earnings on Thursday, with traders looking to see if the results confirm the nation’s accelerating recovery. The Yen held a small decline after the Bank of Japan kept its key interest rate and asset purchases unchanged.

An MSCI gauge of global equities is down almost 5% this week as virus cases surge, and after American lawmakers failed to agree on an economic aid package before the 3rd November election. Germany and France are imposing stricter lockdowns, while Italy, Spain and the UK all reported record case numbers on Wednesday.

Elsewhere, the Pound gained as European Union and UK negotiators made progress toward resolving some of the biggest disagreements, raising hopes that a Brexit deal could be reached by early November. The European Central Bank’s policy decision is due later on Thursday, with the new Coronavirus lockdowns by the Eurozone’s biggest economies boosting the chance of preemptive monetary stimulus.

These are some events to watch this week:

  • Bank of Japan and the European Central Bank briefings from Governor Haruhiko Kuroda and President Christine Lagarde will follow policy decisions on Thursday
  • The Chinese Communist Party’s Central Committee holds its plenum through Friday, where it’s expected to chart the course for the economy’s development for the next 15 years
  • Brexit negotiating teams have started intense daily talks, and these are likely to continue as both sides push to finalise a deal by the middle of November
  • The first reading of US third-quarter GDP Thursday is anticipated to be the strongest on record following a record dive in the prior quarter as many businesses were shuttered by the pandemic

Here are the major moves in markets:

Stocks:

  • S&P 500 Index futures added 1% as of 7.17 am in London. The gauge dropped 3.50% on Wednesday
  • Japan’s Topix Index fell 0.10%
  • South Korea’s Kospi Index was down 0.80%
  • Hang Seng Index fell 0.50%
  • Shanghai Composite rose 0.10%
  • Australia’s S&P/ASX 200 Index retreated 1.60%
  • Euro Stoxx 50 futures rose 0.30%

Currencies:

  • The Bloomberg Dollar Spot Index slipped 0.10%
  • The Yen was little changed at 104.33 per Dollar
  • The offshore Yuan gained 0.30% to 6.7064 per Dollar
  • The Euro was flat at $1.1750
  • The British Pound rose 0.20% to $1.3011

Bonds:

  • The yield on 10-year Treasuries was at 0.78%, up one basis point

Commodities:

  • West Texas Intermediate crude was at $37.36 a barrel, little changed
  • Gold rose 0.30% to $1,882 an ounce

US Market Wrap

US stocks tumbled as Coronavirus cases continue to rise worldwide. The S&P 500 Index fell 3.50%, the biggest drop since June, amid a surge in Covid-19 hospitalisations.

Markets:

  • S&P 500 fell 3.50%
  • Dow Jones Industrial Average lost 3.40%
  • Nasdaq Composite declined 3.70%
  • Russell 2000 dropped 3.00%
  • All 11 main S&P 500 sectors closed lower
  • Real Estate down 2.40%
  • Technology down 4.30%
  • 10-year Treasury yield at 0.77%
  • Bloomberg Dollar Spot up 0.60%

Politics:

  • President Donald Trump accuses Joe Biden of wanting to end all private health insurance, quadruple taxes and quickly impose sweeping lockdowns due to fear of the Coronavirus
  • The leaders of big US technology companies came to testify about legislation that shaped the modern internet and ended up being accused by senators of abusing their power over political speech six days before the election
  • Top Senate Democrats are asking the Trump Organization to explain the company’s ties to China after reports from the New York Times that the president’s company has a bank account there

Economy:

  • Volatility gripped financial markets with the Coronavirus surging in the US just days ahead of a crucial presidential election
  • House Speaker Nancy Pelosi says she hopes a drop in the stock market motivates President Trump to strike a deal on a stimulus 
  • The World Trade Organization’s effort to select a leader and chart a new course for the global trading system hit a roadblock on Wednesday after the Trump administration vetoed a bid by front-runner Ngozi Okonjo-Iweala, who is a US citizen, to be the WTO’s next director-general
  • On Thursday: Weekly Initial Jobless Claims, Continuing Claims 8.30 am; 3Q Advance GDP Annualised, Personal Consumption, GDP Price Index, Core PCE 8.30 am; Weekly Bloomberg Consumer Comfort 9.45 am; September Pending Home Sales 10am

To find out more about the current market conditons please email hello@thechoicealliancegroup.com

Source: Sanlam Private Wealth

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