The Catch Up
- Asian shares moved back on track, after the one-month lows they hit last week, aided by improved Chinese data releases, while oil prices fell sharply as many European countries re-imposed coronavirus-related lockdowns.
- Chinese CSI300 was up 0.50%, while the Hang Seng was 1% higher and the KOSPI rose by 1.5%, all led by the Caixin/Markit PMI which rose by 0.36%, at the highest level in a decade. At the same time, the Nikkei was 1.4% up and the US500 futures were 0.16% in the green.
- Aussie markets were slightly down as China has rejected Australia's appeal to scrap a tariff on its barley exports closing the door on a trade worth about $1.5 billion.
- The major risk event this week is the US presidential elections tomorrow with Joe Biden expected to be the winner according to the polls, leaving Republican President Donald Trump behind. Nonetheless, as the number of people who will vote is still uncertain, figures may change by the end of the day.
- Fresh coronavirus-induced lockdowns in Europe and parts of the United States have raised concerns over the outlook for fuel consumption, pushing Brent prices to a low of $35.74 per barrel, a level not seen since late May, while WTI crude reached $33.64.
- Global coronavirus cases surpassed 500,000 last week, with Europe registering more than 10 million total infections. Similarly, the United Kingdom is faced with more than 20,000 new cases per day, and a record surge of US cases is killing up to 1,000 people a day.
- As analysts note, European investors are looking ahead to early 2021 as the growth outlook looks more clouded than ever, given the new lockdowns. Some noted that a 1% negative hit to European growth would send global GDP down by 0.5% in the coming year.
- The biggest question is how long the lockdowns are needed for the virus to get under control, something which, at the best case scenario, is expected to take up at least a month.
- At the same time, restaurateurs and hoteliers are struggling, not so due to the lockdowns but because people are afraid of travelling and going out.
- Non-hospitality businesses are not doing better either: bad outlooks and results from Wall Street, including Apple and Facebook, pulled US stocks down last week.
- In the currency markets, the risk-sensitive Aussie slipped 0.4%, going below 0.70 against the USD for the first time since July. The Japanese Yen was slightly higher at 104.73, while the British pound and the Euro lost against the greenback.
- As analysts note, a risk-on mode after the US elections could see the Dollar move back to a downwards spiral, especially if the market expects another fiscal package.
- JP Morgan analysts noted that the market likely views a Biden win as "short-term neutral" but "long-term negative", as his expected tax policy outweighs the benefits from a large stimulus package. The analysts suggested an S&P upside to 3,400 but with a larger downside to potentially 2,500.
- Gold was up slightly today, despite a stronger dollar, as investors are wary of a possible contested US election and fear that more European lockdowns will be imposed, thus pushing the safe-haven metal slightly higher to $1880 per ounce.
- Earlier today, manufacturing PMI data from Australia showed a slight deterioration, while the AIG manufacturing index recorded an improvement. An improvement was also reported for building approvals in the country, as well as job ads.
- PMI day in Europe today, with Spanish, Italian, French, and German manufacturing PMIs expected to be at least at the levels of the previous month, if not register a slight improvement, despite the fresh lockdown measures.
- In the US, the ISM manufacturing PMI is forecast to have risen to 55.8 versus 55.4 in the previous month, even though prices are forecast to have eased.