US surge in COVID cases, Markets pull back sharply, FANGs disappoint
MY CALL THIS WEEK : BUY CADJPY
The continuing uncertainty consolidation resulted in markets pulling back by around 6%, but still holding above the September low. The move was probably exacerbated by a sharp increase, and record number, of daily new COVID cases, as there was no real change in the stimulus or election situation.
Next week is unique, in that both NFP and the Fed rate decision are relatively unimportant as all eyes are on the election, both for the White House and the Senate majority. A unified White House and Congress can only be a good thing for markets.
Monday October 26
Stocks today suffered their biggest one-day drop in a month, on fears that COVID cases, which had been rising sharply all last week could mean more economy-damaging safety measures. Oil fell in line. The dollar continued upwards in the consolidation range since August, and Gold fell in line. We have seen Gold move inversely to the dollar, rather than to equities for a while now. Bonds were up, and JPY was flat in line with equities.
Tuesday October 27
The market paused today, with SPX down 0.3% but NDX up 0.6%. The Capital Goods beat was not enough to remove the COVID gloom. Although DXY was flat, the dollar fell against all currencies except EUR, and so Gold was up. Bonds were up again, and Oil staged a small recovery. MSFT beat on estimates, but lowered guidance, and the shares fell 2% AH.
Wednesday October 28
Another sharp leg down today by equities and Oil as coronavirus cases soared on both sides of the Atlantic. The drop was double that of Monday, and at 3.5%, the worst day since June. The dollar was up again, although notably not against JPY. Gold once again appeared to correlate to equities, but in fact was pulling back on the stronger dollar. Bonds were flat on the day.
Thursday October 29
The strong GDP print,+33.1% a beat, and the highest quarterly number on record was enough, coupled with bounce back from Wednesday’s sharp fall was enough to push equities up today, and a message from President Trump that he was preparing a “big fiscal package” (if he is re-elected, of course, a big if). This, plus a dovish ECB meant USD was up again. Gold and bonds were down in line with the equity move, and the dollar. Oil however, was down again, on concerns about COVID-depressed demand.
The FANGs duly reported after the bell, and although all beat on earnings and revenue, forward guidance concerns and poor customer numbers meant all except GOOGL fell AH.
Friday October 30
Markets were down again today, closing the worst week since March, driven by the ‘third wave’ of COVID cases, with the highest daily new cases since the pandemic began. Added to this was of course election uncertainty, and to finish thing, poor reports from the FANG giants that lead the market. Oil followed suit. The dollar was more or less flat, so Gold followed the equity lead and rose. However, bonds were down again.
WEEKLY PRICE MOVEMENT
DAX crashed hard this week, down 8.61%, against ‘only’ 6% in the US. The strongest forex mover was EURJPY down 1.65%. Cryptos were unusually, with BTC and ETH moving in the opposite direction. FANGS of course fell very hard, with only GOOGL unscathed.
Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.
NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold)
This must be a unique week, with both NFP and a Fed rate decision being relatively unimportant as all eyes are on the election, both for the White House and the Senate majority. A unified White House and Congress can only be a good thing for markets.
- US Election
- Non-farm payrolls
- Fed Rate Decision
- New month
Monday November 2
The new month opens with Manufacturing PMIs all day, but clearly all eyes will be on the election, looking past the assumed Biden win to whether the Democrats take the Senate. US Daylight Savings time ends, and is synchronous with Europe again. Markets are closed in Brazil and Mexico.
00:00 Aus TD Securities Inflation
01:45 China Caixin Mfr PMI
08:55 Germany Markit Mfr PMI
09:30 UK Markit Mfr PMI
14:30 Canada Markit Mfr PMI(Oct)
14:45 US Markit Mfr PMI(Oct)
15:00 US ISM Mfr PMI (e55.6 p55.4)
Tuesday November 3
Today is the long awaited US Presidential election, although results will not be known until well after the closing bell. Voting closes at 8am Pacific Time, which is 2300EST/0400GMT. Results are normally in within an hour, unless its very close, and futures will be trading throughout. Markets are closed in Japan.
03:30 RBA Rate Decision/Statement (e0.1% p0.25%)
15:00 Factory Orders (MoM)(Sep)
21:30 AiG Performance of Construction Index(Oct)
22:00 Commonwealth Bank Services PMI(Oct)
23:50 BoJ Monetary Policy Meeting Minutes
Wednesday November 4
Everything today, and probably for the rest of the week will be about the election result, although the ADP print would upset things if wildly out. Markets are closed in Russia.
00:30 Aus Retail Sales (e-1.5% p-1.5%)
01:45 China Caixin Services PMI
08:55 Germany Markit PMI Composite
09:00 Eurozone Markit PMI Composite
09:00 EC Economic Growth Forecasts (time approx.)
13:15 US ADP Employment Change (e526k p749k)
13:30 US Trade Balance(Sep)
14:45 US Markit Services/Composite PMI
15:00 US ISM Services PMI (e57.8 p57.8)
Thursday November 5
Given the election, and the fact that CME Fedwatch has a 100% expectation of a hold for this meeting and for December, today’s Fed meeting is likely to be one of the least important for markets this year.
00:30 Aus Imports/Exports/TB
06:00 Germany Factory Orders
10:00 Eurozone Retail Sales (e2.8% p3.7%)
12:00 BoE Rate Decision/Statement (e0.1% hold)
12:30 BoE Governor Bailey speech
13:30 US Jobless Claims
15:00 ECB Weidmann speech
19:00 Fed Rate Decision/Statement (e0.25% hold)
19:30 FOMC Press Conference
Friday November 6
The NFP figure continues to taper down, with little more than 50% of the March/April losses recovered, but will probably be overshadowed by the election result.
00:30 RBA MPC Statement
07:00 Germany Industrial Production
13:30 US NFP/AHE/UnEmp (NFP e700k p661k)
13:30 Canada NFP/AHE/UnEmp
14:00 BoC Gov Macklem speech
15:00 Canada Ivey PMI
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