Stocks Lower As Covid Cases Rise, US Stimulus Hopes Fade

Covid cases are rising tougher lockdown restrictions are being implemented, Boris Johnson is disappointed by Brexit talk progress and a US stimulus agreement is still some distance away. EU stocks are heading lower.

Charts (6)

There seems to be little to buoy sentiment on Thursday. Covid cases are rising, in some cases, at an alarming rate, tougher lockdown restrictions are being implemented, Boris Johnson is disappointed by Brexit talk progress and a US stimulus agreement is still some distance away – which makes it hardly surprising that European bourses are coming out of the starting blocks on the back foot.

Concerns over the surging number of coronavirus cases are dragging on sentiment. As the number of cases rise, tougher restrictions are being implemented by governments, which threaten to derail the very fragile economic recovery.  

Paris has been placed under curfew for the coming 4 weeks as new daily infections in France exceed 22,000. In Germany new cases are at the highest level since the pandemic started. Furthermore, data is showing that the economic recovery is running out of steam fast. Earlier this week, ZEW German economic sentiment slumped significantly more than expected, whilst yesterday industrial production figures showed that the recovery stalled. Tightening lockdown restrictions could quickly send the recovery into reverse.
Here in the UK Manchester and Lancashire could be next to move into Tier 3 with London also expected to move up a Tier in the coming days. Northern Ireland has also set out plans for a 4-week lockdown. 

OECD warns of UK economic scars
The news comes as the OECD warns that the UK risks economic scars rom Covid and Brexit. The Britain’s economy is on track to record -10.1% GDP contraction this year, making it one of the hardest hit by the pandemic. The UK’s ability to bounce back is largely dependent on the course of the virus and the restrictions needed to contain it. However, the potential for a messy Brexit adds a whole other level of uncertainty.

EU Summit in focus GBP just shy of $1.30
Heading towards the start of the EU Summit, Boris Johnson is disappointed with the progress achieved in Brexit talks. Leaders at the EU Summit, who will assess the progress of negotiations so far are expected to conclude that progress is still insufficient. However, the Pound is holding onto the majority of gains from the previous session on expectations that negotiations will continue despite Boris Johnson’s line in the sand date of today.

US Fiscal stimulus unlikely before elections
US fiscal stimulus talks are going nowhere fast. Recent optimism that some form of stimulus could be agreed before the US elections is fading rapidly. With just 3 weeks to go, and Joe Biden extending his lead in the polls it seems that the Democrats don’t want to give Trump the political victory. Additional fiscal stimulus is unlikely now until after November 3rd which could keep pressure on stocks and boost the safe haven dollar in the near term.

More from FTSE 100

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.