European Equities: A Week in Review – 25/09/20

The Majors

It was a particularly bearish week for the European majors in the week ending 25th September. The CAC40 and DAX30 slid by 4.99% and by 4.93% respectively, with the EuroStoxx600, falling by 3.60%.

Another banking scandal, a fresh spike in new COVID-19 cases, geopolitics, and economic data left the majors deep in the red.

The Stats

It was a relatively busy week on the Eurozone economic calendar.

Key stats included consumer and business confidence figures and prelim private sector PMIs for September.

Eurozone and German consumer confidence saw marginal improvements but not enough to impress. From Germany, business confidence also improved, while coming up short of forecasts.

Key in the week, however, was the prelim PMIs.

While manufacturing sector activity picked up in September, service sector activity slumped, raising concerns over the economic recovery.

France, Germany, and the Eurozone saw a contraction in the services sector. Partially offset by a pickup in manufacturing sector activity, private sector activity stalled in the Eurozone at the end of the quarter.

The Eurozone’s services PMI fell from 50.5 to 47.6, with the composite PMI declining from 51.9 to 50.1.

With the stats raising some red flags, the spike in new COVID-19 cases across Europe also weighed on risk sentiment. Concerns over the possible need to reintroduce lockdown measures left riskier assets in the deep red for the week.

From the U.S

It was a relatively quiet week. Key stats included the durable goods and core durable orders, weekly jobless claims, and September’s prelim private sector PMIs.

The stats were skewed to the negative, adding downward pressure on the majors later in the week.

While manufacturing sector activity picked up in September, service sector growth slowed at the end of the quarter. While steering clear of the 50 mark, the marginal fall in the services PMI was a red flag mid-week.

On Thursday, the jobless claims figures also disappointed. In the week ending 18th September, initial jobless claims came in at 870k, which was up from 866k in the week prior.

At the end of the week, durable goods and core durable goods orders delivered more disappointing numbers.

Durable goods orders and core durable goods orders both increased by 0.4% in August, falling well short of expectations.

While the stats provided direction in the week, central bank commentary also garnered plenty of attention.

FED Chair Powell delivered testimony through the 1st half of the week, calling for support from all levels of government. Powell also stated that plenty of uncertainty remains, with the containment of COVID-19 key to a sustainable economic recovery.

The Market Movers

From the DAX, it was a particularly bearish week for the auto sector. BMW and Volkswagen slid by 5.94% and by 5.47% to lead the way down. Continental and Daimler saw more modest losses of 0.42% and 2.33% respectively.

It was an even more bearish week for the banking sector. Commerzbank and Deutsche Bank tumbled by 10.71% and by 10.69% respectively.

From the CAC, things were not much better for the banks. BNP Paribas and Soc Gen tumbled by 12.57% and by 13.70% respectively, with Credit Agricole sliding by 11.60%.

For the banking sector, yet another scandal rocked bank stocks across the major exchanges. HSBC and Standard Chartered were among the banks that were in the news for the wrong reasons.

The French auto sector also struggled in the week. Peugeot and Renault ended the week down by 1.87% and by 4.73% respectively.

Air France-KLM was among the worst performers, however, tumbling by 19.1%, with Airbus down by 12.51%.

Rising new COVID-19 cases weighed heavily on travel stocks in the week, as concerns over the possible reintroduction of lockdown measures weighed.

On the VIX Index

It was back into the green for the week ending 25th September. Partially reversing a 3.87% fall from the week prior, the VIX rose by 2.13% to end the week at 26.38.

A 4th weekly loss for the S&P500 delivered the upside for VIX in the week.

For the week ending 25th September, the S&P500 and the Dow ended the week down by 0.63% and by 1.75% respectively. The NASDAQ ended the week up by 1.11%, with a 2.26% rally on Friday delivering the upside.

The Week Ahead

It’s a busy week ahead on the Eurozone economic calendar.

Through the 1st half of the week, prelim inflation figures are due out of France, Spain, Germany, and the Eurozone.

Following market concerns over deflationary pressures last time around, expect the numbers to influence.

Alongside Eurozone prelim inflation figures on Wednesday, German and French consumer spending and German unemployment figures will also influence.

The focus will then shift to September manufacturing PMIs for Italy and Spain. Finalized PMIs for France, Germany, and the Eurozone are also due out.

Barring deviation from prelim numbers, expect Italy and the Eurozone’s PMIs to have the greatest impact on Thursday.

Economic data from the U.S and from China will also provide direction in the week.

U.S consumer confidence, finalized GDP numbers, weekly jobless claims, ISM Manufacturing PMI and nonfarm payrolls, and the U.S unemployment rate are due out.

From China, September’s private sector PMIs on Thursday will also influence market risk appetite. The market’s favored Caixin Manufacturing PMI will have the greatest impact.

Away from the economic calendar, COVID-19 news, Brexit, and U.S-China chatter will also need monitoring.

European Equities: A Quiet Economic Calendar Leaves Geopolitics and COVID-19 in Focus

The Majors

It was a bearish day for the European majors on Thursday. The CAC40 and EuroStoxx600 fell by 0.83% and by 1.02% respectively, with the DAX30 ending the day down by 0.29%.

Economic data and the latest uptrend in new COVID-19 cases weighed on the majors, with the markets now expecting further stimulus to counter the sputtering economic recovery.

The Stats

It was a relatively busy day on the Eurozone economic calendar. Germany’s IFO Business Climate Index and sub-index figures were in focus early in the European session.

In September, the Business Climate Index rose from 92.5 to 93.4. Economists had forecast a rise to 93.8. The current assessment sub-index rose from 87.9 to 89.2, with the expectations index up from 97.5 to 97.7.

By sector:

Manufacturing: The Business Climate Index saw a sizeable increase, with significantly fewer companies assessing their current business situation as difficult. More companies also expected that their business situation will improve.

Services: By contrast, the index fell for the 1st time in 5-months, as a result of weaker optimism. Firms viewed their current situation as marginally better.

Trade: Companies were considerably more satisfied with the current business situation, with many being more optimistic about the near-term.

Construction: The index was on the rise once more, with the current situation indicator hitting its highest level since March. While pessimism persisted, firms were less pessimistic than back in August.

From the U.S

It was a relatively busy day on the economic calendar. August new home sales and the weekly jobless claims figures were in focus late in the European session.

In August, new home sales rose by 4.8%, following a 13.9% spike in July. Economists had forecast a 0.1% decline, month-on-month.

More significantly, however, were the jobless claims figures.

In the week ending 21st September, initial jobless claims stood at 870k, which was up from 866k from the previous week. Economists had forecast 840k.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Thursday. Continental rallied by 3.53% to lead the way, with Daimler and Volkswagen rising by 1.60% and by 1.90% respectively. BMW saw a more modest 0.48% gain on the day.

It was a mixed day for the banks after the scandal-driven sell-off. Deutsche Bank rose by 0.46% while Commerzbank ended the day down by 0.87%.

From the CAC, bank stocks saw more losses. Credit Agricole and Soc Gen slid by 1.83% and by 2.61% respectively. BNP Paribas saw a relatively modest 0.94% loss, however.

It was also a bearish day for the French auto sector. Peugeot and Renault ended the day down by 0.55% and by 0.36% respectively.

Air France-KLM hit reverse once more, sliding by 6.77%, with Airbus SE ending the day down by 3.46%.

On the VIX Index

The VIX fell by 0.24% on Thursday. Following a 6.40% gain on Wednesday, the VIX ended the day at 28.51.

Disappointing economic data from the U.S weighed on the majors, while FED Chair Powell’s talk of more support provided a cushion for the U.S markets on the day.

The NASDAQ and S&P500 rose by 0.37% and by 0.30% respectively, with the Dow ending the day up by 0.20%

VIX 25/09/20 Hourly Chart

The Day Ahead

It’s a particularly quiet day ahead on the Eurozone economic calendar. There are no material stats to provide the European majors with direction.

Late in the session, U.S durable goods and core durable goods will garner some interest, however.

With no stats to influence early on, geopolitics and COVID-19 will be the key drivers on the day. On the COVID-19 front, any talk of a reintroduction of restrictions would test support.

U.S – China tensions and Brexit chatter will also need monitoring.

The Futures

In the futures markets, at the time of writing, the Dow was up by 116 points, with the DAX up by 82.5 points.

For a look at all of today’s economic events, check out our economic calendar.

US Stocks Tumble from Extremes as Investors Search for Sweet Spot that Represents Value

The major U.S. stock indexes finished lower on Wednesday after fresh economic data revealed a cooling of U.S. business activity and the stalemate in Congress over more stimulus elevated concerns about the strength of the economy while the number of global coronavirus cases continued to rise.

In the cash market on Wednesday, the benchmark S&P 500 Index settled at 3236.92, down 78.65 or -2.31%. The blue chip Dow Jones Industrial Average finished at 26763.13, down 525.05 or -1.88% and the tech-driven NASDAQ Composite closed at 10632.99, down 330.65 or -2.95%.

Economy is Leveling Off

From March 23 to September 2, hopes of a strong recovery and mountains of fiscal and monetary stimulus measures fueled a rally that took the S&P 500 and NASDAQ Composite to all-time highs. But doubts over another stimulus bill and a sell-off in overvalued heavyweight technology-related stocks have weighed on investor sentiment since the market peaked the first week of the month.

Meanwhile, Federal Reserve Chair Jerome Powell said on Wednesday that the central bank was not planning any “major” changes in its Main Street Lending Program, while saying that both the Fed and Congress need to “stay with it” in working to bolster the economic recovery.

Before Powell made his statement, data from IHS Markit showed gains at factories were offset by a slowdown in the broader services sector in September, suggesting a loss of momentum in the economy at a time when concerns are rising about a potential surge in COVID-19 cases heading into the colder months.

Wednesday market six months to the day that U.S. stocks on March 23 hit their lowest point during the pandemic-induced sell-off. The historic rally from that low was fueled by the notion that the U.S. economy would post a “V-shaped” recovery.

Recent economic data and other developments, however, suggest the economy is now leveling off about 80% of activity before the pandemic and won’t get back to pre-pandemic levels until a vaccine against COVID-19 is in place.

The price action suggests that investors believe the economy is going to struggle recovering that last 20%. Investors believe the economy will eventually get there, but the process is going to be much slower than it was in the first three months of the reopening.

Sectors and Stocks

The S&P 500 slid to lows last seen in late July and is now down 9.6% from its record high hit three weeks ago. That puts it less than half a percentage point from entering corrective territory, as the NASDAQ did last week.

On Wednesday, the benchmark and tech-driven indexes fell more than 2%, and all 11 of the major S&P sectors closed lower. Energy already the worst-performing sector this year – led the rout in its biggest single-day decline since July 9.

Additionally, Wall Street favorites including Apple Inc, Google-parent Alphabet Inc and Amazon.com Inc, which have borne the brunt of recent losses, again declined at a rate exceeding losses of the benchmark S&P 500. A decline in Facebook Inc came in below the S&P decline.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Economic Data, COVID-19 News, and Geopolitics in Focus

Economic Calendar:

Thursday, 24th September

German IFO Business Climate Index (Sep)

The Majors

It was a relatively bullish day for the European majors on Wednesday, with the CAC40 rising by 0.62% to lead the way. The DAX30 and EuroStoxx600 weren’t far behind, with gains of 0.39% and 0.55% respectively.

A sharp pickup in manufacturing sector activity in September delivered support on the day, with the Eurozone Manufacturing PMI hitting a 25-month high. Service sector activity waned, however, limiting the upside for the majors.

Adding to the upside on the day was a continued slide in the EUR, which fell back to $1.16 levels.

The Stats

It was a particularly busy day on the Eurozone economic calendar. Ahead of the European open, German consumer confidence figures were in focus.

For October, Germany’s GfK Consumer Climate Index rose from a revised -1.7 to -1.6. Economists had forecast an increase to -1.0.

According to the GfK Survey,

  • Both economic and income expectations were on the rise, while propensity to buy tumbled.
  • The indicator for consumer income expectations rose by 3.3 points to 16.1 points.
  • There was an even sharper rise in consumer sentiment towards the German economic outlook. Economic expectations rose by 12.4 points to 24.1, logging a 5th consecutive monthly increase.
  • The propensity to buy indicator fell by 5.3 points to 38.4, however.

Later in the morning, prelim private sector PMI numbers for September were in focus.

France’s manufacturing PMI rose from 49.8 to 50.9, while the services PMI declined from 51.5 to 47.5. Economists had forecast PMIs of 50.5 and 51.5 respectively.

For Germany, the Manufacturing PMI increased from 52.2 to 56.6, while the services PMI slid from 52.5 to 49.1 Economists had forecast PMIs of 52.5 and 53.0 respectively.

In September, the Eurozone’s Services PMI slid from 50.5 to 47.6, while the Manufacturing PMI rose from 51.7 to 53.7. Economists had forecast PMIs of 51.9 and 50.5 respectively.

According to the prelim September survey,

  • The prelim Eurozone composite output index fell from 51.9 to a 3-month low 50.1.
  • On the slide was the Service PMI Activity Index that slid from 50.5 to a 4-month low 47.6.
  • By contrast, the Manufacturing PMI rose to a 25-month high 53.7.
  • For the manufacturing sector, a surge in new orders drove the PMI, with Germany’s private sector leading the way.
  • A general trend was seen across the bloc, however, with the service sector sounding the alarm bells.
  • On employment, the private sector reported a 7th consecutive month of job cuts, albeit at a slower pace.

From the U.S

It was a busier day. September’s prelim Makit private sector PMIs provided direction later in the session.

The Services PMI slipped from 55.0 to 54.6, while the Manufacturing PMI rose from 53.1 to 53.5. Economists had forecast PMIs of 54.7 and 53.1 respectively.

FED Chair Powell was also in focus on Tuesday, delivering a 2nd day of testimony on Capitol Hill. Powell talked of the need for more policy to support economic recovery. The FED Chair also noted that there is still a long way to go and that the recovery would be faster if support came from both the FED and from Congress…

The Market Movers

For the DAX: It was back into the red for the auto sector on Wednesday. BMW and Volkswagen fell by 1.08% and by 1.34% to lead the way down. Continental and Daimler saw more modest losses of 0.42% and 0.70% respectively.

It was yet another day in the red for the banks. Deutsche Bank fell by 0.83%, with Commerzbank ending the day down by 2.60%.

While there was plenty of red across the DAX, Adidas rallied by 2.68%. Better than expected Nike earnings delivered support on the day.

From the CAC, bank stocks also continued to struggle in the wake of the latest scandal. BNP Paribas fell by 2.60%. to lead the way down. Credit Agricole and Soc Gen saw more modest losses of 0.76% and 1.18% respectively.

It was another bullish day for the French auto sector, however. Peugeot and Renault ended the day with gains of 1.77% and 3.41% respectively.

Air France-KLM found much-needed support, rising by 0.12%, while Airbus SE slipped by 0.93%.

On the VIX Index

The VIX rose by 6.40% on Wednesday. Reversing a 3.31% fall from Tuesday, the VIX ended the day at 28.58.

Market reaction to dovish chatter from the FED weighed on the majors mid-week. FED Chair Powell talked of the need for more support to sustain the economic recovery.

On the economic data front, service sector activity saw marginally slower growth in September, raising further questions over the economic outlook.

The NASDAQ and S&P500 slid by 3.02% and by 2.37% respectively, with the Dow ending the day down by 1.92%

VIX 24/09/20 Daily Chart

The Day Ahead

It’s a quieter day ahead on the Eurozone economic calendar. Key stats include Germany’s IFO Business Climate Index figures for September.

Expect the numbers to influence, though the latest spike in new COVID-19 cases across the EU could overshadow any upbeat numbers.

From the U.S, the weekly jobless claims figures will also draw plenty of attention later in the session.

Aside from the economic indicators, FED Chair Powell and U.S Treasury Secretary Mnuchin are also in focus…

The Futures

In the futures markets, at the time of writing, the Dow was up by 58 points, while the DAX was down by 95.5 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Private Sector PMIs , Powell, and COVID-19 in Focus

Economic Calendar:

Wednesday, 23rd September

GfK German Consumer Climate (Oct)

Spanish GDP (QoQ) (Q2)

French Manufacturing PMI (Sep) Prelim

French Services PMI (Sep) Prelim

German Manufacturing PMI (Sep) Prelim

German Services PMI (Sep) Prelim

Eurozone Manufacturing PMI (Sep) Prelim

Eurozone Markit Composite PMI (Sep) Prelim

Eurozone Services PMI (Sep) Prelim

Thursday, 24th September

German IFO Business Climate Index (Sep)

The Majors

It was a mixed day for the European majors following Monday’s sell-off. The DAX30 and EuroStoxx600 rose by 0.41% and by 0.20% respectively, while the CAC40 fell by 0.40%.

There was little influence from a light economic calendar on the day. While bank stocks continued to struggle amidst the latest scandal, dip-buyers delivered support on the day.

A softer EUR added support to the DAX30 in particular as the Dollar bounce back continued.

The Stats

It was a quiet day on the Eurozone economic calendar. The Eurozone’s flash consumer confidence figure was in focus late in the European session.

According to the latest survey, the Eurozone’s Consumer Confidence Indicator rose from -14.7 to -13.9 in September. Economists had forecast a rise to -14.6.

While up on the month, the indicator continued to sit well below the long-run average -11.1.

From the U.S

It was a busier day. While existing home sales figures for August were in focus, FED Chair Powell’s testimony on Capitol Hill was the main event of the day.

FED Chair Powell provided few surprises in his first speech of the week, however. Powell cited the path forward would depend on keeping COVID-19 under control and government policy moves.

The Market Movers

For the DAX: It was a relatively bullish day for the auto sector on Tuesday. Continental and Daimler rose by 1.48% and by 0.86% respectively to lead the way. BMW and Volkswagen weren’t far behind, with gains of 0.41% and 0.75% respectively.

It was another day in the red for the banks, however. Deutsche Bank fell by 1.78% following Monday’s 7.64% tumble, with Commerzbank ending the day down by 0.07%.

From the CAC, it was also a bearish day for the banks. BNP Paribas and Credit Agricole ended the day down by 0.52% and by 0.57% respectively. Soc Gen saw a more modest 0.10% loss following Monday’s 7.66% slide.

For the banking sector, the latest scandal continued to pressure European bank stocks on the day.

It was a bullish day for the French auto sector, which bucked the trend on the day. Peugeot and Renault ended the day with gains of 3.63% and 2.66% respectively.

Air France-KLM slid by 4.35% following Monday’s 7.63% slump, with Airbus SE following Monday’s 6.57% slide with a 2.68% loss.

The spike in new COVID-19 cases and fears of a reintroduction of containment measures continued to weigh on travel stocks.

On the VIX Index

On Tuesday, the VIX fell by 3.31%. Partially reversing a 7.55% gain from Monday, the VIX ended the day at 26.86.

Support came from dip-buying, with little else to provide the majors with direction following Monday’s pullback.

FED Chair Powell’s delivery also provided nothing new for investors to fret about on the day.

The NASDAQ and S&P500 rose by 1.71% and by 1.05% respectively, with the Dow seeing a more modest 0.52% gain.

VIX 23/09/20 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats German consumer confidence figures that are due out ahead of the European open.

Later in the morning, September’s prelim private sector PMIs are due out of France, Germany, and the Eurozone.

Following some disappointing numbers from August, there will be plenty of interest in today’s stats.

Any general downward trend in the PMIs and expect the majors to come under pressure. With new COVID-19 cases on the rise and the threat of lockdown measures lingering, COVID-19 chatter will also influence.

On the geopolitical risk front, there’s also Brexit and tensions between the U.S and China to monitor.

From the U.S, prelim private sector PMIs and Powell’s 2nd day of testimony on Capitol Hill will also influence late in the day.

The Futures

In the futures markets, at the time of writing, the Dow was up by 36 points.

For a look at all of today’s economic events, check out our economic calendar.

Asia Pacific Shares Fall as Investors Shun Riskier Assets on Rising COVID-19 Concerns

The major Asia Pacific stock indexes were broadly weaker Tuesday as possible delays in expanded U.S. stimulus and concerns about fresh pandemic lockdowns in Europe dented the recent positive sentiment towards global equity markets. South Korea’s KOSPI led losses among the region’s major markets.

In the cash market, Hong Kong’s Hang Seng Index settled at 23716.85, down 233.84 or -0.98% and South Korea’s KOSPI Index finished at 2332.59, down 56.80 or -2.38%.

China’s Shanghai Index settled at 3274.30, down 42.63 or -1.29% and Australia’s S&P/ASX 200 closed at 5784.10, down 38.50 or -0.66%.

Japan’s Nikkei 225 Index remained closed for a bank holiday for a second session.

China Stocks End Lower as Surge in Global Virus Cases Weigh

China stocks closed lower on Tuesday as material and transport firms dropped following worries about a surge in global cases of the novel coronavirus.

Beijing is unlikely to approve an “unfair” deal Oracle Corp and Walmart Inc said they have struck with ByteDance over the future of video-streaming app TikTok, state-backed newspaper Global Times said in an editorial.

Among sectors, only securities firms gained as investors cheered latest consolidation in the industry. The Guolian-Sinolink merger could help consolidate financial resources and promote healthy development of the securities industry, analysts at Guosen Securities said in a report.

Consumer shares erased earlier gains through losses were narrower than other sectors.

China’s cabinet on Monday issued guidelines to boost new types of consumption, including online shopping and payments, in a bid to support the recovery of the economy.

South Korean Stocks Post Worst Fall in a Month on Europe Lockdown Concerns

South Korean shares dropped nearly 2.4% on Tuesday, logging the sharpest decline in a month, as investors shunned riskier assets on concerns about new coronavirus restrictions in Europe. Both the won and the benchmark bond yield weakened.

With COVID-19 infections on the rise in Europe, countries including Denmark, Greece and England have tightened restrictions, spurring fears about fresh lockdowns that could further pressure the economy.

Most of South Korea’s market heavyweights slumped, with the two largest – Samsung Electronics and SK Hynix – falling 1.7% and 3.8%, respectively.

LG Chem, a Tesla supplier, soared as much as 5.1% ahead of the electric-car maker’s “Battery Day” event on hopes for increased battery cell purchases from Tesla.

Finally, the Bank of Korea said it sees no need to downgrade its current economic growth projections, even after the government imposed tougher social distancing measures to curb a spike in coronavirus cases in late August.

For a look at all of today’s economic events, check out our economic calendar.

Brexit and COVID-19 – The Pound Sits in the Hands of Parliament…

The Internal Market Bill – What’s next?

At the start of the week, the Internal Market Bill had yet to progress to the House of Lords.

While the bill sat in limbo, however, the chatter continued as members of Parliament continued to air their views.

This time around, it was ex-Prime Minister Theresa May who spoke out from the political wilderness.

Having failed to move Brexit along, some appear to have been surprised by the willingness to air a view that was likely to be chastised by many.

Theresa May spoke out at the start of the week saying that she could not support the proposed bill.

The ex-Prime Minister certainly didn’t hold back, calling Johnson’s move both reckless and irresponsible.

Ironically, it reflected Theresa May’s stance on Brexit, a pro-European at heart.

Later this morning

The House of Commons is scheduled to debate Boris Johnson’s Internal Market Bill.

With Johnson’s commanding majority, there is unlikely to be too much concern over Theresa May’s outburst and lack of support.

Expectations are for the bill to be revised to ensure the inclusion of the parliamentary vote before any breach of the Withdrawal Agreement is permitted. The Parliamentary Lock looks to have appeased a number of pro-Brexiteers that had been against the original bill.

As for the House of Lords, the vote on the Internal Market Bill is not due to take place until November.

Between now and November, there will be last gasp attempts by both the EU and Britain to come to a Brexit agreement.

While the bill may not have passed through the House of Lords, Johnson will no doubt use it as part of the negotiations.

Last week, we talked of Johnson taking a leaf out of the U.S President’s book. Unfortunately, for Johnson, however, some MPs are devaluing the bargaining chip by stating their lack of support for the bill.

How the EU responds remains to be seen but we can expect plenty of chatter once Parliament makes its amendments.

The Pound, COVID-19, and Brexit

At the time of writing, the Pound was up by just 0.04% to $1.2807 for the day.

While Brexit has been a key driver for the Pound of late, sinking it back to sub-$1.30 levels, there’s also COVID-19 to consider.

The markets will be looking ahead to a government statement ahead of the Internal Market Bill debate.

News of a spike in new COVID-19 cases doesn’t bode well for the UK economy or the Pound.

Boris Johnson’s statement later this morning will likely deliver new measures to curb the accelerating spread of the virus.

Stricter than anticipated measures will hurt the Pound that has struggled this morning. The markets are expecting stricter enforcement of social gatherings and the early closure of social venues in the UK.

While the service sector activity has recovered from the COVID-19 meltdown, a reintroduction of containment measures will hurt the sector.

Last week, we heard the BoE talk of negative rates. Another lockdown would certainly force the BoE’s hand and the Pound deeper into the red.

GBP/USD 22/09/20 Hourly Chart

Fed News: Bullard’s Hawkish View on Strength of Recovery Contrasts With Powell’s Dovish Outlook

The week began with a slew of Federal Reserve speakers, who investors were hoping would shed light on the U.S. central bank’s new approach to inflation. Federal Chairman Jerome Powell is due to appear before Congressional committees all week, while Fed committee members Lael Brainard, Charles Evans, Raphael Bostic, James Bullard, Mary Daly and John Williams are also scheduled to make public speeches.

The general consensus among traders suggested that if Jerome Powell and the other Fed speakers failed to add more details to the Fed plans for how it is going to reach an average 2% inflation, the U.S. Dollar could move higher like it did after last week’s Fed monetary policy announcements.

Fed’s Powell Says Central Bank Committed to Using All Tools to Help Recovery

The Federal Reserve remains committed to using all the tools at its disposal to help the U.S. economy recovery from the blow delivered by the coronavirus pandemic, Chair Jerome Powell said on Monday.

“We remain committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.”

Powell said in remarks released ahead of Tuesday’s appearance before the House of Representatives Financial Services Committee, the first of three days of testimony to Congress this week.

Powell’s summation of the “marked improvement” in the economic landscape largely repeated what he said last week after the Fed’s latest policy meeting, at which policymakers promised to keep interest rates pinned at zero until the economy reaches full employment and inflation is on track to modestly overshoot the central bank’s 2% target, Reuters reported.

Fed’s Bullard Says U.S. Has Already Delivered Enough Fiscal Aid

Federal Reserve Bank of St. Louis President James Bullard said the U.S. economy has enough momentum to continue its recovery from the coronavirus slump even if Congress fails to pass additional taxpayer support, Bloomberg reported.

“I don’t think there is as much an imperative about a new fiscal package as there might have been” in July or August, Bullard said Monday in a Bloomberg Television interview with Kathleen Hays. “It seems like, at least in some broad macroeconomic type of calculation, we have enough resources to cover this.”

“We might be able to sustain a recovery through this,” he said. “I’m hopeful we still have enough in the pipeline to push us through, get the growth going in the second half of the year. That certainly seems to be what’s happening in the third quarter. I think that will continue in the fourth quarter and the first part of next year.”

Bullard’s Views Differ from Powell’s Outlook

Bullard’s view contrasts with Fed Chair Jerome Powell, who has urged additional fiscal aid and sometimes put the message in dire terms, as well as other Fed officials. In congressional testimony to be delivered Tuesday, Powell said the U.S. faces a long recovery with a high degree of uncertainty surrounding the pandemic, Bloomberg reported.

The U.S. economy may shrink 3%-4% this year, which is less than half of what was expected early during the crisis, so the $3 trillion in pandemic aid passed by Congress as well as he Fed’s easy monetary policy stance should help support growth during the recovery, Bullard said.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: The Futures Point Northwards after Monday’s COVID-19 Sell-off

Economic Calendar:

Tuesday, 22nd September

Eurozone Flash Consumer Confidence

Wednesday, 23rd September

GfK German Consumer Climate (Oct)

Spanish GDP (QoQ) (Q2)

French Manufacturing PMI (Sep) Prelim

French Services PMI (Sep) Prelim

German Manufacturing PMI (Sep) Prelim

German Services PMI (Sep) Prelim

Eurozone Manufacturing PMI (Sep) Prelim

Eurozone Markit Composite PMI (Sep) Prelim

Eurozone Services PMI (Sep) Prelim

Thursday, 24th September

German IFO Business Climate Index (Sep)

The Majors

It was a particularly bearish start to the week for the European majors on Monday. The DAX30 slumped by 4.37% to lead the way down, with the CAC40 and EuroStoxx600 sliding by 3.74% and by 3.24% respectively.

A fresh spike in new COVID-19 cases across EU member states weighed on the European majors on the day.

The sell-off continued on from Friday, following the WHO’s warning of Europe being in a “very serious situation”.

There were no major stats to distract the markets, with the fear of a reintroduction of lockdown measures doing the damage.

Following recent central bank commentary and economic indicators, the economic recovery had already begun to wane. A reintroduction of lockdown measures could hit the European economy far harder than the 1st time around.

The Stats

It was a quiet day on the Eurozone economic calendar. There were no material stats to provide the European majors with direction at the start of the week.

From the U.S

It was also a quiet day, with no material stats from the U.S session to provide the majors with direction.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Monday. Continental and Volkswagen slid by 5.21% and by 5.13% respectively to lead the way down. BMW and Daimler weren’t far behind, with losses of 4.41% and 3.91% respectively.

It was also a particularly bearish day for the banks. Deutsche Bank tumbled by 7.64%, with Commerzbank sliding by 5.42%.

From the CAC, it was much better for the banks. BNP Paribas and Credit Agricole ended the day down by 6.37% and by 5.36% respectively. Soc Gen led the way down, however, tumbling by 7.66%.

It was also a particularly bearish day for the French auto sector. Peugeot and Renault ended the day with losses of 4.91% and 7.75% respectively.

Air France-KLM slumped by 7.63%, with Airbus SE sliding by 6.57%.

On the VIX Index

It was back into the green for the VIX on Monday. Reversing a 2.38% loss from Friday, the VIX rose by 7.55% to end the day at 27.78.

The U.S majors hit reverse as investors responded to the spike in new COVID-19 cases that could derail the sputtering economic recovery.

The Dow and S&P500 fell by 1.84% and by 1.16% respectively, while the NASDAQ saw a more modest loss of 0.13%.

VIX 22/09/20 Daily Chart

The Day Ahead

It’s a quiet day ahead on the Eurozone economic calendar. Key stats include the Eurozone’s flash consumer confidence figures due out late in the day.

With little else to focus on through the day, we can expect sensitivity to the numbers. Consumer confidence and spending remain key to any sustainable economic recovery. Expect any disappointing numbers to peg the majors back.

From the U.S, FED Chair Powell is back in the spotlight, however. We would expect Powell’s testimony to have the final say on the day.

Away from the economic calendar, geopolitics and COVID-19 news updates will also need tracking.

The Futures

In the futures markets, at the time of writing, the Dow was up by 34 points, the DAX up by 148.5 points.

For a look at all of today’s economic events, check out our economic calendar.

Asia-Pacific Markets Rocked by Plunge in Hong Kong Bank Stocks, Rising Global Virus Fears

The major Asia-Pacific stock indexes were lower on Monday, with Hong Kong’s Hang Seng Index leading losses. Markets in Japan were closed on Monday for a holiday. The catalysts behind the weakness were reports that some Hong Kong banks moved suspicious funds, rising COVID-19 cases and escalating tensions between the United States and China.

In the cash market on Monday, Hong Kong’s Hang Seng Index settled at 23950.69, down 504.72 or -2.06% and South Korea’s KOSPI Index finished at 2389.39, down 23.01 or -0.95%.

In China, the Shanghai Index settled at 3316.94, down 21.15 or -0.63% and Australia’s S&P/ASX 200 Index closed at 5822.60, down 41.90 or -0.71%.

Hong Kong Leads Losses as HSBC and StanChart Shares Tumble after Reports Show They Moved Suspicious Funds

Hong Kong-listed shares of Standard Chartered and HSBC tumbled on Monday following reports that they allegedly moved large sums of suspicious funds.

By Monday afternoon, shares of Standard Chartered tumbled 4.84%. HSBC also plunged 4.52%, trading at lows not seen in more than 25-years, according to FactSet. The moves came after the banks – among several global lenders – were identified in media reports as having allegedly moved suspicious funds over a period of nearly two decades, according to Reuters. The reports cited confidential documents submitted by banks to the U.S. government.

China Shares End Lower as Key Lending Rate Kept Steady for 5th Month

China stocks ended lower on Monday, dragged by consumer staples and financial stocks after the central bank left its benchmark lending rate unchanged, with investors taking profits after expectations of further stimulus lifted shares in the previous session.

China kept its benchmark lending rate for corporate and household loans, the loan prime rate (LPR), steady for a fifth straight month, as expected. The monthly fixing came after the People’s Bank of China kept medium-term borrowing costs unchanged, and after President Xi Jinping said China’s economy remains resilient.

South Korea Stocks Dip as Global Virus Concerns Offset Domestic Export Boost

South Korean shares ended lower on Monday as concerns over surging coronavirus cases in Europe and fading U.S. fiscal stimulus hopes offset optimism around domestic trade and virus situations.

European countries from Denmark to Greece announced new restrictions on Friday to curb surging infections in some of their largest cities, while Britain was reported to be considering a new national lockdown.

In other news, South Korea’s exports for the first 20 days of the month returned to growth for the first time since March, helped by higher microchip and car sales, data showed on Monday.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Futures Point Lower, with COVID-19 and Geopolitics in Focus

Economic Calendar:

Monday, 21st September

ECB President Lagarde Speaks

Tuesday, 22nd September

Eurozone Flash Consumer Confidence

Wednesday, 23rd September

GfK German Consumer Climate (Oct)

Spanish GDP (QoQ) (Q2)

French Manufacturing PMI (Sep) Prelim

French Services PMI (Sep) Prelim

German Manufacturing PMI (Sep) Prelim

German Services PMI (Sep) Prelim

Eurozone Manufacturing PMI (Sep) Prelim

Eurozone Markit Composite PMI (Sep) Prelim

Eurozone Services PMI (Sep) Prelim

Thursday, 24th September

German IFO Business Climate Index (Sep)

The Majors

It was a bearish end to the week for the European majors on Friday. The CAC40 slid by 1.22%, with the DAX30 and EuroStoxx600 ending the day with losses of 0.70% and 0.66% respectively.

A fresh spike in new COVID-19 cases across EU member states weighed on the European majors on the day.

Ahead of the European session, the WHO had warned of a “very serious situation” developing in Europe. In a bid to revive consumption and tourism, governments have been active in reopening the respective economies.

With a reliance on consumption to deliver an economic recovery, the latest spikes raise the chances of fresh lockdown measures.

Adding further pressures on the majors at the end of the week were Brexit and U.S – China tensions.

The Stats

It was yet another quiet day on the Eurozone economic calendar. Key stats included August wholesale inflation figures from Germany.

Germany’s producer price index stalled in August, after having risen by 0.20% in July. Whilst beating forecasts of a 0.1% decline, market jitters over deflationary pressures tested the majors going into the European open.

With stats on the lighter side, there was little to distract the markets from the latest U.S-China spat, Brexit, and COVID-19, however.

From the U.S

Key stats included prelim September consumer sentiment and expectations figures.

While both stats were skewed to the positive, both indicators remained well below pre-pandemic levels.

In September, the Michigan Consumer Sentiment Index rose from 74.1 to 78.9, according to prelim figures. While coming in ahead of a forecasted 75.0, the indicator had stood at 101.0 for January.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Friday. Continental and Volkswagen slid by 3.97% and by 3.52% respectively. BMW and Daimler saw more modest losses of 1.72% and 1.91% respectively.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank fell by 1.38% and by 3.11% respectively.

From the CAC, it was a bearish day for the banks. Credit Agricole and Soc Gen fell by 3.16% and by 3.05% respectively. BNP Paribas ended the day down by 2.34%.

It was a particularly bearish day for the French auto sector, however. Peugeot and Renault ended the day with losses of 4.35% and 4.03% respectively.

Air France-KLM fell by 1.93%, with Airbus SE sliding by 3.54%.

On the VIX Index

It was back into the red for the VIX, bringing to an end a run of 2 consecutive days in the green.

On Friday, the VIX fell by 2.38%. Reversing a 1.61% gain from Thursday, the VIX ended the day at 25.83.

U.S – China tension over TikTok and WeChat, rising COVID-19 cases, and the FED’s dovish outlook weighed on the majors.

The NASDAQ and S&P500 fell by 1.07% and by 1.12% respectively, with the Dow seeing a more modest loss of 0.88%.

VIX 21/09/20 Daily Chart

The Day Ahead

It’s a quiet day ahead on the Eurozone economic calendar. There are no material stats due out to provide the majors with direction.

With no material stats from the U.S, talk of retaliation from Beijing over Trump’s targeting of Chinese companies will test the majors.

There is also Brexit to factor in and the recent spike in new COVID-19 cases to consider. A continued rise in new cases could see a reintroduction of containment measures that would throw cold water over any sustainable economic recovery.

On the monetary policy front, Lagarde is due to speak late in the day. There are unlikely to be too many surprises, however, following the latest ECB press conference. That’s assuming that Lagarde holds back from talk of exchange rate risk to the Eurozone economic recovery…

The Futures

In the futures markets, at the time of writing, the Dow was up by 15 points, while the DAX was down by 32 points.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Private Sector PMIs, Powell, Geopolitics, and COVID-19 in Focus

On the Macro

It’s a particularly quiet week ahead on the economic calendar, with just 32 stats in focus in the week ending 25th September. In the week prior, 69 stats had been in focus.

For the Dollar:

It’s a relatively quiet week ahead on the economic data front.

Key stats include prelim private sector PMI numbers for September on Wednesday.

Expect the services PMI to have the greatest impact ahead of the all-important weekly jobless claims on Thursday.

Wrapping up the week, durable and core durable goods orders for August will also influence.

For the markets, it is all about momentum. Any weak numbers will test the demand for riskier assets.

On the monetary policy front, FED Chair Powell is also back in action, giving testimony on Capitol Hill. Following last week’s FOMC press conference, however, will there be any more surprises?

The Dollar Spot Index ended the week down by 0.44% to 92.926.

For the EUR:

It’s a busy week ahead on the economic data front.

In a quiet start to the week, Eurozone flash consumer confidence figures are due out on Tuesday. The EUR will likely respond to the numbers ahead of a busy Wednesday.

Consumer confidence and spending remain key to any economic recovery across the Eurozone. Any weak numbers would test support for the EUR.

The focus will then shift to the busy Wednesday.

September’s prelim private sector PMIs for France, Germany, and the Eurozone are due out. Alongside the figures, Spanish GDP and German consumer confidence figures are also in focus on Wednesday.

The focus will then shift to September’s Ifo Business Climate and sub-index figures due out on Thursday.

While we can expect the private sector PMIs to be the key drivers, both business and consumer confidence will need to improve.

Concerns over economic speed bumps will raise EUR sensitivity to the stats in the week.

On the monetary policy front, ECB President Lagarde is due to speak on Monday. Expect any references to inflation or exchange rates and the economic outlook to influence.

The EUR/USD ended the week down by 0.05% to $1.1840.

For the Pound:

It’s a quieter week ahead on the economic calendar. September’s prelim private sector PMIs, due out on Wednesday, will be the key driver.

Following last week’s BoE forward guidance and chatter on Brexit, the Pound will be sensitive to the numbers.

CBI Industrial Trend Orders are also due out but will likely have a muted impact, barring dire numbers.

On the monetary policy front, BoE Governor Bailey is scheduled to speak on Thursday. Any further chatter on negative rates and a gloomy economic outlook would weigh on the Pound.

The GBP/USD ended the week down by 0.95% to $1.2917.

For the Loonie:

It’s a quiet week ahead on the economic calendar.

House price figures for August are due out that will likely have a muted impact on the Loonie.

Expect the private sector PMIs from the Eurozone and the U.S and market risk sentiment to be key drivers.

Geopolitics and COVID-19 will influence market risk sentiment in the week.

The Loonie ended the week down by 0.19% to C$1.3204 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a particularly quiet week ahead on the economic calendar.

There are no material stats due out of Australia to provide the Aussie with direction.

That leaves the Aussie in the hands of geopolitics and the global economic outlook influenced by the PMIs.

The Aussie Dollar ended the week up by 0.07% to $0.7289.

For the Kiwi Dollar:

It’s a relatively quiet week ahead on the economic calendar but an important one for the Kiwi Dollar.

Key stats include August trade figures due out on Thursday. We’ve seen plenty of sensitivity to China numbers of late, so expect the devil to be in the details.

Earlier in the week, however, is the RBNZ monetary policy decision on Wednesday. There had been the talk of negative rates. Will there be action or just some more chatter? Economic indicators have yet to impress despite all of the support.

The Kiwi Dollar ended the week up by 1.40% to $0.6759.

For the Japanese Yen:

It is a quiet week ahead on the economic calendar.

Prelim private sector PMI numbers for September will be in focus mid-week. Other than that, there are no stats to consider, leaving the Yen in the hands of geopolitics and COVID-19 news.

On the monetary policy front, BoJ monetary policy meeting minutes will likely have a muted impact. The minutes are dated following last week’s monetary policy decision.

The Japanese Yen ended the week up by 1.50% to ¥104.57 against the U.S Dollar.

Out of China

It’s a particularly quiet week ahead on the economic data front.

There are no material stats due out of China, leaving geopolitics in focus in the week.

On the monetary policy front, the PBoC is in action on Monday. We don’t expect any further cuts in Loan Prime Rates, however. PBoC forward guidance and recent economic data support a hold.

The Chinese Yuan ended the week up 0.95% to CNY6.7692 against the U.S Dollar.

Geo-Politics

UK Politics

The Pound found much-needed support last week. Brexit will remain a key driver in the week ahead, however. We have the House of Lords vote on the Internal Market Bill that could throw Brexit negotiations into chaos. Last week, the British PM attempted to soften the impact of the internal market bill. An amendment to the bill was made to prevent ministers from using the bill to override the Brexit Withdrawal Agreement without a parliamentary vote.

It will get interesting as, while this may have placated some of Johnson’s critics, it may not satisfy the EU…

All in all, it spells for a choppy week ahead for the Pound.

U.S – China

Last week, Trump hit TikTok and WeChat. From the weekend, news hit the wires of Beijing taking retaliatory steps in response.

China issued a warning stating that if the U.S insists on going its own way, China would take the necessary steps to protect the rights and interests of Chinese firms.

We can expect more in the week ahead, particularly with Trump trailing Biden in the polls…

U.S Politics

Presidential Election fever should start to pick up and begin to have a greater influence on the global financial markets.

Trump has yet to claw back the deficit that Biden has enjoyed since COVID-19 reached U.S shores.

Expect Trump’s distraction tactics to draw plenty of attention.

European Equities: A Week in Review – 18/09/20

The Majors

It was a mixed week for the European majors in the week ending 18th September. The CAC30 fell by 1.11% to lead the way down, with the DAX40 ending the week down by 0.66%. Bucking the trend for the week was the EuroStoxx600, which rose by 0.22%.

At the start of the week, the markets jumped into action in response to COVID-19 news from the previous weekend. Reports of Oxford University’s resuming trials of its COVID-19 vaccine supported riskier assets early on.

In the week prior, trials had been suspended due to a patient becoming ill.

On the geopolitical front, criticism over Boris Johnson’s Internal Market Bill failed to rile the markets. Hopes are that the House of Lords would reject the bill in its current form. Such an outcome could test support for Johnson and the Brexit hardliners.

A passing of the bill, however, would likely materially increase the chances of a no-deal Brexit, which would be viewed as a market negative.

In the 2nd half of the week, however, the FED and the BoE weighed on riskier assets. For the CAC40 and DAX30, it was a bearish end to the week that reversed gains from earlier in the week.

A spike in new COVID-19 cases also weighed on the European majors on Friday. On Thursday, the WHO had reportedly raised concerns over the jump in new COVID-19 cases in Europe.

A reintroduction of lockdown measures would materially impact the Eurozone’s economic recovery that has shown signs of waning.

The Stats

It was a relatively busy week on the Eurozone economic calendar.

In the 1st half of the week, industrial production and trade figures from the Eurozone delivered positive results.

Economic Sentiment figures for September also improved, delivering the majors with support in the 1st half of the week.

Later in the week, however, the focus shifted to monetary policy, which left the majors on the back foot.

Both the BoE and the FED delivered particularly dovish views on the economic outlook and monetary policy.

While lower for longer tends to be positive for riskier assets, FED talk of near to zero rates until 2023 was unexpected.

With the FED delivering warning signals, the BoE didn’t hold back on Thursday, with the talk of negative rates doing the rounds.

From the U.S

Key stats included the weekly jobless claims, industrial production, and retail sales figures for August and September manufacturing data.

The stats were skewed to the negative, adding downward pressure on the majors later in the week.

While manufacturing sector activity picked up in NY State, sector growth slowed in Philly.

Retail sales figures came up short of expectations questioning the market’s optimistic outlook on the economy.

With jobless claims figures also disappointing, there were few reasons for the markets to shake off the central bank doom and gloom.

Wrapping things up from the U.S were prelim consumer sentiment figures on Friday, which were positive but not enough to shift the mood.

From elsewhere, industrial production and retail sales figures out of China had provided the European majors with support early in the week.

The Market Movers

From the DAX, it was a bearish week for the auto sector. Continental and Volkswagen slid by 3.12% and by 4.91% to lead the way down. BMW and Daimler saw more modest losses of 0.87% and 1.825 respectively.

It was also a bearish week for the banking sector. Commerzbank slid by 7.36% following last week’s 6.06% tumble, with Deutsche Bank falling by 2.04%.

From the CAC, things were not much better for the banks. BNP Paribas and Credit Agricole slid by 5.36% and by 5.70% respectively, while Soc Gen saw a more modest 1.64% loss.

The French auto sector also struggled in the week. Peugeot and Renault slid by 3.61% and by 7.44% respectively.

Air France-KLM and Airbus saw relatively modest losses of 0.46% and 0.32% respectively, however.

On the VIX Index

It was a 2nd consecutive week in the red for the VIX. In the week ending 18th September, the VIX fell by 3.87%. Following on from a 12.62% slide from the previous week, the VIX ended the week at 25.83.

The weekly slide came in spite of the U.S equity markets ending the week in the red after a bearish end to the week.

For the week ending 18th September, the S&P500 and the NASDAQ ended the week down by 0.64% and by 0.56% respectively. The Dow saw a more modest 0.03% loss.

VIX 19/09/20 Weekly Chart

The Week Ahead

It’s a busy week ahead on the Eurozone economic calendar.

At the start of the week, key stats include Eurozone and German consumer confidence figures. With consumer consumption a must to support any economic recovery, sentiment will need to continue to improve.

Of greater significance, however, will be September’s prelim private sector PMIs for France, Germany, and the Eurozone.

Following disappointing numbers for August, another tick lower would be negative for the majors.

Wrapping things up will be Germany’s Ifo Business climate index numbers for September on Thursday.

The degree of influence, however, will depend on Wednesday’s PMIs.

From elsewhere, expect U.S private sector PMIs, weekly jobless claims, and core durable goods orders to also influence.

Away from the economic calendar, COVID-19 and geopolitics will also need monitoring.

Biden Widens the Gap as Swing State Fence Sitters Take a Stand

The Latest Polls

There was yet more movement in the FT’s poll tracker over the last week, as the news wires delivered more coverage on campaigning.

According to the latest FT’s interactive Calculator and polling data, Presidential hopeful Biden saw his lead widen, following a marked narrowing in the week prior.

The Challenger

In the last week, Biden saw his projected Electoral College vote count rise to 280 as at 17th September. As at 10th September, Biden had seen his projected haul slide to 263 Electoral College votes.

Significantly, the projection of more than the minimum 270 votes needed to win was a more positive outcome.  In the week prior, Biden had seen his haul fall below the magic number of 270 required to take the Oval Office.

While the increase in projected Electoral College votes was positive, Biden’s haul still sat below a 5th August haul of 308.

In fact, Biden saw a downward trend through early September until this week’s rise.

Looking at the breakdown of the votes, however, it has been less conclusive.

Of the 298 votes, Biden only has 203 solid votes and 95 leaning votes. Taking away the 95 votes leaves Biden well short of the 270.

While this may be negative in terms of optics, Biden has in fact seen leaning votes decline in recent weeks.

Back on 5th August, when the FT projected a haul of 308 Electoral College votes, leaning votes had stood at 114. Solid votes had stood at 194. So, Biden should take heart in the recent widening in the gap.

Incumbent Trump

For the U.S President, the FT projects a haul of 131 Electoral College votes. This was up from a haul of 122 back on 5th August and last week’s projection of 122 Electoral College votes.

While optically these figures can be considered positive, the reality is that Trump has seen his solid vote projection slip.

As at 5th August, Trump had 80 solid votes and 42 leaning votes. On 10th September, solid votes slipped to 77, while leaning votes increased by 3 to 45.

The latest figures, as at 17th September, has Trump with 54 leaning votes. It is the leaning votes that have driven up Trump’s total vote haul.

Taking away the leaning vote tally, Trump looks to have slim to no chance of winning the 2020 Election.

As we experienced back in 2016, however, it is not so simple.

Leaning votes in favor of Biden and Trump total 131 Electoral College votes. Then there are the fence-sitters, classified as Toss-ups. Toss-ups stood at 127 as at 17th September.

As at 10th September Toss-ups had stood at 153. Back on 5th August, the number was a measly 108…

The upward trend in toss-ups suggests that voters are becoming less certain on which way to cast their ballot on Election Day.

The Toss-up States

At the time of writing, the FT had 127 states sitting on the fence. Classified as toss-up states, these are states where the difference in poll numbers between Biden and Trump is less than 5 percentage points.

6 states fell within the toss-up category, down from 8 states in the week prior.

The 6 states included Texas (38 E.C votes), Florida (29 E.C votes), Ohio (18 E.C votes), Georgia (16 E.C votes), N. Carolina (15 E.C votes), and Arizona (11 E.C votes).

Michigan (16 E.C votes) and Maine 2 (1 E.C vote) shifted in favor of Biden in the week, while Trump drew South Carolina (9 E.C votes).

For U.S President Trump to take the 2020 Presidential Election, he would need to take all of the 127 Electoral College votes sitting on the fence. Even with the 127, however, Trump would still come up short of the magic number of 270. This is assuming of course that all of the 54 leaning Electoral College votes go in his favor.

For Joe Biden, he could afford to give up 10 leaning Electoral College votes from his leans but it would set a dangerous precedent.

On face value, therefore, the odds remain heavily stacked in Biden’s favor, supported by the latest widening in the poll tracker.

Key States

If we look at the key U.S states that tend to be election barometers:

Missouri continues to lean in favor of Trump and the Republicans, with Kansas also leaning in Trump’s favor.

For Biden, Illinois, New Mexico, and Oregon remain solid blues, with New Hampshire and Pennsylvania leaning in favor of Biden. Biden will also be delighted to claw back Michigan in the week. Michigan had sat on the fence on 10th September.

The Road Ahead

We are expecting market sensitivity to the polls and projections to begin to rise in the coming weeks. In fact, we should see volatility pick up ahead of the debates that kick off next month,

As the polls begin to swing with a little more vigor, the markets will likely respond to the uncertainty.

For Biden, it remains an election to lose. For the U.S President, however, there is a lot of work to do.

Changing the narrative on COVID-19 and on the Black Lives Matter movement remain key. Projecting and deflecting may not be enough when considering labor market conditions.

US Stocks Sink as Tech Stocks Extend Recent Decline

The major U.S. stock indexes were down sharply again on Thursday as technology-related shares extended a recent decline and as data showed high levels of weekly jobless claims. Tech-heavyweights Apple Inc and Amazon.com were the biggest drags on the S&P 500 and NASDAQ Composite, which entered correction territory earlier this month.

In the cash market, the benchmark S&P 500 Index settled at 3357.01, down 28.48 or -0.84%. The blue chip Dow Jones Industrial Average finished at 27901.98, down 130.40 or -0.47% and the tech-weighted NASDAQ Composite closed at 10910.28, down 140.19 or -1.25%.

US Economic News

The number of Americans filing new claims for unemployment benefits fell less than expected last week and applications for the prior period were revised up, suggesting the labor market recovery had shifted into low gear amid fading fiscal stimulus.

But jobless claims remained elevated at 860,000, while both housing starts and the Philadelphia Fed business index fell and trading marked a risk-off sentiment.

The Philly Fed came in at 15, matching the forecast, but coming in below the previously reported 17.2. U

Weekly Unemployment Claims were reported at 860K, higher than the 825K estimate, but lower than last week’s upwardly revised 893K.

Building Permits were 1.47 million units, lower than the 1.51m forecast and previously reported 1.48m.

Housing Starts showed a 1.42 million unit increase, missing the 1.47m forecast and 1.49m previous number.

Continued Reaction to Fed

The S&P 500 Financials Index fell 1.4%, a day after the Federal Reserve pledged to keep interest rates low for a prolonged period to lift the world’s biggest economy out of a pandemic-induced recession. Banks tend to benefit from higher borrowing costs.

Fed Chair Jerome Powell laid out a menu of factors – including wage growth, workforce participation and disparities in minority joblessness relative to whites – that must be satisfied before the Fed would view the economy at maximum employment, and thus even consider raising interest rates.

Stocks in the News

General Electric Co rose 3.7% after Chief Executive Officer Larry Culp said on Wednesday the company’s free cash flow would turn positive in the second half.

Ford Motor Co added 3.3% as it said it had begun production of the new generation F-150 pickup truck at its Michigan facility.

The Internals

Declining issues outnumbered advancing ones on the NYSE by a 1.86-to-1 ratio; on NASDAQ, a 1.50-to-1 ratio favored decliners.

The S&P 500 posted 7 new 52-week highs and no new lows; the NASDAQ Composite recorded 36 new highs and 16 new lows, according to Reuters.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: U.S Consumer Sentiment Figures and Geopolitics in Focus

Economic Calendar:

Friday, 18th September

German PPI (MoM) (Aug)

The Majors

It was bearish for the European majors on Thursday, with CAC40 and EuroStoxx600 seeing a run of 4 consecutive daily gains come to an end.

The CAC40 and the EuroStoxx600 fell by 0.69% and by 0.51% respectively, with the DAX30 ending the day down by 0.36%.

Central bank sentiment towards economic recoveries weighed on the markets on Thursday. The futures were already under pressure in response to the FED’s dovish signals. A projection for rates to hold near zero through to 2023 painted a grim picture of the FED’s sentiment towards the U.S economic outlook.

Things were not much better from Japan, with the Bank of Japan stressing that the economy was in a serious condition. Rounding things off on the day was the Bank of England, who highlighted that the economic outlook remained unusually uncertain.

On the economic data front, there was nothing from the numbers to change the somber mood.

The Stats

It was another quiet day on the Eurozone economic calendar. Key stats included August finalized inflation figures for the Eurozone.

The annual rate of core inflation softened from 1.2% to 0.4% in August, which was in line with prelim figures.

In August, consumer prices fell by 0.4%, following on from a 0.4% decline in July. As a result of the slide in consumer prices in August, the annual rate of inflation was down 0.2%, which was also in line with forecasts. In July, the annual rate of inflation had stood at 0.4%.

According to Eurostat,

  • The lowest annual rates were registered in Cyprus (-2.9%), Greece (-2.3%), and Estonia (-1.3%).
  • The highest contribution to the annual euro area inflation rate came from food, alcohol & tobacco (+0.33 pp).

From the U.S

Key stats included weekly jobless claims figures and September’s Philly FED Manufacturing Index numbers.

Other stats included August housing sector data that had a muted impact on the majors on the day.

For the week ending 11th September, initial jobless claims stood at 860k, down from 893k claims from the week prior. Economists had forecast claims of 850k, however.

In September, the Philly FED Manufacturing Index slipped from 17.2 to 15.0, which was in line with forecasts.

The Market Movers

For the DAX: It was another mixed day for the auto sector on Thursday. Daimler bucked the trend on Thursday, rising by 0.71%. Continental and Volkswagen saw losses of 0.72% and 0.26% respectively, with BMW slipping by 0.02%.

It was a bearish day for the banks, however. Deutsche Bank and Commerzbank fell by 1.03% and by 2.79% respectively.

From the CAC, it was a mixed day for the banks. Credit Agricole and BNP Paribas fell by 1.04% and by 0.80% respectively. Soc Gen ended the day up by 0.45%.

It was a bearish day for the French auto sector, however. Peugeot and Renault ended the day down by 1.16% and by 0.19% respectively.

Air France-KLM reversed a 0.87% loss from Wednesday, rallying by 2.78%, with Airbus SE gaining 0.47%.

On the VIX Index

It was a second consecutive day in the green for the VIX on Thursday. Following on from a 1.76% gain on Wednesday, the VIX rose by 1.61% to end the day at 26.46.

Continued market reaction to the FOMC projections and press conference from Wednesday left the majors in the red.

Disappointing Jobless claims and Philly FED Manufacturing numbers added further pressure on the day.

The NASDAQ and S&P500 fell by 1.27% and by 0.84% respectively, with the Dow seeing a loss of 0.47%.

VIX 18/09/20 Daily Chart

The Day Ahead

It’s a quiet day ahead on the Eurozone economic calendar. Key stats include German wholesale inflation figures for August.

With deflationary pressures hitting the Eurozone, a softening in wholesale inflationary pressures would add to the negative sentiment.

Later in the day, prelim U.S consumer sentiment figures for September will also influence.

Away from the economic calendar, Brexit will continue to be an area of focus as will be chatter from Capitol Hill.

The Futures

In the futures markets, at the time of writing, the Dow was down by 76 points, while the DAX was up by 8 points.

For a look at all of today’s economic events, check out our economic calendar.

The BoE Hits the Pound. Uncertainty Has Become the Hip Word for Central Banks

The September MPC

The Monetary Policy Committee of the Bank of England left interest rates unchanged at 0.10% today.

Additionally, the MPC also voted to maintain its QE total at £745bn.

The QE total consists of the BoE’s existing programs of UK government bond and sterling non-financial investment-grade corporate bond purchases financed by the issuance of central bank reserves.

Both decisions were in line with market expectations. More importantly, the Committee voted unanimously in favor of a hold. Following some dovish chatter, none of the members chose to dissent this time around.

The MPC Meeting Minutes

While the vote to stand pat was expected, there was some degree of uncertainty over the BoE’s outlook. Not just on monetary policy but also on the economic outlook.

A reintroduction of containment measures to curb the spread of COVID-19 and Brexit remained key considerations.

Salient points from the MPC Meeting Minutes included:

  • The outlook for the economy remains unusually uncertain.
  • In August, the MPC’s central projections assumed that the direct impact of COVID-19 on the economy would dissipate gradually.
  • Additionally, the projections assumed an immediate, orderly move to a comprehensive free trade agreement on 1st January 2021.
  • Substantial fiscal and monetary policy actions also supported the BoE’s economic activity outlook.
  • Indicators of global activity have been broadly in line with the Committee’s expectations back in August.
  • Recent domestic economic data have been a little stronger then the Committee expected back in August.
  • Given the risks, however, it is unclear how informative Committee members are about how the economy will perform further out.
  • Recent increases in COVID-19 cases in parts of the world, including the UK, could weigh further on economic activity.
  • The view is, however, that any impact would be on a lesser scale than seen earlier in the year.
  • Risks of a more persistent period of elevated unemployment than in the MPC’s central projection remains. This was also the view back in August.

The Committee will, therefore, continue to monitor the situation and stands ready to adjust policy to meet its remit.

Additionally, the Committee does not intend to tighten monetary policy until there is clear evidence that significant progress is being made in:

  • Eliminating spare capacity.
  • Achieving the 2% inflation target sustainably.

The British Pound

At the time of writing, the Pound was down by 0.71% to $1.28748.

Earlier in the week, Brexit troubles on Boris Johnson’s front door had provided some much-needed support for the Pound.

Last week, the Pound had slumped by 3.64% to visit sub-$1.28 levels before a partial recovery this week.

Ahead of the MPC’s policy decision and minutes, the Pound had clawed its way back to $1.30 levels before hitting reverse today.

GBP/USD 17/09/20 Daily Chart

Looking Ahead

With the MPC focused on both inflation and spare capacity, tomorrow’s retail sales figures will influence.

Greater spare capacity on the economy would ultimately be a drag on consumption that would weigh on inflationary pressures.

Looking ahead to next week’s numbers, September’s prelim private sector PMIs will also be key.

In the wake of the EU Referendum, the BoE did not hesitate to make a move based on survey-based data.

When considering key stats due out and Brexit and COVID-19 uncertainty, it is going to be a rocky road for the Pound.

On the Brexit front, the House of Lords vote on the Internal Market Bill could be the killer blow next week. Failure to reach a trade agreement knocks off one of the MPC’s assumptions made for its economic projections…

Fed Statement, Projections, Powell’s Comments Produce Mixed Reactions by Traders

At the end of the trading day, the market’s reaction to the series of Fed announcements was mixed. Stocks initially surged after the Fed released its post-meeting statement and its latest economic forecast, showing it will keep interest rates at zero at least through 2023, as expected.

Stocks gave up their gains as Fed Chairman Jerome Powell briefed the media, and described the Fed’s guidance as strong and “powerful.”

Treasury yields moved slightly higher after Powell said the Fed plans to keep its asset purchases at current levels for now. Some bond pros have been expecting the Fed to increase Treasury purchases, and Powell did not commit to that. The 10-year Treasury yield rose to 0.695%.

“We’re going to continue to monitor developments, and we’re prepared to adjust our plans as appropriate,” Powell said.

Some Experts Find Fed’s Guidance Dovish

It was the Fed’s guidance that the markets found dovish. In the Fed’s latest projections, core inflation is expected to stay low and not reach the Fed’s 2% target until 2023. At the same time, the job market is expected to improve to the point where unemployment is at 4% in 2023, below the longer run rate of 4.1%.

“This is dovish – lower rates for longer, higher equities, weaker dollar,” said Jon Hill, senior fixed income strategist at BMO. “The Fed is saying we’re not hiking in 2023, maybe in 2024…What they’re saying is these are our goals. We expect to have just barely met them and even then, they’re not raising rates.”

Others Think Powell May Have Undercut the Dovish Tone

AB Economist Eric Winograd said Powell may have undercut the dovish message he was sending.

“He noted that targeting an inflation overshoot for ‘some time’ as the statement says, means that they are not targeting a ‘sustained’ overshoot. So how long is ‘some time’ if it isn’t sustained?” Winograd said. “That imprecision is a problem that the committee is going to have to solve to reap the full benefits of the framework shift. It’s not a coincidence that the stock market, which had been in positive territory, flipped negative after the chair’s comments.”

Forex Markets – Dollar Strong on New Projections

The commodity-linked Australian and New Zealand Dollars finished mixed after retreating from their highs. The Euro fell hard after reversing earlier gains. The Japanese Yen, however, spiked higher.

Overall, the U.S. Dollar gained ground after the Fed announcements in a mostly two-sided trade. Although the Federal Reserve kept interest rates pinned near zero, which is bearish for the U.S. Dollar, policymakers also said they expect the U.S. economy from the coronavirus to accelerate with unemployment falling faster than the central bank expected in June.

In new economic projections, Fed policymakers at the median see economic growth dropping by 3.7% this year, an improvement from the 6.5% drop projected in June. It was this upgrade to the economic outlook that supported the U.S. Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Quick Fed Analysis: FOMC Sees Rates Near Zero Until Inflation Hovers Over 2%

The U.S. Federal Reserve released its monetary policy statement at 18:00 GMT on Wednesday. Central bank policymakers kept interest rates pinned near zero and promised to keep them there until inflation is on track to ‘moderately exceed” the U.S. central bank’s 2% inflation target “for some time.”

The change in guidance was in line with the Fed’s monetary policy shift announced last month that is aimed to offset years of weak inflation and allow the economy to keep adding jobs for as long as possible.

This week’s Federal Open Market Committee (FOMC) meeting was the last before the U.S. Presidential election in November and contained a multitude of information that affects both the short-term and long-term aspects of the economy as well as across all markets from commodities to stocks.

Here are some of the key points derived from the Fed’s monetary policy statement and its latest economic forecasts.

  • The U.S. Federal Reserve maintained key overnight interest rates in target range of zero to 0.25 percent.
  • The median forecast of Fed policymakers is for rates to stay near zero through 2023.
  • The Fed also saw GDP declining in 2020 less than the previous forecast but growing more slowly in 2021 and 2022 than previously forecast.
  • The Fed also expects to maintain the current Fed Funds rate until the labor market has reached levels consistent with assessments of maximum employment, and inflation has risen to 2% and on track to exceed that for some time.
  • The Fed repeated its commitment to using its full range of tools to support the U.S. economy.
  • Additionally, the Fed said it seeks to achieve maximum employment and inflation at a rate of 2% over the long-run.
  • The Fed also said it will aim to achieve inflation moderately above 2% for some time so it averages 2%.
  • The Fed stated that it will maintain Treasury and agency-backed securities purchases at least at the current pace to help foster accommodative financial conditions.
  • Fed members voted 8-2 in favor of the current policy.

Key Points of Powell’s Post-Meeting Press Conference

  • When asked about inflation, Federal Reserve Chairman Jerome Powell said guidance from policymakers shows confidence in its ability to reach its 2% goal.
  • Powell also said one would expect the pace of improvement to be the fastest in the early stages of recovery.
  • When asked about the fiscal policy response, Powell said there’s been a really positive effect but more is likely to be needed.
  • When asked about the possibility of a delayed arrival of a coronavirus vaccine, Powell says we’re learning to live with COVID-19 and engage in economic activity.
  • Finally, Powell admitted that there are still areas of the economy that are going to really struggle until we have a vaccine that is in wide usage.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: FED and BoE Monetary Policy and U.S Jobless Claims in Focus

Economic Calendar:

Thursday, 17th September

Eurozone Core CPI (YoY) (Aug) Final

Eurozone CPI (YoY) (Aug) Final

Eurozone CPI (MoM) (Aug)

Friday, 18th September

German PPI (MoM) (Aug)

The Majors

It was another relatively bullish day for the European majors on Wednesday.

The CAC40 and the EuroStoxx600 rose by 0.13% and by 0.58% respectively to mark a 4th consecutive daily gain.

For the DAX30, a 0.29% rise delivered a 2nd consecutive day in the green, reversing 3 consecutive days in the red.

Economic data was mixed on the day. Trade data from the Eurozone and retail sales figures from the U.S both disappointed on Wednesday.

Upside on the day came as the markets looked ahead to the FOMC policy decision, projections, and press conference.

On the geopolitical front, there was little to shift the market’s mood on Brexit, while EU Commission President Ursula von der Leyen delivered her union address on Wednesday.

The EU Commission President talked of the rising chances of a no-deal Brexit, which was of little surprise. Of surprise, however, was talk of an ambition to build a new transatlantic agenda with the U.S, regardless of the election outcome.

All in all, the comments had a muted impact, with hopes of dovish interest rate projections propping up the majors.

The Stats

It was a quieter day on the Eurozone economic calendar. Key stats included July trade data for the Eurozone

The Eurozone’s trade surplus widened from €20.2bn to €27.9bn in July. Economists had forecast a narrowing to €12.6bn.

According to Eurostat,

  • Exports of goods to the rest of the world slid by 10.4% to €185.2bn compared with July 2019.
  • Imports of goods from the rest of the world tumbled by 14.3% to €157.3bn.
  • Intra-euro area trade fell by 8.6% to €153.7bn when compared with July 2019.
  • Year-to-date, the export of goods to the rest of the world fell by 12.4% to €1,199.6bn compared with January to July 2019.
  • Imports fell by 13.1% to €1,086.6bn delivering a Eurozone trade surplus of €113.0bn.
  • Intra-euro area trade fell by 13.0% to €1,021.8bn, when compared with January to July 2019.

Annual comparison by Member State:

  • In July 2020, compared with July 2019, the export of goods decreased for all member states except Malta (+16.1%), Slovenia (+10.6%), Estonia (+9.4%), and Slovakia (+8.8%).
  • Greece (-23.8%), Finland, (-19.6%), and France (-19.5%) resgisted the largest decreases in exports.

From the U.S

Key stats included August retail sales figures and July business inventory numbers. The stats preceded the FOMC monetary policy and economic and interest rate projections and the FOMC press conference.

In July, business inventories rose by 0.1%, following a 1.1% fall in June. Economists had forecast a 0.1% increase.

In August, retail sales figures fell short of forecasts. Core retail sales rose by 0.7%, following a 1.3% increase in July. Economists had forecast a 0.9% rise. Retail sales increased by 0.6%, following a 0.9% rise in July. Economists had forecast a 1% increase in sales.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. Continental and BMW rose by 0.51% and by 0.66% respectively, with Daimler up by 0.17%. Volkswagen saw red, however, falling by 0.05%.

It was also a bullish day for the banks. Deutsche Bank and Commerzbank rose by 2.16% and by 1.88% respectively.

From the CAC, it was another bearish day for the banks. Credit Agricole fell by 1.05% to lead the way down. BNP Paribas and Soc Gen saw more modest losses of 0.35% and 0.20% respectively.

It was also a mixed day for the French auto sector. Peugeot and Renault ended the day down by 0.94% and by 1.75% respectively.

Air France-KLM fell by a further 0.87%, while Airbus SE rose by 1.89%.

On the VIX Index

A run of 3 consecutive days in the red came to an end for the VIX on Wednesday. Reversing a 1.01% fall from Tuesday, the VIX rose by 1.76% to end the day at 26.04.

The upside on the day came as the U.S equity markets reversed gains in response to FED Chair Powell’s press conference. A more dovish than expected stance weighed on the majors late in the session.

The NASDAQ and S&P500 fell by 1.25% and by 0.46% respectively, while the Dow rose by 0.13%.

VIX 17/09/20 Daily Chart

The Day Ahead

It’s another relatively quiet day ahead on the Eurozone economic calendar. Key stats include finalized August inflation figures for the Eurozone.

Barring material deviation from prelim figures, however, the stats will likely have a muted impact on the majors.

Through the early part of the day, the markets will likely respond to the FOMC economic and interest rate projections and Powell press conference.

Later in the day, the markets will shift attention to the BoE monetary policy decision and economic data from the U.S.

Key stats include the weekly jobless claims and Philly FED Manufacturing Index numbers for September.

While both sets of numbers will influence, any disappointing jobless claims would likely overshadow a pickup in manufacturing sector activity.

Away from the economic calendar, Brexit will continue to be an area of focus along with U.S – China tensions.

The Futures

In the futures markets, at the time of writing, the DAX was down by 1.04 points, with the Dow down by 224 points.

For a look at all of today’s economic events, check out our economic calendar.