Market movers today
Today’s main market mover is US consumer confidence for October. After the rebound in September as the second coronavirus wave abated, the indicator is expected to stay broadly unchanged as improved employment prospects are weighed down by the uncertainty about further fiscal stimulus.
Other than that the key focus is on the rise in new coronavirus cases both in Europe and the US, with the latter now seeing a third wave and new lockdowns from the authorities.
We are hosting our next US Election Webinar on Friday 30 October 13:00-13:50 CET about the budgetary and economic implications of the US election, where we talk to Marc Goldwein, Senior Vice President and Senior Policy Director for the Committee for a Responsible Federal Budget (CRFB), who will enlighten us both on Trump and Biden’s economic proposals and the process of how the US conducts economic policy, something that can be really difficult to follow when living in the Nordic region.
The 60 second overview
Macro. German businesses have taken notice of the recent surge in COVID-19 cases with the October IFO slightly down after five months of increase. The weakening trend was broad-based and visible both in the current assessment and expectations components. Fresh GDP figures out of South Korea this morning show Asia’s fourth largest economy grew 1.9% in Q3 following a 3.2% decline in Q2, likely making Korea one of the best performing economies in the world this year. Exports have been through the roof, not least semiconductor sales.
Equities. Soaring COVID-19 cases weighed heavily on markets yesterday with S&P500 down 1.9%, the biggest daily loss in more than a month. Optimism about reaching a deal on a stimulus package from Nancy Pelosi, the Democratic speaker of the House of Representatives, even gave some support. The German DAX index tumbled 3.7%. This morning, Asian markets also trade in red with MSCI’s broadest index of Asia-Pacific outside Japan down 0.3% at the time of writing.
FI. During yesterday’s trading session, most European rates stayed in a relatively tight range, albeit with somewhat mixed direction on the sour risk sentiment in global markets. Most EGB spreads to Bunds ended less than 1bp changed, with the exception of Italy that tightened 1.5bp, after being 8bp tighter in the morning on the back of the surprising positive change on Friday. The sentiment changed as US markets opened. Ireland got a small tailwind compared to peers yesterday, amid Brexit negotiations.
FX. The continued deterioration in the European COVID-19 situation has yet to clearly spill over to EUR/USD.
Credit. While CDS indices had a rough day yesterday, with iTraxx Xover and Main widening 11bp and 3bp, respectively, cash bonds were more steady and only widened marginally. According to a Bloomberg article, the credit market is bracing for extremely low recovery values, with the median credit derivative auction value in the US at just 3.5 cents so far in 2020.