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Global stocks trim losses amid COVID uptick and US stimulus delays

27 Oct 2020 11:33 AM

Global stocks and futures witnessed some fluctuations on the beginning of trading on Tuesday.

Chief drivers of market sentiment include questions on how consolidated the global economic recovery is as Europe and North America face a second wave of Covid-19, the seemingly never-ending talks on a stimulus package in the US, and a weak US dollar.

The S&P 500 yesterday witnessed its biggest loss in more than five weeks. Dow Jones futures meanwhile plunged to their lowest levels since the beginning of October - around 27,260 - before recovering this morning and settling just above 27,500 at the time of writing. Asian stocks have also trimmed their losses today.

Hopes of a stimulus deal in the US ahead of the November 3rd presidential election are fading fast, despite House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin spending almost an hour on the phone yesterday.

This week, the markets are seeking visibility on what they can expect as the Northern Hemisphere heads a potentially grueling winter.

The Brexit trade talks between the UK and EU are a key variable: an agreement is possible by the middle of next month ahead of the end of transition period on December 31st, but negotiations involving the EU have a habit of going down to the wire. Forthcoming rate decisions by the ECB, Bank of Japan and Bank of Canada should also yield clues about their internal modelling.

Attention will also turn to the advance US GDP reading, expected to show growth of 32% in Q3 after a record drop of -31.4% in the previous quarter.

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