November 3, 2020

Election Day: Stock Futures Trade Higher

Election Day: Stock Futures Trade Higher

Election Day 

The U.S. is heading into an election day, and the coronavirus cases are going through the roof. There is no doubt that we are going to see a massive shift in the coronavirus situation in the coming days, which could include reintroducing the restrictive measures. This is because the hospitalization rate is surging sharply. 

Camps for Joe Biden and Donald Trump continue to claim that they are in the lead and one step closer to sealing the victory. The current polls show that the race is really close in crucial states, and overall more than 98 million Americans have already voted. 

Investors will be keeping a close eye on Twitter as it is this particular platform that is more likely to break the news before any of the other major news channels.

If things continue to go according to the normal plan, we should have a clear idea of who will become the next president of the United States by Wednesday morning. 

Markets Today 

U.S. stock futures and European stock futures are trading higher today as investors continue to bag some bargains. There is no doubt that last week’s selloff opened the door wide open for some great deals, and investors are busy sealing those deals this week. The U.S. and European markets enjoyed healthy gains yesterday, and stock futures show no shortage of demand today. 

Currencies 

In terms of currency markets, we are expecting higher volatility for the Euro, as E.U. finance ministers will virtually meet today to discuss the current coronavirus situation.

The ECB supervisory board chairperson will also attend the meeting and will discuss the impact of the current situation on the banks, their liquidity, and how investors see the current risk environment. 

There is no doubt that investors and traders are largely expecting more easing measures from the ECB and the BOE, given the chaos the second coronavirus wave is creating. The local governments will need to step up their efforts to save businesses. 

Any hint about an increase in the asset purchase programme or further loosening of the monetary policy is very much likely to push the Euro currency lower. 

National Lockdown and Businesses 

England will enter another national lockdown on the 5th, and the government is trying to save businesses by bringing some support back, which it had provided earlier. However, the fact is that the same level of support is not available in the same way that it was back in March. 

For instance, mortgage holders who already had their six-month holiday cannot re-use the government loan holiday scheme as they have already utilized it. The government is trying to save the U.K. housing market, but the fact is that with new lockdowns, businesses are likely to be impacted even more, and mortgage holders will not be able to make their payments. Given that there is little to no support for people who have already used the government support programmes, a higher default rate is the base case scenario for us. 

Commodities 

Oil prices continue to trade near a five-month low, and the chances are that this downward trend will continue. We have not seen any coronavirus restrictive measures in the U.S. yet. It is immensely difficult for the U.S. government not to introduce them and control the coronavirus situation.

So, the biggest threat to the oil price is still out there, while supply is still on the rise. It will be no surprise to see the oil price moving all the way near the $30 mark. 

As for the gold price, the precious metal is still trading below the 1900 mark. It seems like the bulls are really struggling to keep the price above this mark.

However, we have two major catalysts this week that are likely to bring higher volatility for the gold price: the Fed meeting and the U.S. non-farm payroll data. Looking at the price action, it becomes clear that there are more odds stacked in favour of a higher gold price.