October 26, 2020

Stock Futures Retreat, Earnings And Coronavirus In Focus

Stock Futures Retreat, Earnings And Coronavirus In Focus

European futures are starting the week on the back foot, as investors are concerned about the rise in Europe’s coronavirus cases. Spain has announced a national curfew, and Italy has introduced the most restrictive Covid-19 measures to control the virus. The coronavirus situation has become a lot worse in the U.S. as well, as the country recorded two consecutive days of record infections. 

It is not all doom and gloom among investors though because AstraZeneca has resumed its Covid-19 vaccine trial, which is currently in Phase-3. Johnson & Johnson is also expected to resume its trial today or tomorrow, and the company believes that its vaccine may be ready for emergency use as soon as January.

Investors in the U.S. are also somewhat sceptical about the second stimulus package as the blame game continues among politicians. The White House believes that a deal is possible this week however traders know that having an agreement before the U.S. presidential election is unlikely.  

Earnings 

In terms of earnings seasons, this week, we are expecting to hear from big oil companies. Investors do not hold any expectations, as it is widely expected that the common theme among the oil companies is likely to be a dividend cut.

It is likely that we may see more losses among three major companies, BP, Exxon, and Shell. B.P. will kick off the earnings for the energy companies tomorrow. On Thursday, we will see the earnings from Chevron and Exxon, and Total will announce their earnings on Friday.  

The big tech earnings will also start this week, and we will hear the results from Facebook, Amazon, Twitter, and Google’s Alphabet

Week Ahead 

As for the week ahead, it is likely that we may see higher volatility in the Forex market, and a number of central banks are set to announce their monetary policies.

We are expected to hear from the ECB, BOJ, and BOC. These central banks will assess the economic conditions and announce their rate decision. The expectations are for no change in their rate decision; however, we are expecting to hear a more cautious tone among these central banks, and that is due to the recent surge in the coronavirus situation. In addition to this, we will also get to see the U.S. third-quarter GDP reading for the first time, and this is highly likely to influence the dollar index

Commodities 

As for the commodity market, we see more pressure for the oil prices, as investors believe that the path of least resistance is likely to be skewed to the downside, as coronavirus cases continue to increase.

In addition to this, it is likely that the oil demand and supply may go out of whack as Libya is set to surpass its oil production of over one million barrels per day.

The fear is that we may see more indiscipline among other oil producers, and this could result in higher oil prices

Brexit 

As for Brexit, the trade talks are still going on between the U.K. and the E.U., and investors are hoping for a breakthrough this week. E.U. Chief Negotiator Michel Barnier has extended his stay in London as the negotiation discussions continue, while the new deadline for negotiations is extended to October 28. The fact that Barnier is still in the U.K. has given hopes for an agreement on a trade deal between the U.K. and the E.U. This is supporting the Sterling price.