October 6, 2020

Stock Futures Steady | Oil Prices Up

Stock Futures Steady | Oil Prices Up

European futures are trading higher as traders are cheering the better than expected German economic data. Once again, it is clear that the economic recovery is on track for the Eurozone’s biggest economy, Germany. The German factory order number was highly encouraging as it came in at 4.5%, while the forecast was for 2.8%. Clearly, the ECB’s aid package is supporting the recovery in Germany.

Optimistic View

The U.S. futures are also maintaining their gains for another day as President Trump returns to the White House. The biggest job for the White House is to limit the president’s exposure to other staff as several people have been tested positive at the White House including Trump’s press secretary. Trump’s doctor has warned about taking precautions as he said that it is true that the president is leaving the hospital, but he is not out of the woods yet.

Nonetheless, the market participants are feeling a lot more comfortable with the fact that the president is healthy and back at the White House. More importantly, the U.S presidential elections are back on track. Trump has confirmed that he will participate in the October 15th debate with the former vice president, Joe Biden. Biden has also said that he is willing to debate Trump if doctors approve it.

Tech Reforms?

While the Dow Jones and the S&P 500 futures are trading higher, we do not see the same momentum for the Nasdaq Composite index as traders worry that a U.S. House panel may propose a sweeping reform plan for the U.S. tech sector. Having said that, the Nasdaq index had the strongest close yesterday between the Dow and S&P 500. But if the U.S. policymakers do propose new laws and restrictions for the U.S. tech sector, we may likely see the entire tech sector coming under pressure today. If the U.S. tech sector begins to sell-off, it will probably bring the whole of the stock market down.

Spain Extends Furlough

In terms of coronavirus fiscal support, Spain is expected to extend the furlough scheme beyond this year. It is widely unclear when the coronavirus vaccine will be available; especially as we all know that the distribution of the potential vaccine will face enormous challenges. The country is determined to support the labor market, and it will continue to do whatever it takes to provide as much backing as possible. 

Quarterly Earnings

Investors are also likely to position themselves for the upcoming quarter earnings. One particular sector that is likely to see more positive news could be the banking sector, as the worst could be behind us. Having said that, there is still a mammoth risk concerning loan defaults, but again, most of the banks have already set aside a substantial amount for such losses. Both large-cap and small-cap banks could see greater volatility next week, when the financial sector reports its earnings. 

Energy

As for the energy prices, Crude and Brent prices scored more than 6% yesterday, and today, traders are building upon these gains. The Brent price is back above $41; however, the crude oil price is still trading below $40. What we need, is to see the crude oil not only breaking the $40 price level but also firmly staying above this level.