October 13, 2020

Stock Futures Trade Lower, Earning In Focus

Stock Futures Trade Lower, Earning In Focus

European and U.S. futures are trading lower as investors have become a little cautious ahead of the U.S. earnings season, which kicks off today. In addition to this, traders are also disheartened as J&J have stopped the potential coronavirus vaccine trial due to an unknown illness of one of the trial participants. 

Investors are also not too hopeful for another stimulus aid package from the U.S. this week as it seems quite clear that House members are in no mood to have any sort of resolution this week. In addition to this, Senate Republicans have also failed to warm up to the President’s stimulus proposal. Traders know that this is a bumpy road, but there were hopes that perhaps we may finally see politicians coming to their senses and finally forming a deal. 

In the presence of all these hurdles, it is difficult for investors not to book any profit off the table. But in the tech sector, things are a little different, as investors are betting on more positive outcomes, such as Amazon’s Prime Day bonanza and Apple announcing its new iPhone. Stocks like Twitter, Facebook, Amazon, and Apple helped the Nasdaq index yesterday score its best day since April this year. 

Earnings Season 

The U.S. stock earnings season begins today, and it is your U.S. banks that are likely to remain in focus among investors. JP Morgan, Citigroup, and BlackRock are expected to announce their earnings today. 

Coronavirus update 

The global coronavirus cases number rose to 37.7 million, and the virus has claimed nearly 1.078 million lives. The U.S. is still holding on to the top spot related to coronavirus cases as there are over 7.8 million people infected by this virus. The U.K falls into the fifth position as the worst country hit by the virus. 

Yesterday, Prime Minister, Boris Johnson, announced new restrictive measures to quell the infection rate. The prime minister introduced a three-tier system yesterday. Bars are shut in hot spot areas in the U.K. However, speculators continue to question if this is enough to stop the infection rate from surging. 

Do Not Expect Negative Rates 

The Bank of England is in no rush to introduce negative rates yet, and this is despite the fact that Boris Johnson has not been able to forge any Brexit deal. The hope was that the prime minister would be able to break the deadlock in Brexit negotiations before E.U’s summit, which is taking place on Thursday. The bank said that when it asked the U.K. banks if they were ready for negative rates, it was nothing more than a mere inquiry. The bank’s Governor, Andrew Bailey, said that such an inquiry doesn’t mean a policy move. 

The Sterling has moved higher as traders now know that the bank isn’t going to push the interest rates into negative territory. As long as the Sterling-Dollar pair continues to defend the 1.30 mark, the possibilities are that we may see higher moves for the pair. 

No Recovery Until 2023

Oil prices had the worst drop yesterday in nearly a week. Having said that we are seeing some rebound in Oil prices, but the crude prices are trading below the critical level of $40. The IEA took the sting out of the Oil rally with their comments yesterday. The agency doesn’t expect any recovery until 2023, and that is under the assumption that Covid-19 comes under full control.