October 29, 2020

U.S. Elections, National Lockdown, Tech Earnings

U.S. Elections, National Lockdown, Tech Earnings

The U.S. and European futures are taking a breather today after suffering a massive sell-off this week. The Dow Jones dropped over 900 points yesterday, the largest one-day drop since mid-June.

Traders have become highly sensitive to coronavirus related news as the daily new cases are getting out of control, and new restrictive measures are introduced. 

For now, we have not seen any significant shift in the U.S. in terms of new coronavirus measures, but in Europe, all guns are blazing.

Germany has introduced a four-week partial lockdown while France has gone back into new nationwide restrictions, which are going to last until December 1.

The fear is that this particular lockdown is going to hurt the economy even more. The European economy is already in a fragile state, and another blow is going to draw more blood. 

ECB Day 

All eyes will be on the European Central Bank’s monetary policy today. Investors would like to hear unwavering support from the ECB today in terms of their monetary policy, and this means an increase in their asset purchase programme as the interest rates are already in negative territory. There is a possibility that we may hear of an increase in the asset purchase programme by the ECB today, given what the Eurozone economy is facing. 

Speculators are mostly positioned for the Euro to show more weakness today. 

Stimulus 

Traders have finally given up on the second stimulus package becoming a reality before the U.S. elections as the U.S. Senate has gone on recess until November 14. However, investors do know that they will see another stimulus package, as the U.S. economy is in desperate need of further support.

The delay we are seeing could mean that we may actually see a bigger stimulus package. But this depends on the smooth transition of power of leaders.

For instance, if Donald Trump wins the U.S. election, there is no doubt that we will see a massive stimulus package very soon; however if Donald Trump loses the U.S. election, he is likely to make the power transition process as difficult as possible, by potentially contesting it. 

U.S. Elections 

Joe Biden is still in the lead in terms of national polls. There is a significant difference between Donald Trump and Joe Biden in Michigan and Wisconsin. According to the CNN poll, Biden is up 54%, while Donald Trump is up 4%. As we discussed yesterday, polls are highly misleading and paying attention to them, and trading on the back of these numbers may not be the best strategy. 

Tech Earnings 

Today we are also going to see earnings from big tech. Apple, Google, Amazon, and Facebook are going to announce their earnings.

When it comes to social media platforms, it is all about digital ad revenue. Investors would like to see improvement in impression when it comes to companies like Facebook and Twitter as the advertising revenue is pretty much linked to this particular matrix.

There are also higher expectations of a rebound in Google’s advertisement revenue. As for Apple, investors are very much focused on the guidance, and Apple’s iPhone 12 should have a positive impact. 

Commodities 

Crude oil is trading near their four week low, as investors are concerned about the surge in coronavirus and its influence on oil demand. Yesterday, we saw an increase in inventory data, which was very much expected in the market, given the circumstances. Traders are hoping that OPEC will keep its supply under control. The only way of executing that is to extend the current supply agreement.