AWAITING A DOSE OF STIMULUS AND A VACCINE SHOT
Last week the news centred on the resurgence of Covid-19 cases, very often concerning countries that had previously brought the pandemic under control. Core equity markets remain turbulent places as the number of cases soars, raising the prospect of mini-lockdowns in various parts of the world – along the lines of the daily curfew instigated in nine French cities, starting at 9pm. In contrast, the number of hospitalisations and fatalities still lies below the figures seen in the first wave as the virus infects younger, more resilient subjects. At this time of the year, earnings reports usually stoke volatility in equity markets, but this will be higher this year as the presidential election approaches, with Democrats and Republicans in addition failing to find common ground on fiscal support measures and how much to spend. Last week, the results reported by US banking majors outstripped analysts’ estimates on the back of higher trading revenues and stringent cost management.
An agreement on the fiscal stimulus package this week could act as a catalyst for markets, while Pfizer hopes to secure marketing approval for its vaccine next month. Judging by the broad Russel 2000, which has outperformed the S&P500 in recent weeks, investors are expecting a victory for Joe Biden, who is then likely to launch a generous spending package for small- and medium-sized companies. Roughly two weeks before the election, the Democratic candidate has reportedly cornered 66% of voting intentions according to online bets. The debate between Donald Trump and Joe Biden this Thursday is eagerly awaited.
On the economic front, retail sales in the US rose by 1.9% month on month in September, twice as fast as expected. The economy is perking up more quickly than projected, despite a renewed uptrend in initial jobless claims, which last week reached 898,000 versus the 825,000 forecast.
The Chinese economy was the first to be hit by Covid-19, and Beijing’s measures to limit the contamination and get growth back on track have now paid off. GDP picked up pace in the third quarter, accelerating to 4.9% like for like. This was slightly short of the 5.2% expected. Strong retail sales, up 3.3% in September, and brisk growth in industrial production, up 6.9%, both point in the direction of a continued recovery. The Chinese stock market, having amazingly performed on a par with US growth stocks year to date (CSI 300 +16%), is set to continue climbing.
At this particularly worrying time for Europe and its pandemic, it remains to be seen if the ECB is ready to take further measures.
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