Stocks slide on surging Covid-19 cases, stimulus doubts; dollar rises

Marco Green
October 27, 2020

On Monday, the American currency surged across the board as a likely second wave of pandemic outbreak in the United States and Europe had pushed the investors on their toes and helped US Dollar regain its safe-haven appeal. Spain announced a new state of emergency and Italy has ordered restaurants and bars to shut by 6 p.m.

The spreading pandemic, along with no clear progress on a USA stimulus package and caution ahead of the November 3 US presidential election dragged the MSCI world equity index down.

The Stoxx Europe 600 Index erased most of its decline after earlier heading toward its lowest close since June amid concern about the relentless spread of coronavirus.

Asian stocks markets fell on Tuesday as soaring global coronavirus cases and slow progress on a U.S. stimulus deal hammered investor sentiment and took a toll on Wall Street.

The sharp stock market decline set a bleak tone ahead of a busy third-quarter earnings season, with large United States tech firms like Apple Inc, Amazon.com Inc and Google-parent Alphabet Inc set to report.

China's CSI300 Index edged down 0.1%, as investors looked out for any news from a meeting of China's Communist Party leaders to set the next five-year plan.

It has slipped earlier by half a per cent after the German Ifo business climate index fell for the first time in six months in October.

On the vaccine front, hopes rose after AstraZeneca said on Monday its shot developed with the University of Oxford produced an immune response in both young and old adults.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.2%.

The euro EUR=EBS , which has the largest percentage share of the dollar index, fell 0.4% to $1.1811. Markets assume the European Central Bank will sound cautious on inflation and growth even if it skips a further easing.

"We have raised the probability of a Democratic sweep, already our base case, from 40% to just over 50% and have increased our expectation of (Democratic presidential candidate) Biden to win from 65% to 75%", NatWest Markets analysts said. "We see steeper USA yield curves and a weaker Dollars as likely to prevail in our base case".

Italian government bond yields slid across the curve, with short-dated yields falling to a one-year low, after S&P Global's unexpected outlook upgrade.

Benchmark 10-year notes last rose 13/32 in price to yield 0.7977%, from 0.841% late on Friday.

Surging coronavirus cases sent investors to the safety of the dollar after it fell broadly last week.

The Bloomberg Dollar Spot Index was little changed.The British pound dipped 0.1% to $1.3006.The Japanese yen strengthened 0.1% to 104.78 per dollar.The Turkish lira weakened 0.8% to 8.1476 per dollar.

USA oil gained 39 cents, or 1.01%, to $38.95 a barrel.

Oil prices extended last week's losses as the prospect of increased supply and resurgent coronavirus infections anxious investors. Through Oct. 29.Brexit negotiating teams have started intense daily negotiations, and these are likely to continue as both sides push to finalize a deal by the middle of November.Bank of Japan and the European Central Bank have monetary policy decisions Thursday, followed by briefings from Governor Kuroda and President Lagarde.The first reading of USA 3Q GDP Thursday is anticipated to be the strongest on record following a record dive in the prior quarter as many businesses were shuttered by the pandemic.

Meanwhile, sales of new homes fell by 3.5% in September to a seasonally-adjusted annual rate of 959,000 million units.

The strong pace of home sales continued through the summer, driving home prices in many places to record highs.

The median price of a new home sold was $326,800, according to the Commerce Department.

Other reports by Click Lancashire

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