Things turned distinctly sour across markets on Thursday after France and UK imposed strict new lockdown rules to curb rising virus cases.
There was a late rebound on Wall Street that saw indices end narrowly in the red. That should help setup a more positive start in Europe on Friday after benchmark indices dived over 2%. The dollar gained as a haven while gold held up over $1900 per oz despite the dollar strength. Oil recovered from steep losses after a bigger than expected draw in US inventories (3.8M vs. 2.8M).
Wall Street ends well off lows in wild trading
The US equity benchmarks fell for a third day but by much narrower margins that mid-day losses would have implied. The Dow was down by over 300 points but bounced back to close just 20 points lower. Facebook led tech stocks lower amid fears of increased regulatory scrutiny after the site blocked a New York Post article and as the European Union prepares plans to curb their influence in Europe. Better than expected results from Morgan Stanley helped bank stocks finish mostly higher, partially offsetting losses in tech.
European stocks nosedive after new virus restrictions implemented
The floodgates finally bust open in Europe after days of rising virus cases brought about tighter virus restrictions. The killer blow was the state of emergency in France and tough new measures in London. President Emanuel Macron made the move in France after hospitalisations jumped over 9,100. The British government is under pressure to follow scientific advice for a 2-week circuit breaker national lockdown but has so far resisted, but has raised the capital to the Level 2 tier of restrictions. That means two different families can no longer mix indoors- be that in their home or in a pub or restaurant. There is still no sign of the joint European recovery fund so in the meantime economies stand to take the hit – risking a double dip recession – from the new restrictions.
With COVID-19 more front and centre than ever – quite simply the winners are online and losers offline. Budget Irish airline Ryanair said it would operate at 40% of its typical winter capacity, pulling most airlines lower. Shockingly later in the day – United Airlines boss said he didn’t expect business travel to full comeback until 2024. Business travel is the bread and butter of most big airlines outside of budget travel. United posted a $1.8 billion loss for the third quarter sending shares lower by 3.8%.
Winner: AO World
Shares of AO World – the online seller of kitchen appliances surged 30% after the firm reported a 57% spike in the six months through September. People still need to upgrade the essential appliances they use every day –t he difference being that they couldn’t always get to the physical shop to get it. Sales jumped 54% in the UK while the rose 83% in Germany. The company commented that “We believe we have seen a lasting step change in online penetration.” The Pandemic has shifted old perceptions that some things are unsuited to online delivery – for example heavy items like appliances.
EUR/USD back to 1.16 handle
A worsening economic outlook under the weight of the new virus restrictions – as well as the prospect of more monetary stimulus – weighed on the euro. EUR/USD dropped below 1.17 as investors looked to the dollar for safety. The dollar was in favour as a haven with investors increasingly realising the door is shutting on a pre-election stimulus deal. Gains in the dollar accelerated after data showed a rise in weekly jobless claims – symbolising a slowing of the labour market recovery.
European Council meeting continues
Eurozone CPI (Sep)
US Retail Sales (Sep)
US industrial production (Sep)
Bank of NY Mellon Q3 earnings