Investors Hub World Daily Markets Bulletin Thursday 24 September 2020

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Worries About Economy, Elections May Weigh on Wall Street

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US Market

The major U.S. index futures are pointing to a lower open on Thursday, with stocks likely to extend the sell-off seen over the course of the previous session.

Lingering concerns about the global economic outlook may weigh on the markets as Europe grapples with a second wave of coronavirus infections.

Recent data has suggested the economic recovery in the U.S. may be plateauing, leading to calls by officials such as Federal Reserve Chair Jerome Powell for more fiscal stimulus.

However, with the elections looming, lawmakers are expected to continue to have difficulty reaching an agreement on a new coronavirus relief bill.

Worries about the aftermath of the presidential elections may also generate some selling pressure after President Donald Trump refused to commit to a peaceful transition of power if he losses to Democratic nominee Joe Biden.

“Well, we’ll have to see what happens. You know that,” Trump said at a news conference on Wednesday. “I’ve been complaining very strongly about the ballots. And the ballots are a disaster.”

Trump has repeatedly argued that a jump in mail-in ballots due to the coronavirus pandemic will lead to massive voter fraud.

The president predicted the race would ultimately be decided by the Supreme Court and suggested that is why he is pushing to replace late Justice Ruth Bader Ginsburg before the election.

The futures saw further downside following the release of a report from the Labor Department showing an unexpected uptick in first-time claims for U.S. unemployment benefits in the week ended September 19th.

Stocks moved sharply lower over the course of the trading day on Wednesday, more than offsetting the strength seen on Tuesday. With the drop on the day, the major averages ended the session at their lowest closing levels in well over a month.

The major averages saw further downside going into the close, finishing the day just off their worst levels. The Dow tumbled 525.05 points or 1.9 percent to 26,763.13, the Nasdaq plummeted 330.65 points or 3 percent to 10,632.99 and the S&P 500 plunged 78.65 points or 2.4 percent to 3,236.92.

The sell-off on Wall Street came amid renewed weakness among technology stocks, as reflected by the particularly steep drop by the tech-heavy Nasdaq.

Big-name tech companies like Netflix (NFLX), Apple (AAPL), Amazon (AMZN) and Alphabet (GOOGL) all showed significant moves to the downside.

Concerns about surging coronavirus cases in certain parts of the world may also have weighed on the markets even as President Donald Trump indicated the U.S. would not follow the U.K.’s lead and implement a second round of lockdowns.

“The U.K. just shut down again. They just announced that they’re going to do a shutdown, and we’re not going to be doing that,” Trump told Fox 2 Detroit on Tuesday. “We understand the disease, we understand how to handle it.”

In other coronavirus-related news, Johnson & Johnson (JNJ) announced it has begun a phase 3 trial of its coronavirus vaccine candidate.

Meanwhile, Fed Chair Powell, continuing to testify before Congress for the second day, said the U.S. Congress and the Federal Reserve both need to “stay with it” in working to bolster the economic recovery.

Despite progress in rebounding from the coronavirus economic downturn, “there is a long way to go,” with millions still jobless compared to where the economy was in February, he said.

“We need to stay with it … The recovery will go faster if there is support coming both from Congress and the Fed,” Powell said.

Gold stocks moved sharply lower on the day, dragging the NYSE Arca Gold Bugs Index down by 6.3 percent to its lowest closing level in over two months. The sell-off by gold stocks came amid a steep drop by the price of the precious metal.

Substantial weakness was also visible among energy stocks, which came under pressure despite a modest increase by the price of crude oil.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 6.3 percent and the NYSE Arca Oil Index tumbled by 4.5 percent.

Housing stocks also showed a significant move to the downside on the day, resulting in a 4 percent slump by the Philadelphia Housing Sector Index.

Networking, software, retail and commercial real estate stocks also saw considerable weakness, moving sharply lower along with most of the other major sectors.

 

U.S. Economic Reports

In a sign of continued weakness in the labor market, the Labor Department released a report on Thursday showing an unexpected uptick in first-time claims for U.S. unemployment benefits in the week ended September 19th.

The report said initial jobless claims inched up to 870,000, an increase of 4,000 from the previous week’s revised level of 866,000.

The modest increase surprised economists, who had expected jobless claims to drop to 843,000 from the 860,000 originally reported for the previous week.

At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of August. New home sales are expected to decrease by 1.0 percent in August after spiking by 13.9 percent in July.

Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin are also due to testify before the Senate Banking Committee at 10 am ET.

At 12 pm ET, St. Louis Federal Reserve President James Bullard is scheduled to speak at a Global Interdependence Center virtual event.

The Treasury Department is due to announce the results of its auction of $50 billion worth of seven-year notes at 1 pm ET.

Also at 1 pm ET, Richmond Fed President Thomas Barkin is scheduled to speak to the Money Marketeers of New York University and Chicago Fed President Charles Evans is due to at the annual meeting of the Illinois Chamber of Commerce.

Barkin, Atlanta Fed President Raphael Bostic and New York Fed President John Williams are also scheduled to speak at separate virtual events at 2 pm ET.

 

Stocks in Focus

Shares of E.W. Scripps (SSP) are soaring in pre-market trading after the broadcasting company announced it will buy national broadcast network ION Media for $2.65 billion.

Software company BlackBerry (BB) is also seeing significant pre-market strength after reporting better than expected fiscal second quarter results.

Shares of Jefferies (JEF) are also likely to move to the upside after the investment firm reported fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Accenture (ACN) may come under pressure after the consulting firm reported fiscal fourth quarter results that missed analyst estimates and provided disappointing guidance.

 

Europe

European stocks have moved lower on Thursday, lingering near three-month lows as weak data and rising Covid-19 infections in Europe coupled with uncertainties surrounding the U.S. presidential elections and the U.S. stimulus package spooked investors.

Speculation is rife that the U.S. Congress will not agree on extra fiscal stimulus to counter the ongoing Covid-19 crisis in the run up to the November election.

In economic news, survey data from ifo Institute showed that German business confidence improved further in September. The business confidence index rose to 93.4 in September from 92.5 in August – coming in slightly below economists’ forecast of 93.8.

Earlier today, Switzerland’s central bank maintained its expansionary monetary policy stance to cushion the impact of the coronavirus pandemic on economic activity and inflation. Norway’s central bank kept its key interest rate unchanged at zero, as widely expected.

While the U.K.’s FTSE 100 Index has slid by 0.9 percent, the French CAC 40 Index is down by 0.6 percent and the German DAX Index is down by 0.4 percent.

Online payments company Adyen has fallen. The company said that one of its two co-founders, Arnout Schuijff, would step down from its management board as of Janury 1.

British engine maker Rolls-Royce and GKN owner Melrose Industries have also come under pressure on concerns about the long-term impact of Covid-19 on the airline industry.

Smiths Group has moved sharply lower after the diversified engineering business reported a 26 percent fall in annual operating profit.

Cineworld Group shares have also plunged. The multiplex giant warned of further challenges ahead after reporting bleak interim results for the six month period ended 30 June 2020.

On the other hand, specialty pharmaceutical company Indivior has jumped after announcing it is taking organizational and cost actions.

 

Asia

Asian stocks ended lower on Thursday as Europe grapples with a second wave of coronavirus infections and data showed business activity in the United States and Europe cooled in September due to new restrictions to quell the virus.

A series of warnings from U.S. Federal Reserve officials also underscored investor worries over the resilience of the economic recovery.

The U.S. economy is recovering very robustly, but we’re still in a deep hole, said Fed Vice Chairman Richard Clarida in an interview on Wednesday.

Federal Reserve Bank of Cleveland President Loretta Mester said the recovery remains narrow and isn’t sustainable.

Federal Reserve Chair Jerome Powell noted that despite progress in rebounding from the coronavirus economic downturn, “there is a long way to go.”

Chinese shares followed Wall Street lower on economic recovery concerns. The benchmark Shanghai Composite Index tumbled 56.53 points, or 1.7 percent, to 3,223.18, while Hong Kong’s Hang Seng Index plunged 431.44 points, or 1.8 percent, to 23,311.07.

Japanese shares fell sharply after data showed the speed of recovery in U.S. business activity slowed in September. Rising Covid-19 infections in Europe coupled with uncertainties surrounding the U.S. presidential elections and the U.S. stimulus package also spooked investors.

The Nikkei 225 Index slumped 258.67 points, or 1.1 percent, to 23,087.82, while the broader Topix closed 1.1 percent lower at 1,626.44.

Steelmakers JFE Holdings and Kobe Steel fell 6.1 percent and 4.3 percent, respectively. Automakers Honda Motor, Nissan Motor and Toyota Motor gave up 2-4 percent.

Sumitomo Mitsui Trust Holdings tumbled 3 percent after reports that it failed to count some postal votes for about 1,000 companies ahead of annual general meetings.

Australian stocks fell notably as fresh coronavirus-induced curbs globally dented hopes of a swift economic recovery.

The benchmark S&P/ASX 200 Index dropped 48 points, or 0.8 percent, to 5,875.90 after climbing 2.4 percent in the previous session. The broader All Ordinaries Index ended down 54.80 points, or 0.9 percent, at 6,056.50.

Mining heavyweights BHP and Rio Tinto slipped 0.7 percent and 0.3 percent, respectively. Gold miners Northern Star Resources, Evolution Mining and Newcrest lost 3-5 percent as bullion prices extended losses into a fourth session to hit a more-than-two-month low.

Buy-now-pay-later firm Afterpay slumped 5.8 percent after announcing changes to its executive team. Appen and WiseTech Global fell around 2 percent after U.S. technology stocks suffered massive losses overnight.

Westpac Banking Corp ended little changed with a negative bias after it agreed to pay a A$1.3 billion ($920 million) fine for breaches of money-laundering and counter-terrorism laws. Energy stocks Woodside Petroleum and Santos declined around 2 percent.

Seoul stocks plunged to hit a more than one-month low as hopes of a quick economic recovery faded and tensions on the Korean Peninsula resurfaced. The benchmark Kospi plummeted 60.54 points, or 2.6 percent, to 2,272.70.

Market bellwether Samsung Electronics gave up 1.4 percent, chemical maker LG Chem declined 3 percent, steelmaker POSCO slid 3.6 percent and pharmaceutical firm Samsung Biologics shed 4.5 percent.

 

Commodities

Crude oil futures are slipping $0.34 to $39.59 a barrel after inching up $0.13 to $39.93 a barrel on Wednesday. Meanwhile, after plunging $39.20 to $1,868.40 an ounce in the previous session, gold futures are falling $11.80 to $1,856.60 an ounce.

On the currency front, the U.S. dollar is unchanged versus the 105.39 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1635 compared to yesterday’s $1.1660.

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