Will the US election, and what that means for covid-19 stimulus, be in the driving seat this week?
US
The US markets are entering a bit of a tricky period in the latter half of October – close to the election, but with enough else going on that it’s unclear how much attention is being paid to the actual outcome of the vote.
Last week was dominated early on by Trump’s covid-19 diagnosis, but less what it meant for the election, and more for its impact on a new stimulus package. His return to the White House appeared to remove an obstacle to a deal getting gone, only for Trump himself to emerge as a blockage, halting negotiations in their tracks.
After a major wobble investors were reassured by the President’s claims he would pass a package immediately if he won the election, while signalling a willingness to bail out US airlines, giving the go ahead for Nancy Pelosi and Steven Mnuchin to continue their talks.
Any further progress on a package, be it just for airlines or otherwise – and Pelosi has signalled an unwillingness to support an airlines-only deal without wider stimulus – will likely remain the focus for investors as the week goes on.
In terms of the election, after a chaotic week – which sees the debate schedule up in the air after the President rejected a virtual tete-a-tete on Thursday – Spreadex is offering Biden odds on at 40/85, with Trump at 7/4. Biden’s then also at an Electoral College Votes spread of 320-328, well ahead of the incumbent at 210-218, with the Democrat at a Total States Won spread of 25.5-27 to Trump’s 24-25.5.
These prices could continue to change dependent on if Trump pushes ahead with rallies in key states, what the lay of the land is regarding the debates, and the results of Joe Biden’s town hall address on Thursday, set to be shown on ABC News instead of the postponed debate.
As for the economic calendar, after Columbus Day on Monday, there’s inflation on Tuesday, PPI on Wednesday, jobless claims and Philly Fed and Empire State manufacturing indices on Thursday, and retail sales, consumer sentiment and industrial production readings on Friday.
The third quarter earnings season also gets underway, with JP Morgan (NYSE:JPM), Citigroup (NYSE:C), Johnson & Johnson (NYSE:JNJ) and Procter & Gamble (NYSE:PG) on Tuesday; Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) on Wednesday; and PayPal (NASDAQ:PYPL) and Morgan Stanley (NYSE:MS) on Thursday.
UK
The big focus for the UK this week is the October 15th Brexit deal ‘deadline’ – the point at which Boris Johnson has said, if an agreement isn’t reached, both sides should ‘accept that and move on’. The pound and FTSE could feel a bit anxious ahead of that date, unless there are serious signs that either a deal is imminent, or that the ‘deadline’ will be extended.
Before that, there’s the jobs report on Tuesday, and the Bank of England credit conditions survey on Thursday.
Eurozone
Also keeping an eye on Brexit negotiations, the Eurozone sees German inflation and ZEW economic sentiment readings on Tuesday, industrial production on Wednesday, French inflation on Thursday and the region-wide inflation and trade balance numbers on Friday.
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