This morning, oil prices fell more than 2% and Asian stocks are mostly down. Rising coronavirus cases around the world and new government restrictions, as well as growing doubts that a U.S. fiscal stimulus package could be passed ahead of next week’s elections, weigh on markets.
The United States has announced its highest number of new Covid-19 cases in the past two days and Spain has declared a state of emergency. The virus has infected more than 42 million people worldwide and resulted in 1.1 million deaths. You can read more on our live coronavirus blog here:Brent, the world benchmark, lost nearly a dollar, or 2.27%, to $ 40.82 per barrel while US light crude fell 2.43% to $ 38.88 per barrel.
David Madden, Market Analyst at CMC Markets UK, explains:
Oil is under pressure amid fears Libya’s supply will increase as rival factions have called for a ceasefire and this should pave the way for increased production. Concerns over the increase in coronavirus cases in Europe and the United States have raised concerns over demand.
Nearly half of UK small businesses (48%) fear the impact of the second wave of coronavirus, far more than they fear the impact of Brexit (24%), according to a study by business finance provider Nucleus Commercial Finance released today.
Small and medium-sized businesses are also worried about how their business will survive the reduction in consumer spending due to lack of financial confidence (28%) and their ability to recover from the impact of the coronavirus (25% ). In contrast, nearly a fifth (18%) of SMEs said they were not afraid of anything.
Companies have adapted by moving their teams to remote work (27%), offering their products and services online (19%), and an additional 13% have started offering new products and services.
One more week to participate in the American presidential race. Markets moved to gauge the possibility of a Democratic president and Senate, which would likely mean more government spending and borrowing. This pushed yields on 10-year US Treasuries to their highest levels since early June.
NatWest Markets analysts said:
We’ve increased the likelihood of a Democratic sweep, already our baseline scenario, from 40% to just over 50%, and increased our expectation of Biden to win from 65% to 75%. We believe steeper US yield curves and a weaker US dollar should prevail in our baseline scenario.
Democrats face a daunting challenge to regain control of the Senate. They are against the 53-47 majority of Republicans. With 35 seats for re-election, it will likely shrink to seven key races.
In Beijing, the central committee of the ruling Communist Party in China headed by President Xi Jinping is meeting this week to develop an economic plan for the next five years. Markets are wondering if Chinese leaders will be more flexible in terms of growth targets, after dropping this year’s target due to the pandemic.
The economic calendar is light today, with the German business confidence survey from Munich’s Ifo economic research institute the main event.
Later in the week, the Bank of Canada, the Bank of Japan and the European Central Bank hold their monthly meetings. Markets aren’t expecting much action this week, but the ECB could pave the way for more stimulus in December.
9am GMT: Confidence of Ifo companies in Germany for October (forecast: 93; previous: 93.4)
2 p.m. GMT: US new home sales for September (forecast: 2.8% per month)