Pre-release stocks: markets can no longer ignore the pandemic

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What’s happening: US futures are showing sharp declines to open Wednesday, with Dow futures at 1.7%, or over 450 points. European stocks plunged to their lowest level in five months. The German DAX fell 2.8%, while the French CAC 40 lost 2.5% and the London FTSE 100 lost 1.5%.

“Financial markets continue to be concerned about the increasing number of cases and the pandemic,” said Paul Donovan, chief economist at UBS Global Wealth Management. “The concern is about the impact this can have on fear levels – whether among consumers or among policy makers. ”

Right now, Donovan said, policymakers seem more worried than the general public. This may mean that in the United States, where restrictions have been tighter, the economic damage will be less severe – one of the reasons why US stocks have not sold as strongly as those across the Atlantic.

In the news: French President Emmanuel Macron to announce new measures to fight the coronavirus on Wednesday, while German Chancellor Angela Merkel is expected to discuss new measures to contain the virus during a meeting with the leaders of the country’s 16 states .

Analysts are quick to see that the situation is very different from what it was almost eight months ago, when the markets entered a free fall.“Unlike March, we… know a lot about what Covid-19 means for the plumbing market,” Jordan Rochester, currency analyst at Nomura, told clients on Wednesday.

He noted that the Federal Reserve has put in place the framework to ensure easy access to US dollars, and that bond purchases “are progressing and can be accelerated at the whim of central bankers.”

He has one point: The European Central Bank, which is due to announce its latest policy decision on Thursday, is expected to indicate it will adopt further measures before the end of the year, although details remain unclear.

“We expect the Governing Council to signal a growing urgency to act – noting that it is ready to provide further easing if the recovery slows enough,” Goldman Sachs economists said in a recent research note.

But any indication that policymakers feel they have provided enough support “would seriously change the dynamics of risk sentiment,” Rochester warned.

Microsoft continues to enjoy life at home

Months after the start of the Covid-19 crisis, Microsoft’s business is still booming as people spend more time at home.

The latest: The company reported more than $ 37 billion in revenue for the three months ending in September on Tuesday, well above Wall Street forecasts, my CNN Business colleagues Shannon Liao and Clare Duffy report.

Revenue from Azure, its cloud computing division, jumped 48% year-over-year. Personal computing revenue grew 6% thanks to increased Xbox and Microsoft Surface sales.

Microsoft (MSFT) CEO Satya Nadella said the company has benefited from accelerated adoption of digital capabilities such as cloud computing and Teams, its workplace collaboration offering.

Teams now has more than 115 million daily active users, up from 75 million in April.

“The next decade of economic performance for every business will be defined by the speed of their digital transformation,” Nadella said on a call with analysts.

The results bode well for other tech companies including Amazone (AMZN), Facebook (FB) and parent Google Alphabet (GOOGL), which are due to publish their results on Thursday. Like Microsoft, they have been spurred on by behavioral changes, which have increased the demand for online services.

Investor Outlook: The big question now is whether Microsoft can continue to meet its ambitious growth goals without burning a lot of money. The shares are down 1.5% in pre-market trading.

“As revenues explode, we note that developing cloud services is getting more and more expensive,” Bespoke Investment Group said in a note to clients.

Not just Tesla: shares of these American automakers are on the rise

The rally in Tesla (TSLA) shares – which have risen more than 150% since the start of June – shame most other stock increases.

More GM (GM), Ford (F) and Fiat Chrysler (FCAU) work well too. All have jumped more than 30% over the same period, reports my CNN Business colleague Chris Isidore. There is nothing to sneeze at.

What’s happening: Earlier this year, when auto factories and many dealerships were shut down with Covid-related shutdown orders, there was great uncertainty about how automakers would weather the storm. But auto sales rebounded strongly in the third quarter, as concerns about using public transit to get to work helped generate demand.

Investors are also hoping that traditional automakers will benefit from a growing interest in electric vehicles, which are cheaper to build and could improve their profit margins. GM – which recently announced a $ 2 billion investment to build electric cars in Tennessee – is leading the pack, analysts say.

Watch this space: America’s Big Three automakers all lost money in the second quarter. But a return to profitability is expected when these companies release third quarter results. Ford and Fiat Chrysler report Wednesday, while GM reports next week.

following

Boeing (BA), Your brands (OF), GIVE (GIVE), MasterCard (MA), Fiat Chrysler (FCAU) and UPS (UPS) publish the results before the US markets open. Etsy (ETSY), Ford (F), Gilead Sciences (BROWN), Pinterest (ÉPINGLES) and Visa (V) follow after the close.

Coming tomorrow: The first look at U.S. GDP for the third quarter should reveal an economy growing at record speed.

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