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US bank stocks getting clobbered

The British pound rallied (GBP>1.30) after the UK signalled it would not walk away from trade talks after today's EU Summit.

Big US banks have seen shares turn lower after earnings results. The prospect of future loan losses and low interest rates are keeping the sector out-of-favour with investors.

MARKETS
Stocks ticked lower for a second day, led lower by bank stocks following poorly-received quarterly results and as hopes for a pre-election stimulus deal continue to fade.

Mnuchin dampens stimulus hopes, small caps suffer
Nothing dramatic is happening but markets are pricing out the chance of pre-election stimulus, reconciling it with the idea that post-election stimulus will be bigger. In the short term that has meant lower stocks and a stronger dollar but also a return of the underperformance of small cap stocks versus mega cap tech.

Treasury Secretary Steve Mnuchin and House Speaker Nancy Pelosi have been doing a lot of talking but it doesn’t seem to be bridging the different views of the two parties.

Talks continue Thursday so hopes are being kept alive but Mnuchin said “getting something done before the election and executing on that would be difficult.” Realistically a deal seems unlikely before the election. Democrats don’t want President Trump getting credit for more stimulus and Republican Senators don’t want to be seen to sign off on massive government spending which is antithetical to what they are voted in for by conservative voters.

European open / virus surge
European stocks look set for a lower open on Thursday. That's after they edged lower on Wednesday. A burst of new restrictions on movement across Europe to contain the record 100,000 coronavirus cases per day will crimp the economy and investor optimism has come unstuck. Germany has taken some of the softest approaches to the rising cases yet the ZEW survey showed investors confidence collapse in October, though the September market correction will explain some of that. Yesterday Europe overtook the US in new COVID-19 cases. That has all but put to bed the idea that European assets might outperform owing to a better virus outlook.

European Summit (Brexit deadline)
UK Prime Minister Boris Johnson marked out today (Oct. 15) as the day when enough progress needed to have been made on UK/EU trade talks or the UK would walk away and prepare for a no deal exit. Clearly no deal is not the preferred outcome from a UK perspective and it looks like Johnson will allow his deadline to come and go with little fanfare.

Reports on Wednesday suggested the UK would look toward the start of November as a fresh deadline in which a deal should be in place. The October deadline was not random- it coincides with a scheduled EU summit, where agreement could have been quickly reached. It might still be that the gathering of leaders today will focus attention on Brexit priorities that will allow a deal to pass.

Bank earnings – BOA, Goldman Sachs, Wells Fargo
Lending-focused banks Bank of America and Wells Fargo missed expectations and their stocks dropped. Bank of America generated $20.45 billion in revenue, below the $20.8 billion expected while Wells missed on profits. Banks are central to the idea of a rotation into cyclical companies set to benefit when economies recover from the pandemic. The reaction to the Q3 bank results look like they aren’t enough to coax investors away from high-flying tech performers this year. Goldman Sachs shares also dipped although it topped estimates thanks to a boom in bond trading and asset management.

DAY AHEAD
European Council Summit: Brexit deadline
Philly Fed manufacturing
LVMH Q3 earnings
Morgan Stanley Q3 earnings
Walgreens Boots Alliance Q3 earnings

23-10-2020

Bitcoin above 13k, Barclays Q3 results & flash PMIs
The day ahead will see the reaction to the second and final US presidential debate as well as the release of October PMIs and Q3 earnings from British bank Barclays. European stocks look set for cautiously higher open with the idea that the presidential debate… Read more

22-10-2020

Intel is selling off parts before Q3 results
The day ahead will see two US corporate behemoths Intel and Coca-Cola report Q3 results while the lack of US stimulus puts the spotlight on weekly jobless claims. European stocks look set for opening losses on Thursday with indices testing the lowest levels in… Read more

21-10-2020

No pre-earnings delirium for Tesla
The day ahead will see earnings from EV carmaker and retail options trading favourite Tesla and the UK reports inflation stats at a critical stage in EU/UK trade negotiations. This really feels like it's the last-chance saloon for a pre-election US stimulus bi… Read more

20-10-2020

Netflix earnings and stimulus deadline
MARKETSEuropean markets have opened lower following the late losses headed into the close on Wall Street. Stocks in Asia are mostly lower with the exception of China after the PBOC kept the LPR steady. Early optimism gave way to sweeping losses across stock ma… Read more

19-10-2020

48 hours for stimulus, China GDP grows
HEADLINESChina GDP grew 4.9% in the third quarter, slightly missing estimates Stocks are bouncing back from last week’s sell-off on hopes for US stimulus There could be a coronavirus stimulus bill within 48 hours and an emergency-use COVID-19 vaccine by Novemb… Read more

16-10-2020

Stricter COVID rules send stocks tumbling
MARKETSWall Street ends well off lows in wild tradingThe US equity benchmarks fell for a third day but by much narrower margins than mid-day losses would have implied. The Dow was down by over 300 points but bounced back to close just 20 points lower. Facebook… Read more

15-10-2020

US bank stocks getting clobbered
The British pound rallied (GBP>1.30) after the UK signalled it would not walk away from trade talks after today's EU Summit. Big US banks have seen shares turn lower after earnings results. The prospect of future loan losses and low interest rates are keepi… Read more

14-10-2020

Paused vaccine trials hit market optimism
Eli Lilly has put its antibody treatment for the coronavirus on hold after Johnson & Johnson paused its vaccine trials on Monday. The pauses stretch out the timeline for when investors should expect to see a vaccine approved. MARKETSEurope openEuropean mar… Read more