Financial market research and analysis

MARKETS
Stocks in Europe look set for a higher open on Monday. They were mostly lower on Friday as mounting virus cases bring on stronger lockdown measures that in turn drag on the economic recovery. A case in point was UK August GDP that rose 2.1% in the month- a gigantic rise by historical standards – but slower than needed to keep V-shape recovery hopes alive.

Mining stocks led gains on the FTSE 100, which bucked the trend of weaker trends across European markets. Rolls Royce shares led the UK benchmark higher again on Friday. The shares gained 50% last week for the best weekly return since listing in 1987. The £5 billion capital raise has put solvency concerns to the side and given investors confidence to look past virus travel issues and invest for the long term.

Large cap tech stocks were performing best on Friday on Wall Street rather than stimulus-friendly small caps like in the previous two days. That comes as Senate majority leader Mitch McConnel cast doubt on chances for a deal before the election- calling the situation ‘murky’. House speaker Pelosi went a step further in dampening chances of a pre-election deal by rejecting the White House's raised £1.8 billion proposal.

The onshore Chinese yuan jumped by 1.2% on Friday- the most in four years. That was following heightened demand for the currency over the Chinese holiday week. The offshore rate traded in Hong Kong had already been gaining on rising belief in a new China-friendly Biden administration – as well as data showing much hotter than expected activity in the country’s service sector. The Caixin services PMI rose from 50.7 to 54.8 in September. Donald Trump has been the most hawkish President on China in decades while Biden has said he would roll back the tariffs.

Oil prices have been on a hot streak thanks to a shutdown in Norwegian oil output because of strikes in the country. That strike is now over and attention maybe switch back to the surprise build in US inventories that signal slowing demand.

Looking beyond Norway, there is also an idea Biden would bring the Iran nuclear deal back into operation. That would lift sanctions on the country and allow Iran to export its oil to many more countries, which would no longer face the wrath of the US. A sudden dearth of Iranian supply is bearish for the oil price under Biden. Especially in the context of tepid demand during the pandemic.

DAY AHEAD

Lot's of central bank speak including from the ECB's Lagarde and BOE's Bailey. Also its Columbus Day in the US.