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Yuan in focus as traders look to Biden presidency

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.

 

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