Tech Leads Retreat in Stocks; Dollar Strengthens: Markets Wrap

Table of Contents1 Stocks2 Currencies3 Bonds4 Commodities (Bloomberg) — U.S. equity futures dropped and the dollar strengthened on concern that rising coronavirus cases will weaken the economy as Washington fails to agree on an economic aid package. In Europe, German software maker SAP SE plunged 20% after cutting its revenue […]

(Bloomberg) — U.S. equity futures dropped and the dollar strengthened on concern that rising coronavirus cases will weaken the economy as Washington fails to agree on an economic aid package.

In Europe, German software maker SAP SE plunged 20% after cutting its revenue forecast and saying that pandemic will hurt business through mid-2021. The announcement sparked losses across other technology stocks, sending Europe’s Stoxx Tech Index to the biggest drop since March. Apple Inc. and Microsoft Corp. fell about 1% in pre-market trading.

Treasuries rose, sending yields on the 10-year lower. Oil futures and copper declined, while gold was little changed.

Turkey’s lira weakened through 8 per dollar for the first time. The country’s central bank rattled investors last week by unexpectedly keeping rates on hold, and geopolitical risks have sapped interest in Turkish assets.



chart, histogram: Odds on a Blue Wave in next month's elections drop toward 50/50


© Bloomberg
Odds on a Blue Wave in next month’s elections drop toward 50/50

Investors remain focused on the prospect of a U.S. stimulus deal, even as time runs out to finish a deal before the election. U.S. House Speaker Nancy Pelosi said the burden is on President Donald Trump to push forward on stimulus talks. Treasury Secretary Steven Mnuchin said there’s been significant progress, but blamed Pelosi for holding up an agreement.

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“The current mood in the market is bracing and non committal,” said Peter Rosenstreich, head of market strategy at Swissquote Bank SA. “The concern around the Covid-19 pandemic and U.S. fiscal stimulus is dominating the market.”

He added, “Everyone is talking up the Blue Wave, but behind the scenes ‘what if 2016 repeats?’ is keeping investors cautious.”

Pelosi, Mnuchin Trade Blame on Unending Stimulus Stalemate

On the virus front, the World Health Organization’s director general said some countries in the northern hemisphere are facing a “dangerous moment” after U.S. infections hit a record for the second day. European countries are also tightening restrictions on business. Spain has announced a nationwide curfew and Italy introduced the strongest measures since May.

In other markets, the MSCI Asia Pacific Index dropped 0.2%, with Japan and South Korea posting declines. Emerging market stocks were also lower.

Bayer AG climbed 2.8% after agreeing to buy U.S. biotech company Asklepios BioPharmaceutical Inc. for as much as $4 billion, bolstering its pharma division with experimental gene therapies before patents expire on some key drugs.

Boeing Co. slid 2% in the U.S. pre-market. China announced it will impose unspecified sanctions on the defense unit of Boeing, Lockheed Martin Corp., and Raytheon Technologies Corp. after the U.S. approved $1.8 billion in arms sales to Taiwan last week.

These are some events to watch this week:

The Chinese Communist Party’s Central Committee holds its all-important plenum, where it’s expected to chart the course for the economy’s development for the next 15 years. Through Oct. 29.Brexit negotiating teams have started intense daily negotiations, and these are likely to continue as both sides push to finalize a deal by the middle of November.Bank of Japan and the European Central Bank have monetary policy decisions Thursday, followed by briefings from Governor Kuroda and President Lagarde.The first reading of U.S. 3Q GDP Thursday is anticipated to be the strongest on record following a record dive in the prior quarter as many businesses were shuttered by the pandemic.

Here are the major moves in markets:

Stocks

Futures on the S&P 500 Index decreased 1% as of 8:19 a.m. New York time.The Stoxx Europe 600 Index fell 0.7%.The MSCI Asia Pacific Index dipped 0.2%.The MSCI Emerging Market Index declined 0.4%.

Currencies

The Bloomberg Dollar Spot Index rose 0.3% to 1,162.57.The euro fell 0.4% to $1.1819.The British pound was little changed at $1.3042.The Japanese yen weakened 0.2% to 104.93 per dollar.

Bonds

The yield on 10-year Treasuries declined four basis points to 0.81%.The yield on two-year Treasuries declined one basis point to 0.15%.Germany’s 10-year yield declined one basis point to -0.57%.Britain’s 10-year yield fell two basis points to 0.274%.

Commodities

West Texas Intermediate crude declined 2.6% to $38.87 a barrel.Gold was little changed at $1,902.64 an ounce.

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©2020 Bloomberg L.P.

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