Monday’s Bullseye: 26 October 2020


Here is our week ahead preview for the week commencing 26 October 2020.



In the run up to the US elections, it has become quite a tentative time for market participants as they continue to ponder on the economic impact of rising coronavirus cases, deaths and restrictions, as well as US fiscal stimulus predicament and the outcome of the elections. With many conflicting influences to deal with, it is little wonder why some investors are having a tough time committing to a particular direction. For some, it is undoubtedly a struggle to translate all these factors into economic reality for the world, and in turn the markets. Many investors must feel like this election cannot be over soon enough. Indeed, many outcomes are possible regarding the US fiscal stimulus, while the race for the White House still favours Joe Biden, judging by the latest opinion polls. But then there is the Senate, which looks like will remain under the control of the Republics, making it difficult for Biden to pass a very large stimulus package should he win the election. As investors try to digest and make sense of these possibilities, and adjust their positions and portfolios accordingly, this has created a rather volatile but a range-bound market.
 
Look ahead
 
In the week ahead, although the above factors will dominate the agenda again, the focus might turn back to interest rates and monetary stimulus momentarily. We have policy decisions to look forward to from the Bank of Canada (Tuesday), Bank of Japan and European Central Bank (both on Thursday), while we also have a handful of macro data. On a micro level, there is plenty of company earnings to look forward, including from the big tech giants such as Apple, Amazon and Microsoft.
 
On a side note, day light savings mean an extra hour of sleep for Europeans on Sunday, but it also means an extra hour added to 2020!
 
Economic data and earnings highlights
 
Monday
  • Data: German ifo Business Climate and US New Home Sales
Tuesday
  • Data: US Durable Goods Orders and CB Consumer Confidence
  • Earnings: Microsoft, AMD, Caterpillar, Pfizer, £M, Merck & Co and Harley-Davidson
 
Wednesday
  • Data: Aussie CPI
  • BOC policy decision and press conference
  • Earnings: Visa, eBay, Boeing, Baidu, GE, Ford, GrubHub and UPS
 
Thursday
  • Data: German Unemployment; US GDP, Unemployment Claims and Pending Home Sales
  • BOJ and ECB policy decisions
  • Earnings: Apple, Amazon, Google, Facebook and Twitter
 
Friday
  • Data: Japan Industrial Production; German Prelim GDP and Retail Sales; Eurozone Flash CPI and Prelim GDP Estimates, and US Personal Spending and Core PCE Price Index
  • Earnings: Exxon Mobil and Chevron
 
ECB policy decision and earnings to take centre stage
 
As mentioned, the main focus will be on rising virus cases, deaths and lockdowns, as well as the looming US presidential election, stimulus and not to mention the ongoing EU-UK Brexit negotiations.
 
That said, we do have plenty of macro data and central bank meeting, as well as big earnings to look forward to as well. From a macro point of view, the case for further easing from the ECB has risen due to the impact of rising infections and restrictions across the Eurozone. However, it is highly likely the central bank will wait until the December meeting when they publish their staff forecasts. But hints that they will increase the PEPP purchase pace, or cut rates further is what market observers will be watching out for in this meeting. Meanwhile, the above tech earnings and other big US company results have the potential to cause great volatility for the major indices around the time of the earnings releases. The results and outlooks will provide us with fresh clues about the health of the global economy. But if you are a stock trader, then these earnings should provide plenty of opportunities as well.


US elections latest
 
After Biden’s stark remarks on the oil and gas industry, there is a possibility that polls might tighten in key swing states such as Pennsylvania, Ohio and Texas. It is also important to consider the fact that some Americans are probably not truthful to pollsters, especially Trump supporters. Thus, the possibility for surprisingly strong showing from Trump is always there.

SPXSource: ThinkMarkets and TradingView.com
 



Back