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Research Market strategy
by Swissquote Analysts
Daily Market Brief

Wall Street to Start Busy Week Off On the Right Foot

1

Wall Street to Start Busy Week Off On the Right Foot

By Strategy Desk

After the best weekly performance in more than two months, Wall Street maintains the bullish stance even though the hopes for another stimulus before the election faded on Sunday. At the time of writing, the S&P 500 and Dow Jones futures have gained over 0.20%, and Nasdaq futures are up almost 0.50%.

Last week, the Dow surged about 3.3% to conclude its biggest weekly gain since August. The other two benchmark indexes saw their best weeks since July.

This week, investors will have to focus on a more diverse range of fundamentals. Besides the stimulus debate between Democrats and Republicans, many companies will report on their third-quarter performance.

As for the next stimulus package, the White House proposed a $1.8 trillion economic support on Friday, but House Speaker Nancy Pelosi and lawmakers, even Republicans, do not agree with many of its conditions. For example, Pelosi stressed the insufficient funds for healthcare issues. Meanwhile, Democrats’ $2.4 trillion bill is not endorsed by Trump, who even tried to cancel negotiations abruptly at one point.

The impasse could put pressure at the beginning of the week.

In Asia, the stock markets are dominated by bulls, except in Japan, where the benchmark index flashes red. The markets reacted positively to Trump’s new offer of a $1.8 trillion stimulus bill, but negotiations seem to fall apart already.

China restarted the trading activity last Friday after a week-long pause amid Golden Week holidays. At the time of writing, the Shanghai Composite has surged 2.39%, and the Shenzhen SZSE Composite has jumped 2.69%. The People’s Bank of China introduced measures to cut the Yuan’s sharp raise after the holidays, which supported equities. Besides this, China is now considered a reliable refuge from the pandemic effect, which is currently damaging Europe and the US. Investors are also pricing a potential win of Democrat candidate Joe Biden, who leads in the polls right now. For China, that might suggest a smoother relationship with the US.

Hong Kong’s Hang Seng Index has also gained over 2%.

The Australian ASX 200 closed 0.49% higher.

South Korea’s KOSPI is up 0.40%, while Japan’s Nikkei is down 0.20%.

Europe is also leveraging the general bullishness, even though the continent experiences another wave of COVID infections. Most major indices are opening higher on Monday.

In individual corporate news, Apple is expected to launch a new generation of iPhones on Tuesday, which, according to Morgan Stanley analysts, will be the most significant iPhone event in years. The upcoming version will come with greater changes in design and will support 5G cellular networks.

Yesterday, the Financial Times cited people familiar with the matter who said that the European Union is creating a ‘hit list’ of 20 tech giants, including Apple, Facebook, Google, and Amazon. The listed companies should expect more severe rules than competitors.

In the commodity market, oil prices continue to retreat from their one-month highs, as US producers are restarting production after Hurricane Delta faded. Elsewhere, the major strike in Norway, which affected production, came to an end. Both WTI and Brent have lost about 1%. On larger timeframes, crude prices are still moving within a horizontal channel near the $40 mark.

Gold is extending gains amid the stimulus uncertainty. The metal has increased by 0.40% to $1,933 per ounce, near the highest level since September 21. Even though stimulus talks are at an impasse right now, investors are pricing in the victory of Joe Biden, who is leading in the polls in the final weeks of the race. The argument for Biden is even more evident considering that a large number of initially unsolicited votes, mostly favoring the Democrat candidate, would take part in the election – the estimates range between 40 and 80 million additional votes. Should Biden win, a huge stimulus package is likely to be approved.

Besides this, Biden would pay special attention to support renewable energy trends in an effort to curb climate change. His project includes up to $2 trillion in funds to be allocated by 2050 to infrastructure and general zero-emission trends. This might boost utilities and industrials, especially companies operating in the renewable energy sector, including Siemens Gamesa, Avangrid, and Ormat Technologies.

In FX, the US dollar is increasing slightly as stimulus talks falter, but it’s still close to one-month lows. The USD Index has gained 0.03% to 93.102. EUR/USD fell 0.09% to 1.1813. The euro is under pressure amid Europe’s second wave of the pandemic. Meanwhile, the pound holds gains as the Times reported that Britain and the EU had agreed to pursue ‘mini-deals’ in the case trade negotiations fail and end up with a no-deal divorce.

 
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