Week in a Glance: European lockdowns, US GDP and earnings season

2 нояб. 2020 г.

The past week turned out to be extremely eventful with very important fundamental events. Its main result was a radical change in market sentiments. Neither record GDP growth rates in the US and the Eurozone, nor excellent reporting by US corporations could change the negative mood. We will talk about this and much more in today's review.

After it became finally clear at the start of the week that there would be no new stimulus before the elections in the United States, and the second wave of the pandemic totally covers Europe and the United States, market sentiments changed radically. The massive exodus from risky assets triggered a sell-off in the stock and commodity markets. In the foreign exchange market, the dollar was restoring its previously lost positions.

An additional injection of negativity was given by France and Germany, which announced new lockdowns. During this weekend UK and Ausrtia joined them. And if Germany is still talking about a partial restrictions (restaurants, bars, cinemas, theaters and some other similar objects are closed), then France is breaking bad, introducing measures similar to those provided in the spring. The French Ministry of Finance estimates that it will cost the country a 15% drop in economic activity.

Negative sentiments could not break either the record figures for GDP growth in the US (+ 33.1%) and the Eurozone (+ 12.7%), or excellent reporting from leading US corporations: Amazon, Alphabet, Facebook, Apple and many others.

The commodity markets were also under pressure. In particular, the oil market, for which last week was remembered for a sharp increase in oil stocks in the United States, the announcement of an increase in Libya's production to 1 million barrels per day and a ripening split in OPEC + (Iraq, the United Arab Emirates (UAE) and Kuwait do not want to maintain production restrictions in 7.7 million b / d in 2021).

The central banks of Europe, Japan and Canada did not try to turn the tide and left the parameters of monetary policies unchanged. The ECB, for example, decided to take a break until December, when, apparently, a decision will be made on further easing of monetary policy.

The coming week is not going to be easy. Everything will begin with the elections in the United States (Presidential and Parliamentary), will continue with the announcement of the results of the meetings of the FRS and the Bank of England, and will end with statistics on the US labor market.

Perhaps these events will be able to reverse the current trends and sentiments, but for now, other things being equal, we continue to sell on the US stock market, as well as on the commodity markets. In the foreign exchange market, we give preference to buying the dollar.