Very volatile week open
COVID, Political risks weigh
Nikkei 0.18% Dax -2.70%
UST 10Y 0.666
Asia and the EU
North America Open
It’s been a very volatile open to weeks trade with equity futures down by as much 2% as COVID and political risks weighed on the markets with cable also seeing a lot of selling pressure.
Stocks were essentially a one-way trade to the downside today as a fresh wave of COVID infection in Western Europe sparked fears of a second round of lockdowns that could derail the nascent recovery in the region.
The COVID rise is particularly troubling in UK where a second lockdown could stifle what looked to be a strong consumer led rebound. Cable hit a six day low as a result trading below 1.2850. One key concern is that the combination of COVID shutdowns and final Brexit negotiations could weaken Mr. Johnson’s hand as it would force him to negotiate just the economy turns sour.
In the US the focus is more political. Athough COVID cases will cross the 200,000 death mark today the greater turmoil is on the political implications of Supreme Court Justice Ginsburg’s death. The vacancy allows the President to fill the slot with less that six weeks to go before the election and could alter the composition of the court for decades.
Both sides of the political spectrum were energized by the President’s actions only complicating the already volatile US election landscape. Indeed with economic data stalling the story in the markets could turn to geo-political risk which by its very nature suggests far more volatile price action in week’s ahead.
With no data on the docket today – markets will likely follow every headline from DC and if US corps can’t rally equities at the open there is a strong possibility that we could see deeper selloff as the day proceeds.