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Market Updates

Third quarter earnings season gets underway

Market Update

Third quarter earnings season gets underway

This week has the potential for fireworks as the third quarter earnings season gets underway. Things kick off on Tuesday when we’ll see results from two banking giants Citigroup and JP Morgan, along with the multinational consumer healthcare giant Johnson & Johnson. Then on Wednesday we have numbers from Bank of America, Goldman Sachs and Wells Fargo, with Morgan Stanley reporting on Thursday.

More economic data

Things get more exciting on the data front too. We have UK unemployment data, the German ZEW economic survey and the US Consumer Price Index on Tuesday. Then on Wednesday we’re expecting the Bank of England’s Monetary Policy Report hearings and US Producer Prices index. Thursday sees the release of US Weekly Unemployment Claims and Crude Oil Inventories with US Retail Sales rounding off the week on Friday.

And the election?

Meanwhile the US Presidential Election campaign gallops on, taking us ever closer to polling day on 3rd November – and what an extraordinary campaign it is proving to be. Following a stormy and frankly very unpleasant first presidential debate, President Trump succumbed, and apparently recovered from, coronavirus. Then last week we saw the vice-presidential debate between Mike Pence and Kamala Harris. This brought far more light to the real politics involved. It also did much to show up the personalities of the two people who could end up being president themselves in the next term, should anything happen to either Trump or Biden following the election. It was widely agreed across political and financial media that Mike Pence had the best of the debate. Kamala Harris floundered on a number of occasions and like her boss, she refused to answer the big question about packing the Supreme Court. The Pence win was confirmed by betting volumes and odds which moved in Donald Trump’s favour after the debate. However, it is possible the public felt otherwise. A snap poll from CNN/SSRS of 609 registered voters who watched the debate showed 59% felt Kamala Harris did best, while only 38% thought Mike Pence won.

Betting odds

Following the first presidential debate last week, betting aggregate site showed the probability of a Joe Biden election win rose to 58% while Trump’s fell to 42%. Mr Biden’s chances increased sharply to 71.4% following Trump’s coronavirus diagnosis before retreating to 66.7% by the beginning of last week. This number fell back to 65.8% following the vice-presidential debate, not enough to worry the Democrats to any great degree. As pointed out: “It's been a bad few months for the President as it was only in May when his odds implied he had over a 61% chance of winning the 2020 US election.”

Market reaction

US equities and stock index futures continue to recover following September’s plunge. The S&P 500 has made back close to 70% of last month’s losses, taking it within close proximity of its record high around 3,580. This is despite all the uncertainty ahead of the election and the failure of Congress to agree on a fresh rescue package to help individuals and businesses through the coronavirus troubles. As far as the latter issue is concerned, there have been a number of contradictory statements from all sides concerning how close Congress is to agreeing a deal. It’s generally thought that there’s still a large gap between the Republicans and Democrats on both the size of further fiscal stimulus, as well as where it should be directed. However, last Thursday President Trump insisted that the administration and Democrats were “starting to have some very productive talks.” Concerning the election outcome: it’s generally the case that markets tend to favour continuity and that usually means preferring victory by the incumbent. However, this time could be different. It can be argued that Trump is quite mercurial when compared to Biden. On top of that, it’s thought that Biden is much more likely to open the purse strings when it comes to stimulus. Overall, it appears that investors are fairly relaxed about who wins, so long as the victory is quick and decisive. The polls and betting markets currently give Biden a clear lead suggesting that postal votes and the issue of suspected fraud aren’t being considered as serious issues.

What happens next?

Trump should be in quarantine for the second debate which is scheduled for 15th October. But the president is refusing to do this virtually. Instead he said he would be holding a rally while Biden is expected to hold a question and answer session with voters on the ABC channel. Both sides agreed that the third debate should go ahead as planned on 22nd October.

Market events

As you can see from our Market Screener, coronavirus and Donald Trump dominated social media mentions at the end of last week. But it’s interesting that Kamala Harris has not only jumped into third position but was more than twice as popular as her boss, Joe Biden. Also, her debate opponent Mike Pence didn’t even make it into the top ten. You can keep on top of all the most important social media stories related to the markets by following Smart News. Just click on the widget in the bottom right hand corner of the trading platform. Here you can follow specific feeds and channels and even create your own watchlists.




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