SMarket investors are getting ready for a bumpy ride this week as the likelihood of Covid-19 cases around the world increases significantly on the final days of the presidential election campaign. USA.
Last week, stocks in the US and Europe fell at their fastest pace since March and analysts expect something worse will happen, after France and Germany imposed strict door lock measures. and US states are under pressure to tackle the growing death toll.
Barclays strategist Emmanuel Cau said: “New asset locks across Europe are being heavily priced by the market.
Gabriel Sterne, head of global macro research at consulting firm Oxford Economics, added: “There is great anxiety about the second wave. “With some government funding starting to drag on, the threat of door locks continues to pose a great deal of anxiety.”;
The higher level of concerns about the virus’s path began to hit markets three weeks ago. From New York to Paris, London and Tokyo, investors sold a lot from October 13 onwards as news of higher infection rates and increasing deaths was every day.
More stringent measures to curb mixed households come into effect, and government ministers of all political factions begin to talk about wider door locks as the only answer to spread of the virus.
The CAC in Paris lost more than 400 points, or 8%, from October 13 to the end of last week while London’s top 100 listed companies fell 7.5% year-on-year. Last week, the Stoxx 600 index of European companies fell to its lowest level in five months, down 3.1% in a day.
In the US, the stock price drop that started in September with viral panic became a trend after it became clear that Congress would not give Donald Trump the stimulus he desire.
Without a second trillionth of cash to support businesses shutting down and millions of workers unemployed, the president bragged that a recovery “looked great” was intrinsically lacking. The S&P 500 Index lost more than 8% over the 16 days followed by October 13.
This is not the first time this year fears of a second wave by Covid-19 have terrified the market, but the rallies have turned earlier panics into bright spots on the chart. apparently not this time. Investors stopped hearing hopeful stories about vaccines and began to look at the ripple effect stemming from the widespread adoption of masks and physical alienation.
As Dhaval Joshi, chief European strategist at BCA Research, says that consumers who cannot use their nose or mouth near others are hardly consumers.
He estimates that while dumps temporarily hinder economic activity, masking and remote governing rules will cut GDP by up to 10% as long as they are applied. Transport – has been defeated since March.
However, investors turning to the tech industry have eliminated concerns about viruses. Major tech companies – Apple, Amazon, Alphabet (owner of Google), Microsoft and Facebook – have been behind the 50% increase in the S&P 500 since Trump took office and have generally benefited from the move into a more digital economy since the door lock in March. If US stocks recover, the technology will have to work.
In the UK, where the FTSE 100 is dominated by banking, insurance and oil and gas companies, the stock price has barely recovered after falling to 5,000 points in March. Across Europe, successful industrial giants like Mercedes-Benz, Volkswagen and Siemens were hit as their share prices rebounded in six months of negative shifts.
Donald Trump’s offensive lines in the closing weeks of the US presidential campaign have also highlighted the potential downside for investors of a win for Democratic candidate Joe Biden in. November 3. Desperate to inflict some punch on his opponent, the president tweeted more than once: “A vote for Joe Biden is a vote for the biggest TAX HIKE in history.”
So far, the claim that even the US right-wing thinkers say overstated his tax proposals, has not changed the polls and they continue to propose a victory. by Biden. But the distrust of Trump’s polls and veiled threats to challenge the validity of a narrow Biden win only worries the stock market.
A constant source of light for investors is the central bank’s action. After being encouraged by the US Federal Reserve to raise interest rates in the Trump administration’s early years, all central banks have cut borrowing costs to zero, and some, including the Central Bank. European Central Bank (ECB) and Bank of Japan, below zero.
Central banks have also pumped trillions into the financial system to maintain the easy flow of credit for small and large businesses, adding to the feeling that anything Covid-19 could throw in. for them, the borrowing costs of companies will be negligible.
This week, the Bank of England monetary policy committee plans to add another £ 100 billion to the £ 745 billion “quantitative easing” – buying government and corporate debt from institutions financial institution – it’s been pumped into the economy. The US Fed governing board will also meet this week and signs that the recent decline in share value should convince their policymakers to increase $ 7.2 billion (5, 6 billion pounds) QE currently.
Last week, the president of the ECB, Christine Lagarde, signaled an even stronger stimulus to the euro zone in December, while the Bank of Japan said it was determined to print as much money as possible to keeping interest rates below 0 is “unlimited”.
Such support from central banks will be essential as the virus continues to wreak havoc on people in Europe and America. Whether it is enough to bring the stock market back in a more positive direction is another matter.