The Monday Market Minute
- Global stocks rally from two-month lows as investor react to solid factory activity in Europe and Asia.
- U.S. election volatility continues to grip markets, however, as does the rising tide of coronavirus infection rates, which could top 100,000 per day in the coming weeks.
- Europe’s manufacturing PMI reading for October hit a two-and-a-half month high, while a private sector reading from China surged to the highest in January 2011.
- The United Kingdom’s four-week lockdown, however, means that as many as six European countries will see restricted movements for the next four weeks in an attempt to tame the latest surge in coronavirus infections.
- Wall Street futures suggest a firmer open following the worst week for the three major benchmarks since March and ahead of tomorrow’s election drama and a week highlighted by 129 S&P 500 earnings reports.
U.S. equity futures surged higher Monday, fueled by solid factory activity in Europe and Asia, as Wall Street looks to rebound from its worst month since March heading into tomorrow’s Presidential election drama that could roil markets for weeks to come.
Activity in China’s manufacturing sector rose at the fastest pace since 2011 last month, a private report indicated earlier today, while Europe’s factory activity surged to a two-and-a-half year high thanks in part to Germany’s return to full strength following summer business restrictions linked to the coronavirus pandemic.
However, with Germany one of six European countries instituting lockdowns amid a surge in new winter infections, those numbers are unlikely to be repeated — or even approached — over the final months of the year.
In the U.S., Wall Street’s worst week since March sent the Dow Jones Industrial Average down more than 1,800 points by the close of trading Friday, hiving 6.5% from the benchmark amid a record rise in coronavirus infections, as well as a surge in new hospitalizations, that threatens to accelerate further in the coming months.
Election volatility is also hovering over markets as polls show a steady, and substantial lead in national polls for former Vice President Joe Biden, but narrowing gaps between the Democratic challenger and President Donald Trump in many of the seven key ‘swing states’ that will ultimately decide the election on Tuesday or the over the days that follow.
Still, with U.S. corporate earnings showing solid improvement over the course of the third quarter reporting season, and investors looking to bargain hunt following last week’s sell-off, stocks are set to open firmly higher Monday, with contracts tied to the Dow indicating a 440 point opening bell gain.
Contracts linked to the S&P 500, meanwhile, are priced for a 47 point advance while those tied to the tech-focused Nasdaq Composite are price for a 115 point jump.
With around 320 S&P 500 companies reporting so far this season, collective earnings are likely to fall 10.2% from last year, according to Refinitiv data. Of those companies reporting, however, some 86.2% have topped Wall Street forecasts, a figure that sits around 20 percentage points over the long-term average.
European stocks were marked firmly higher in early Monday trading, as well, despite the lockdown restrictions announced Saturday in the United Kingdom, which will see everything but schools and essential businesses closed for at least four weeks starting on Thursday.
The region-wide Stoxx 600 benchmark jumped 1.2% in Frankfurt as U.S. equity futures surged, with Britain’s FTSE 100 rising 0.88% as the pound drifted to 1.2917 against a firmer dollar.
Global oil prices took another hit Monday, however, as lockdowns in Europe point to waning energy demand over the final months of the year.
WTI contracts for December delivery, the U.S. benchmark, traded $1.00lower from their Friday close in New York and were changing hands at $34.79 per barrel in early European dealing while Brent contracts for December, the global benchmark, were seen 87 cents lower at $37.07 per barrel.
In Asia, the stronger-than-expected factory data from China gave regional shares a boost, with the MSCI ex-Japan benchmark rising 0.7% into the final hours of trading, while stronger earnings and a weaker yen helped the Nikkei 225 in Tokyo rally from a two-month low to close 1.39% higher at 23,295.48 points.