Monday October 19th

19-10-2020

Dow futures climb amid stimulus hopes, but rising coronavirus cases cap upside

U.S. stock index futures advanced early Monday as investors hoped for a stimulus deal from Washington, although a rising number of Covid-19 cases dampened sentiment. Futures contracts tied to the Dow Jones Industrial Average rose 200 points, indicating a more than 100-point gain at the open. S&P 500 and Nasdaq 100 futures also traded in positive territory. House Speaker Nancy Pelosi’s office said Saturday evening that she is giving the Trump administration 48 hours to reach an aid deal before the Nov. 3 election. Pelosi and Treasury Secretary Steven Mnuchin continued their discussions over the weekend. They agreed to speak again on Monday. A continued economic recovery in China also boosted sentiment on Monday. The world’s second largest economy reported third-quarter GDP growth of 4.9%, which was on the low end of expectations, but indicates an improving outlook. ″[China’s] Q3 GDP fell a bit short of expectations, but the Sept figures (retail sales and IP) both exceeded forecasts, and this is giving a boost to equity sentiment,” noted Adam Crisafulli of Vital Knowledge. Meanwhile, global coronavirus cases hit 40 million on Monday, which put a damper on bullish sentiment. A CNBC analysis of Johns Hopkins University data showed Covid-19 cases were growing by 5% or more in 38 states as of Friday. Nationwide, the daily case average has risen by more than 16% on a week-over-week basis to nearly 55,000. New coronavirus infections in Europe are rising by about 97,000 per day, up 44% from the prior week. “The 48 only relates to if we want to get it done before the election, which we do,” Pelosi told ABC’s “This Week” on Sunday. “We’re saying to them, we have to freeze the design on some of these things — are we going with it or not and what is the language? I’m optimistic, because again we’ve been back and forth on all this.” Stocks are coming off a week of choppy trading action. The S&P 500 and Dow fell for three straight days last week before closing slightly higher on Friday. The Nasdaq Composite posted its first four-day losing streak since September. “The many cross-currents we have been fretting over in recent weeks remain omnipresent,” said Sherif Hamid, a strategist at Jefferies, in a note. “The US elections are close at hand, fiscal stimulus remains a key near-term potential catalyst, and developments on the virus front remain critical to the longer-term outlook.” “A lot is very likely to happen over the next several weeks, and the broader macro picture could thus change pretty massively depending on developments along all of those fronts,” Hamid added. On the earnings front, IBM is slated to release its latest quarterly results after the bell on Monday. Meanwhile, Federal Reserve Chairman Jerome Powell is scheduled to speak Monday morning. Stocks in Asia-Pacific were mixed on Monday, as investors reacted to the release of China’s GDP data. Mainland Chinese stocks were lower on the day, with the Shanghai composite down 0.71% to around 3,312.67 while the Shenzhen component shed 0.824% to about 13,421.19. Hong Kong’s Hang Seng index rose 0.64% to close at 24,542.26, with shares of HSBC listed in the city gaining 2.49%. In Japan, the Nikkei 225 rose 1.11% to close at 23,671.13 while the Topix index added 1.25% to end its trading day at 1,637.98. South Korea’s Kospi also advanced 0.22% to close at 2,346.74. Oil prices fell on Monday after reports that China’s third-quarter economic growth did not rise as much as expected, underscoring concerns that surging coronavirus cases globally are impacting demand in the world’s largest oil importer. The world’s second-largest economy in the third quarter expanded by 4.9% from a year earlier, missing analyst expectations, government data showed. Refiners in China, the world’s second-largest oil user, slowed their processing rates in September and industrial metal imports, underpinned by government stimulus, were lower. Brent crude for December slipped 30 cents, or 0.7%, to $42.63 a barrel. U.S. West Texas Intermediate crude for November was at $40.61 a barrel, down 27 cents. The contract will expire on Tuesday. Brent rose 0.2% last week while WTI gained 0.7%, after crude and oil product inventories in the United States, world’s top oil consumer, fell. Gold climbed on Monday as a softer dollar and optimism over a new U.S. stimulus agreement before next month’s presidential election lifted demand for bullion as an inflation hedge. Spot gold was up 0.7% at $1,911.41 per ounce. U.S. gold futures rose 0.5% to $1,915.30.