- Very volatile week open
- COVID, Political risks weigh
- Nikkei 0.18% Dax -2.70%
- UST 10Y 0.666
- Oil $40
- Gold $1931/oz
- BTC/USD $10818
It’s been a very volatile open to this week's trade with equity futures down by as much 2% as COVID and political risks weighed on the markets with the 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. The 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. Although 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 may allow the President to fill the slot with less than 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 weeks 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 a deeper selloff as the day proceeds.