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GDP, Jobless Claims, ECB and Big Tech Earnings - What's up in Markets

Stock MarketsOct 29, 2020 07:34AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- Big Tech reports in the shape of Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL) and Facebook (NASDAQ:FB); the U.S. will publish third-quarter GDP figures that will break records but not bring GDP back to where it was before the pandemic; weekly jobless claims will give a more up-to-date look at the state of the economy; the European Central Bank meets a day after France and Germany tightened their public health measures to stop the coronavirus, and central banks became net sellers of gold for the first time in a decade in the third quarter. Here's what you need to know in financial markets on Thursday, October 29th.

1. Big Tech Earnings

It’s peak earnings season, with Apple, Amazon, Facebook and Alphabet all reporting after the close. The earnings again come only a day after some of their CEOs were in Congress, the timing thus sparing them the embarrassment of having to defend their monopoly profits at a time of widespread hardship across the economy.   

The sell-off in Microsoft (NASDAQ:MSFT) stock after it beat expectations on Tuesday night has generated some caution among analysts, amid signs that investors are starting to worry about sky-high valuations for a bunch of Big Tech names that have been seen by many as a safe haven from the rout elsewhere in the market this year.

Of interest to Apple may be news overnight that rival Samsung (KS:005930) posted its biggest profit in 18 months, thanks to a rebound in smartphone sales and strong demand for memory chips. The company is also positioning itself to substitute for Huawei in parts of the wireless networks business.

2. Q3 GDP, jobless claims due

The U.S. will report gross domestic product figures for the third quarter at 8:30 AM ET, along with the weekly jobless claims report.

Of the two, there’s no question which is the more important as regards the current dynamic of the economy: the weekly jobless numbers are much more up to date and have a more direct impact on consumer and voter sentiment with less than a week to go before the elections.

However, it’s the GDP figures that will likely grab more attention, if only because of the exaggerated numbers generated by annualizing the numbers. Analysts expect an annualized increase of 31% that, while unprecedented in superficial terms, still won’t bring actual GDP back up to its pre-pandemic level.

If anyone still has attention to spare after that, pending home sales data are due at 10 AM ET.

3. Stocks set for weak bounce; old economy updates supportive

U.S. stocks are set to open with the weakest of bounces after their worst day in four months on Wednesday, helped by some reassuring corporate updates overnight but still overshadowed by the spread of the Covid-19 virus across the U.S. and Europe.

By 7:30 AM ET (1130 GMT), Dow 30 futures were up 63 points, or 0.2%, while S&P 500 Futures were up 0.4% and NASDAQ Futures were up 0.7%.

Even before the Big Tech earnings-fest this evening, there are plenty of updates to grab the attention: Comcast (NASDAQ:CMCSA) beat expectations thanks in part to a strong debut for its Peacock streaming service, while Anheuser Busch Inbev (NYSE:BUD) rose 3.2% in Europe after reporting strong sales in the U.S. and Brazil that overshadowed a dividend cut. Royal Dutch Shell (LON:RDSa) meanwhile raised its dividend, only six months after an epoch-making cut.

Shopify (NYSE:SHOP) and Kraft Heinz (NASDAQ:KHC) also reported stronger-than-expected sales for the quarter, while Tiffany's (NYSE:TIF) deal with LVMH (OTC:LVMUY) will go ahead after the two sides agreed a modest cut in LVMH’s offer price.

4. ECB set to meet as BoJ cuts growth forecast

The European Central Bank meets in Frankfurt, with the big question being whether it will react immediately to the tightening of restrictions on economic and social life in Germany and France that was announced on Wednesday.

Consensus is still that the ECB will wait until December to announce any new moves. But to keep markets happy, Christine Lagarde may signal an increase in bond purchases through the 1.35 trillion euro ($1.5 trillion) Pandemic Emergency Purchase Program at her press conference, which begins at 9:30 AM ET (1330 GMT).

Overnight, the Bank of Japan made no change to its monetary policy, but said the Japanese economy will shrink by 5.5% in the year through March, more than the 4.7% contraction it had previously forecast.

5. Central banks sell gold for first time in a decade

Central banks were net sellers of gold in the third quarter for the first time in over a decade, cashing in on the record high prices created by investor demand for hedging against pandemic risks.

According to the World Gold Council, the central banks of Turkey and Uzbekistan – both of which face intense balance of payments challenges – were the biggest sellers.

Central banks had fueled the rally in gold between 2014 and 2018, bolstering their reserves as confidence in the world economy led the previous rally in bullion to unwind. The other main pillar of demand for physical gold, from jewelry buyers in China and India, has also weakened markedly in recent months as prices have soared, the WGC said. Indian jewelry demand, in particular, was down by around 50%.

GDP, Jobless Claims, ECB and Big Tech Earnings - What's up in Markets
 

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Comments (7)
Greg Houff
Greg Houff Oct 29, 2020 11:06AM ET
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Stocks drop till stimulus is agreed on.  When approved, the dollar will swoon and gold/silver will rush to new highs.
Bill Riley
Bill Riley Oct 29, 2020 9:22AM ET
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Fake News from world News organizations about Coronavirus is creating fear.
Stephane CHANDELIER
Stephane CHANDELIER Oct 29, 2020 9:22AM ET
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Now you know, you have a huge advantage, use that for you.
Ronald Warren
Ronald Warren Oct 29, 2020 8:15AM ET
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Just finished reviewing earnings so far this week. The market is so fraudulent, traders don't stand a chance. 2nd quarter earnings were missing and the market soared. 3rd quarter beats and the markets crash.
Matt Kay
Matt Kay Oct 29, 2020 8:10AM ET
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Gimme your prediction, boys! How far do we fall today? 1%? 3%?
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Andrew Meadows
Andrew Meadows Oct 29, 2020 8:10AM ET
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Yeah, after Europe sold it out 318 looks possible today or tomorrow.
Carlos GA
Carlos GA Oct 29, 2020 8:10AM ET
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2.5%
Invest Right
Invest Right Oct 29, 2020 8:10AM ET
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1%-2% lower today. I don't see a repeat of yesterday happening today... but what do I know? :)
John Healy
John Healy Oct 29, 2020 8:10AM ET
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Su.ck.er’s rally on GDP and better-than-expected initial jobless claims. Up 1%.
Richard Clinton
Richard Clinton Oct 29, 2020 8:10AM ET
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I think we go flat to 1%.
Jesse Mulliniks
Jesse Mulliniks Oct 29, 2020 8:04AM ET
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This is the end game
Ronald Warren
Ronald Warren Oct 29, 2020 7:46AM ET
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Good overview. Still need that crystal ball.
John Raymond
John Raymond Oct 29, 2020 7:45AM ET
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annualised gdp from current qtr is far representative than the historic backward looking approach used by most countries. A 31% increase is a blowaway in this environment
 
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