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Research Market strategy
by Swissquote Analysts
Daily Market Brief

US Equities Flashing Red for 3rd Straight Session


US Equities Flashing Red for 3rd Straight Session

By Strategy Desk

Wall Street continued the bearish trend for the third consecutive session, though it bounced back from session lows on Thursday. Investor sentiment has been damaged by fears of slow recovery, the stimulus impasse, and the second wave of the COVID pandemic.

The US Labor Department reported that initial jobless claims surprisingly rose to 898,000 in the week ended October 10, which is the highest figure since August, prompting fears that the recovery in the job market is delayed. Analysts expected a decline to 825,000. Separately, a report showed that manufacturing activity in New York State had dropped more than anticipated in the current month.

As for the stimulus saga, President Donald Trump said he would raise his proposal of $1.8 trillion for another coronavirus relief package, but the offer was immediately dismissed by Senate Majority Leader Mitch McConnell.

The S&P 500 fell 0.15%, recovering part of earlier losses. The Dow almost did it as well, closed 0.07% lower. Nasdaq dropped by 0.47%.

The S&P’s financial sector index rose 0.8%, while healthcare was among the worst performers, falling 0.7%. Airlines tumbled 1.5% after United Airlines saw a 78% drop in Q3 revenue.

The share price of Morgan Stanley rose 1.3% after it reported Q3 earnings and revenue that beat analysts’ expectations, giving a boost to mixed results from major US banks. So far, the banks focused on trading saw major gains, while those relying on retail banking dealt with the impact from the pandemic.

In other individual corporate news, Twitter’s site was down for hours, though the company ruled out any hacking attacks. It said that the breach was caused by an irregularity with its API during a system change.

Asian stocks are mixed in early trading on Friday, with the accelerating pandemic being the main topic of discussion among investors. Meanwhile, China is about to introduce new national security export laws, prompting investor uncertainty. The law will let China control what it considers to be sensitive exports. Thus, certain companies and organizations might be prohibited by China to receive certain technologies and strategic materials. The move is quite worrying considering that Asia’s largest economy produces 90% of rare earth metals, which are used in most devices.

At the time of writing, China’s Shanghai Composite is trading flat, while the Shenzhen Composite has declined by 0.58%.

In Australia, the S&P/ASX 200 closed 0.54% lower. In South Korea, the KOSPI is down 0.68% after earlier gains.

Hong Kong’s Hang Seng Index is up 0.72%, while Japan’s Nikkei 225 is down 0.36%.

Europe is about to open mostly in the green after losing about 2% on Thursday on the Brexit impasse. In individual news, Mercedes maker Daimler reported forecast-beating Q3 results driven by a faster than anticipated market recovery in September.

In the commodity market, oil prices have declined on Friday, but continue to trade sideways on weekly and monthly charts. Investor sentiment was damaged by yet another surge in coronavirus infections in Europe and the US, which will affect crude demand. The stronger US dollar doesn’t bode well for oil prices either. Both WTI and Brent brands have lost over 1% today.

Despite an increased interest for safe havens amid the worsening pandemic, gold is down on Friday, though it still maintains above $1,900. The metal has dropped 0.08% to $1,907.

The US dollar maintains the bullish stance and is set to end the week higher against majors. The USD Index is now up 0.01% to 93.862 after surging 0.50% yesterday. EUR/USD is down 0.08% to 1.1698, updating the October low. The European currency is under pressure amid the Brexit impasse. So is the British pound, which fell about 0.20% against both majors as EU leaders are asking the UK for more concessions to reach a deal. The UK’s deadline for a Brexit deal expired yesterday, but the EU is ready to extend it until January 1, 2021.

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