Virus Gains Momentum, Stimulus Stalls, Ant Group IPO - What's up in Markets

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Virus Gains Momentum, Stimulus Stalls, Ant Group IPO - What's up in Markets
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By Geoffrey Smith -- The spreading coronavirus triggered sharp new containment measures in Europe, hitting global stocks. Aides to Vice President Mike Pence tested positive for the virus, while U.S. stimulus talks remained deadlocked. Ant Group gets closer to completing its IPO. New homes sales are set to hit a new 14-year high. Here's what you need to know in financial markets on Monday, October, 26th.

1. Virus spreads further; Stimulus talks still deadlocked

The U.S. registered over 60,000 new cases of Covid-19 on Sunday, a drop from the daily records set last week but still up from a week earlier. While the high number is partly explained by expanded testing, hospitalizations, at just under 42,000, are up by some 50% from a month ago, while the seven-day daily average for deaths, at 885, is also up by over 10% over from a week ago.

Over the weekend, the White House confirmed that a number of aides to Vice-President Mike Pence had tested positive for the virus, casting further doubt over the administration’s ability to keep the virus under control. Pence, who denied the reality even of a second wave of the pandemic in the summer, has indicated he won’t suspend his campaigning activities, with only eight days to go before the election.

The chance of a package of economic stimulus measures, meanwhile, receded still further at the weekend, with both sides blaming each other (yet again) for the lack of progress.

2. Europe takes fright as cases hit record 

Europe lurched further toward a full lockdown as France – with just 20% of the U.S.’s population – posted over 52,000 new cases on Sunday, or nearly 90% of the U.S.’s number. Italy meanwhile enforced a 6 PM nationwide closing time on bars and restaurants, while Spain’s government declared a fresh nationwide state of emergency (which can stay in force for up to six months).

The rapid deterioration in the public health situation was evident in the closely-watched Ifo business climate index , which tracks German business sentiment. It fell more than expected to 92.7 from 93.2.

Some modest relief came from the delayed reaction to Standard & Poor’s ratings announcements over the weekend. S&P upgraded the outlook on Italy’s sovereign debt to stable from negative, leaving the long-term rating at BBB. It also left the U.K.’s AA-rating untouched, adding some favorable commentary about the flexible response of U.K. monetary and fiscal policy to the pandemic. Italian 10-Year bond yields fell nearly 10 basis points to test record lows

3. Stocks set to open lower: SAP shocks, Astra reassures

U.S. stock markets are indicated to open markedly lower, with investors spooked by the surge in virus cases and the prospect of a long and difficult winter.

By 7:35 AM ET (1135 GMT), Dow 30 futures were down 266 points, or 0.9%, while S&P 500 Futures were also down 0.9% and NASDAQ Futures were down 0.8%.

Europe’s stock markets had fallen sharply at the open before recovering somewhat, as business software giant SAP (NYSE: SAP ) slashed its short- and medium-term profit forecasts after accepting that the pandemic will have a longer-lasting impact on business.

Markets were supported by positive news from AstraZeneca (NYSE: AZN ), which claimed that its experimental Covid-19 drug had provoked a robust response in the immune systems of elderly patients in its late-stage trial.

4. China sanctions U.S. defense companies, Ant Group prices HK leg of IPO

China slapped sanctions on Boeing (NYSE: BA ) and Lockheed Martin (NYSE: LMT ) in response to the recent U.S. deal to sell state-of-the-art weaponry to Taiwan.

The measure came as China’s Communist Party begins a four-day meeting to map out its priorities for the next five years. The event is closed to the press so its conclusions may not be known until later in the week.

Elsewhere, Bloomberg reported that Ant Group has priced the Hong Kong leg of its record-breaking IPO at HK$80 a share. The IPO, which is set to be the world’s largest ever with an estimated US$35 billion of shares up for grabs, has sparked a scramble for stock among notoriously exuberant Chinese retail investors. Ant Group has earmarked 80% of the dual offering in Shanghai and Hong Kong for institutional investors.

5. New home sales, regional Fed surveys due

The U.S. will report new home sales data for September at 10 AM ET.  Sales are expected to hit 1.025 million, the highest level since the heady days of the subprime credit boom in 2006, albeit that would reflect a slowdown in month-on-month growth to 2.8% from over 4% in August.

There will also be surveys from the Chicago Federal Reserve at 8:30 AM ET and the Dallas Federal Reserve at 10:30 AM ET, as the focus sharpens on the Federal Reserve’s policy-making committee meeting next week.

The earnings calendar is also relatively light before a flood of updates later in the week, with Hasbro (NASDAQ: HAS ) already reporting better-than-expected results. Twilio (NYSE: TWLO ) and NXP (NASDAQ: NXPI ) report after the closing bell.

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