S&P 500 tumbles in worst stock rout in four months


This comes amid rising coronavirus infections and tougher lockdowns
Newsfeed29 Oct 2020
Photo credit: AFP Photo


US

Stocks tumbled in the US and Europe as rising coronavirus infections and tougher lockdowns added to worries about the economic hit from the pandemic.

The S&P 500 Index fell 3.53% to 3,271.03, the biggest drop since June, amid a surge in COVID-19 hospitalisations, especially in the Midwest. Energy shares sank with oil prices, and technology stocks were also among the worst performers, with Microsoft Corporation (MSFT US) down after a disappointing forecast. The VIX Index, a measure of expected US equity volatility, climbed to the highest level since June.

The US and Europe stock benchmarks are both down more than 5% this week (ending 30 October) as virus cases surge and after American lawmakers failed to agree on an economic aid package before the 3 November election. Analysts are also warning about increased volatility ahead of the presidential vote and in its aftermath, with some saying that a contested outcome is still a worrisome possibility. – Bloomberg News.

The Dow Jones Industrial Average tumbled 3.43% to 26,519.95, and the Nasdaq Composite Index slipped 3.73% to 11,004.87.

EUROPE

Europe equities fell the most in a month, with the DAX Index entering a correction as Germany and France prepared for harsher coronavirus-related restrictions.

The Stoxx Europe 600 Index dropped 2.95% at the close to 342.17, its lowest level since 22 May. All 20 sectors were in the red, with cyclicals such as autos, construction, and miners leading losses. The DAX fell 4.2%, taking its drop since an October high to more than 10%. France’s CAC 40 Index slid 3.4%.

Investors fear a repeat of February’s market selloff as restrictions get tougher in Europe to curb rising coronavirus cases, while the US election and difficult fiscal stimulus negotiations add to the uncertainty. German Chancellor Angela Merkel reached a deal for a one-month partial lockdown, and French President Emmanuel Macron prepared to announce tougher restrictions that may also include a shutdown.

Corporate updates provided relief to some shares. Delivery Hero SE (DHER GR) climbed after its full-year revenue forecast beat estimates. Cyclical stocks were particularly under pressure because a new round of lockdowns is likely to stall the nascent economic recovery and hurt such sectors as travel and leisure.

 “In Europe, the main fear is that a new lockdown will constrain the economy, and this affects cyclical stocks,” according to a trader in Germany.

Market players are also bracing for the US elections next Tuesday (3 November) and the possibility of a contested result, which is likely to fuel volatility across global markets. – Bloomberg News.

 

JAPAN

The Bank of Japan (BOJ) is seen standing pat on policy, with investors likely to focus on any changes to the bank’s assessment of risks to the recovery amid rising waves of the coronavirus abroad.

All but one of 43 economists surveyed forecast the BOJ will leave its key interest rate and asset purchases unchanged at the end of its meeting Thursday (29 October). Analysts see the bank making only slight tweaks to its quarterly forecasts as it weighs the unpredictable course of the pandemic.

The decision comes hours before the European Central Bank is expected to hold fire but signal more stimulus in the pipeline to combat the potential impact of the virus’s recent spread on the continent. In his post-decision briefing at 3:30 pm in Tokyo, Governor Haruhiko Kuroda is likely to stress the BOJ’s readiness to take further action if needed.

BOJ officials see Japan’s recovery still developing roughly in line with the bank’s July projections, with the economy picking up after a record contraction in the second quarter, people familiar with the matter said.

There is little need for the BOJ to move now, they said, because businesses have access to credit and markets have been relatively stable, although investors have become more pessimistic in recent days.

On prices, the bank is likely to consider trimming its inflation forecast due to a government discount campaign for the tourism industry, according to the people. The measure weighed more heavily on consumer prices than some private sector economists expected.

Kuroda has hinted the BOJ is likely to extend the end date of funding programmes adopted to help businesses cope with the pandemic. Most analysts see the announcement coming by January, with only a small minority expecting it Thursday. – Bloomberg News.

The Nikkei 225 Index opened 1.02% lower at 23,180.74 on Thursday (29 October). It fell 0.29% to 23,418.51 the previous session.

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