We saw strong selling in the US overnight, but it is interesting to note that there was a little bit of late buying. The DOW was down almost 1,000 points but closed 600 lower. The SP500 was down almost 100 points but closed only 64 points lower at the key 3,400 level. We have been expecting volatility around the US election, and we expect things to continue to whip in a volatile way for at least the next week or so.
We have seen many mainstream media outlets blame the increase in Virus numbers in the US overnight as they hit new records. But the interesting thing is the number of daily deaths has not increased like it did in the first wave. At this stage, we feel it is more about the stimulus than the virus. Talks continue for more fiscal stimulus but with the election only next week it is very unlikely that we will see anything happen this week. The overall feel though is that markets in the US will continue to rise after the election if there is a majority in the sentient and more stimulus is passed soon after.
Locally, everything is moving in the right direction; Vic has had two days in a row with no new virus numbers, bringing our daily average down to 2.8. We are now in the third step of reopening with retail and hospitality reopening this week. This takes the whole of Australia a step closer to reopening borders in a similar way to the Trans-Tasman Travel Bubble. This will help small tourism business, retail and hospitality get back to a new normal.
So, we expect a strong market locally coming into the end of the year but as usual, we will get caught up in the short-term volatility of world markets as we head into the US election next week.
The XJO is expected to open lower following negative leads from the U.S overnight. U.S futures remain flat, and if they remain so or in the red, our market is likely to maintain the losses through our session.
Our market has been surprisingly resilient against the U.S jitters. Yesterday, our market held up well despite U.S futures trading heavily in the red. The expected fall this morning is not as bad as one might typically expect following such a move from overseas. This points to the idea that the sentiment for our market remains strong, and if we see a U.S recovery (likely on the back of a Biden win), we should be able to make fresh post fall highs. Add a Christmas rally and things look good leading up to New Years.
Our strength likely comes from a handle on the virus and the reopening announcements of Victoria’s economy over the next few weeks.
US stocks fell overnight, with US COVID-19 cases reaching their highest daily rates since the virus began. Some defence related stocks fell particularly hard with China announcing plans to sanction some companies over arms sales to Taiwan. US markets are also hopeful that the fourth fiscal stimulus package will be arriving soon, but it has seemed apparent for some time now that such a package won’t come until after the November 3 election.
On the economic data front, US new home sales were slightly worse than expected overnight. Every major sector fell overnight, with Oil & Gas stocks falling the hardest, while Basic Materials, Technology stocks, and Financials also fell strongly.