10/27/2020 | Press release | Distributed by Public on 10/27/2020 02:15
US markets echoed the late September retreat last night as nothing stacked up for the bulls and sellers surrendered two per cent on major indices. As noted,, prior, VIX technical had been warning of more considerable volatility, and that emerged last night as the 'fear index' hit a two month high above 33.4. Red lights had been flashing in the Street for a while as Covid-19's surge gained momentum while stimulus negotiations lose theirs.
The broad sell-off also struck a familiar note as concerns for an economy under assault again turned eyes toward recent safe harbours. Big winners like Amazon, Netflix and Zoom Video subdued losses for the Nasdaq 100 while the Dow closed below its 50 days moving average for the first time since September end. Energy once again bled and led the way down, losing 3.47% as all eleven sectors closed in the red. In tandem to the startling infection numbers. one of the largest vaccine trials from Pfizer has failed to provide the promised October update which industry insiders frame as worrying. Another chink in the buy-forever argument is emerging in the tightening race for the Whitehouse. Earlier polling gave Biden a double-digit lead which led markets to dream of a democratic victory in all three houses. That equates to an unimpeded and large stimulus which inflates confidence and asset prices. More detailed polling finds a far narrower spread in the local races, and 54% of Americans asked said they were better off now than four years ago which hasn't happened in forty years.
Bankruptcy filings are trending strongly opposite to last night's action as companies cede defeat to the pandemic and go belly up. Not even Corporate Bondholders can swoop in for a reasonable settlement like they used to, with many collecting less than five cents in the dollar. Historically, unsecured investors could pull back around forty cents in the dollar, but the severity and speed of the lockdowns have decimated those risk models. Very low-interest rates encouraged companies with weak track records to sell bonds. Investors seeking high returns against that same low-interest environment are also to blame as they traded off normal safeguards for some of the action. But when the whole world inverts normative behaviour, there's little shelter left for anyone, least of all debt gamblers. The cheapest median debt in credit derivatives auctions in 2020 is a record low 3.5 cents on the dollar. The median for 2005 through 2019 was 23.4 cent.
New Home sales could quell the bears this time as a downwardly-revised August equated to 3.5% less than thought. True perspective is still spectacular for the sector as sales are up 32% year on year. Cruise liners' highlighted investors' fears of the pandemic's strength again with Royal Caribbean off 9.7% and Carnival down 8.7%. China also sanctioned several US firms after The State Departments $1.8 billion approval for new weapons for Taiwan was submitted to Congress for a final review. Boeing Co., Lockheed Martin Corp., and Raytheon Technologies Corp all slid 3 to 4% on the news. The issue has the potential to offer another headache for the market as Chinese fighter jets crossing the mid-line of the Taiwan Strait this year is already up 129 per cent compared with all of 2019.
|Gold Futures ($US/oz)||1905.70||+0.50||0%|
|Spot Iron Ore ($US/t)||115||-0.55||-0.5%|
Europe led the way this time as its infections are more immediately met with economic restrictions. The STOXX 600 fell by 1.8%, and their tech sector dropped 7.4%. Germany's biggest software maker SAP, fell 17% after cutting its 2020 sales estimates and reporting a 4% drop in total revenue in the third quarter of the year. Our markets are off 58 for the open as Rio Tinto fell and BHP copped large losses in London.
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