The Week Ahead 12th – 16th October 2020

Market Outlook for Today

Chinese stocks led Asian markets higher on Monday as investors bet on a steady recovery for the world’s no. 2 economy, though caution about the fate of U.S. stimulus kept the dollar firm and a central bank policy tweak unwound some of the yuan’s gains.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1% to 2-1/2-year highs, buoyed by a 2.4% gain in Chinese blue chips .CSI300 and a 2% rise by Hong Kong’s Hang Seng index .HSI.

Japanese stocks fell on Monday as concerns about upcoming corporate earnings reports prompted some investors to take profits, with industrial and consumer discretionary sectors leading the decline.

Japan’s Nikkei .N225 slipped 0.3% as investors fretted about corporate earnings while the broader TOPIX fell 0.24% to 1,643.35.

Shares of Yaskawa Electric Corp were the biggest decliner on the Nikkei, sinking 5.43% after the industrial robot maker said on Friday it expects its dividend payments to fall by around half.

Analysts said the news also weighed on broader sentiment, with investors also reluctant to buy stocks due to uncertainty about the U.S. presidential election on Nov. 3 and how that will affect economic policy.

In the U.S. Midwest, infections are at record levels and the World Health Organization is urging fresh curbs for Europe.

Coronavirus aid plans in the United States are also in disarray, with the Trump administration on Sunday calling on Congress to pass a stripped-down relief bill while talks on a more comprehensive proposal were again at an impasse.

“The economic fallout of COVID-19 has accelerated the relative decline of the U.S. as the world’s economic engine,” said ANZ chief economist Richard Yetsenga. “It is also increasing the centrality of Asia – and particularly, of China.”

Chinese blue chips have gained 17% this year, compared with an almost 8% gain by the S&P 500 .SPX. Foreigners’ buying of Chinese government bonds hit its fastest pace in more than two years last month.

Britain faces a surge in unemployment before Christmas, economists fear, as business struggle under lockdown restrictions and the government prepares new rules for areas where Covid-19 is the biggest threat.

Prime Minister Boris Johnson’s government are to impose further COVID-19 restrictions and the risk of spreading the virus is higher in pubs, restaurants and nightclubs, Culture Secretary Oliver Dowden said on Monday.

“The purpose of these measures is to get the virus under control,” Dowden told Sky. “The point of moving to this tiered system is so that in those most highly affected areas, we have got measures in place to control the virus.”

He said he hoped the virus would be under control by Christmas or sooner.

The CEBR thinktank is warning this morning that at least 1.25 million more people are at risk of losing their jobs by Christmas, as it hikes its Christmas unemployment forecast.

With Covid-19 still battering the economy, more companies will be forced to lay staff off – particularly those who were furloughed since the lockdown.

That would push the jobless total towards three million – up from 1.4m this summer. It would drive the unemployment rate over 8% – for the first time in almost a decade.

In other news, the International Monetary Fund (IMF) and the World Bank’s annual meeting is taking place, virtually, this week – under the shadow of the worst slump in decades due to COVID-19.

Today, ECB President Christine Lagarde and IMF European Department Director Alfred Kammer will talk about the need for ‘structural transformation’ to improve the economic landscape after the pandemic.

Overview for the Week Ahead

The UK corporate calendar on Monday has trading statements from XP Power, Network International Holdings, and Scapa Group, while e-Therapeutics will report half-year results. In the economic calendar on Monday, European Central Bank President Christine Lagarde is scheduled to speak at a Governor Talk virtual meeting at 1200 BST.

Also, this week, US bank earnings season gets underway with third-quarter results from JPMorgan Chase and Citigroup due on Tuesday. Wells Fargo, Bank of America and Goldman Sachs report on Wednesday, followed by Morgan Stanley on Thursday.

Apple Will Release Its 5G iPhones This Week. It’s a Big Deal for Stocks. Apple is holding a virtual event on Tuesday at which it is widely expected to unveil the new phones.

These events have the potential to influence the markets which means there is plenty of trading opportunities.

Today’s High Impact Events

The times below are GMT+3.

Monday 12^th October

19.00 – BOC Gov. Bailey Speaks (U.K.)

Potential instruments to Trade: GBP Crosses. 

Tuesday 13^th October

09.00 – Claimant Count Change (U.K.)

Potential instruments to Trade: GBP Crosses. 

15.30 – CPI & Core CPI m/m (U.S.)

Potential instruments to Trade: USD Crosses. 

Wednesday 14^th October

15.30 – CPI & Core CPI m/m (U.S.)

Potential instruments to Trade: USD Crosses. 

Thursday 15^th October

00.45 – RBA Gov. Lowe Speaks (Australia)

Potential instruments to Trade: AUD Crosses. 

03.30 – Employment Change & Unemployment Rate (Australia)

Potential instruments to Trade: AUD Crosses. 

15.30 – Philly Fed Manufacturing Index (U.S.)

Potential instruments to Trade: USD Crosses. 

15.30 – Unemployment Claims (U.S.)

Potential instruments to Trade: USD Crosses & Gold. 

Friday 16^th October

15.30 – Core Retail Sales m/m & Retail Sales m/m

Potential instruments to Trade: USD Crosses. 

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