Stock Futures Retreat on Political Risks, Rising Infections
September 30 2020 - 4:31AM
Dow Jones News
By Anna Isaac
U.S. stock futures retreated Wednesday after an acrimonious
presidential debate underscored the risks around the election, and
investors fretted about a second wave of coronavirus infections
hobbling the economic recovery.
Futures tied to the S&P 500 dropped 0.8%, suggesting that
the broad market gauge remains on track to end September with its
first monthly drop since March. Contracts tied to the Nasdaq-100
fell 1%.
President Trump and Joe Biden on Tuesday night clashed in a
rancorous debate. The president sidestepped a question about
whether he would urge his supporters to stay calm and not engage in
any civil unrest if there was a period after the Nov. 3 election
while votes were still being tabulated. Mr. Biden suggested that it
may take awhile to count thousands of ballots that can't be opened
until Election Day.
Concerns about rising coronavirus infections in recent days and
the risk it poses to the economic recovery are also weighing on
markets. The share of people who tested positive in New York City
climbed over 3.25%, highlighting the risk of a second wave of
infections.
The Cboe Volatility Index, a measure of expected swings in the
S&P 500, continued to advance on Wednesday.
"Markets seem to be getting more concerned, with VIX futures
peaking around the election," said Edward Park, deputy chief
investment officer at Brooks Macdonald. "But whoever takes over,
and however long it takes to take over, the person will be facing a
battle against coronavirus."
Delays to fiscal stimulus on both sides of the Atlantic are also
a worry for investors, who fear economies will need fresh support
in the absence of a clear timeline for a coronavirus vaccine. While
U.S. lawmakers are trying to find common ground on a deal ahead of
the election, a German government spokesperson late Tuesday warned
of possible delays to the approval process for the EU recovery
fund.
"For financial markets, there's a growing understanding that it
was a V-shaped rebound, but that doesn't mean it will be a V-shaped
economic recovery," said Carsten Brzeski, an economist with ING
Bank in Frankfurt. "Any delays in fiscal stimulus will add to that
realization."
House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin
are making a late push to try to reach agreement on a
coronavirus-relief deal before the election, despite skepticism on
Capitol Hill that a deal is possible at this stage. The two are
expected to talk again Wednesday.
"At the moment markets are very range bound, contained by the
risk of coronavirus but against a backdrop of monetary stimulus,"
Mr. Park said. "A U.S. fiscal stimulus ahead of the election would
be a very welcome surprise."
In bond markets, the yield on the benchmark 10-year Treasury
ticked up to 0.653%, from 0.644% Tuesday.
The ICE U.S. Dollar Index, which tracks the greenback against a
basket of currencies, ticked up 0.1%.
In commodities, Brent crude, the international energy benchmark,
fell 0.5% to $41.35 a barrel ahead of weekly data on U.S. crude
inventories. Gold fell 0.7% to $1,890.20 a troy ounce.
Overseas, the pan-continental Stoxx Europe 600 edged down
0.3%.
China's Shanghai Composite ended the day down 0.2% in the
market's last trading session before a weeklong holiday. Data on
Wednesday showed that China's economic recovery gathered more steam
in September. A rebound in global demand and the government's
supportive measures bolstered factory activity and helped push
sentiment in the service sector to its highest level in nearly
seven years.
Japan's Nikkei 225 ended the day down 1.5%. Financial stocks led
losses amid ongoing uncertainty over the pace of a global economic
recovery from the coronavirus pandemic.
Write to Anna Isaac at anna.isaac@wsj.com
(END) Dow Jones Newswires
September 30, 2020 05:16 ET (09:16 GMT)
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