Key Points:

Europe braces for new lockdowns as Covid cases spiral

US indices slightly lower as risk aversion remains

Mnuchin: ‘Difficult’ to get a stmulus deal before the election

Risk aversion continued to be the theme with US indices wobbling once again as a pre-election stimulus agreement looks unlikely. Mnuchin conceded that getting a deal done and implemented before 3rd November would be ‘difficult’. Nasdaq once again the biggest mover -0.8% with the other indices performing marginally better on the day. If the Democrats win the White House and the Senate stocks are likely to soar on a bigger stimulus package in Spring 2021, however despite strong polling, markets are nervous of another repeat of 2016 and the possibility of Trump pulling a surprise win out of the bag. Social media stories highlighting long queues and the difficulty in voting in some states seem to be setting the platform for a contested election result. Outside of the US, Brexit news sent GBP into an extremely volatile day after dipping to 1.2860 in the European morning, Cable rallied back to 1.3060 as news broke that the 15th October deadline is likely to be pushed back. No surprises there! Most pairs endured decent ranges with Gold once again dipping into the 1880’s before closing at 1901 and the JPY continued to be supported due to the risk off sentiment. News across Europe of government panic as Covid cases spiral has seen France impose a curfew between 9pm-6am on Paris and eight other cities as of Saturday night, Merkel also voicing her concerns with the German escalation. Italy posted a record daily count of 7332 new cases and the UK once again added almost 20,000 with talk of a 2-3 week total lockdown likely. Currencies largely aren’t reacting to Covid news but EUR spent most of the day in a range either side of 1.1750 and largely side-tracked despite the Brexit volatility. The central bank speakers didn’t offer anything to affect momentum with the last of the day ahead when RBA’s Lowe adds his two cents at 0845AEST. Unlikely to add anything new markets will keep one eye on any talk of or dismissal of negative rates although a cut to 0.1% by the end of the year is already priced in. Australian employment data for September and Chinese CPI will be the highlights ahead before the weekly US jobless claims release tonight.

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