US stocks slumped overnight as daily infection rates rose to record levels and the US Congress appears unlikely to reach a fiscal response before the election. European markets were restrained by a seeming impasse on Brexit negotiations, and the Euro rose as investors repatriated funds.
Procedural requirements mean that a deal between Democrats and Republicans on further support must be reach within 24 hours if it is to pass both houses before the elections on November 3. A last minute deal is still possible, but investor pessimism is growing. Rising infection rates in multiple US states highlights the crucial nature of fiscal support for the US economy.
The 1.5% tumble is US stocks came despite a good start to the US reporting season. Only 10% of reports are in, but so far they show earnings growth in industrials and IT stocks, and less damage in financial stocks than feared. Materials stocks are also faring better, although the energy sector continues to go backwards.
Asia Pacific markets likely to open lower this morning as investors move to the sidelines. Commodity currencies came under renewed pressure overnight, and stock futures finished the overnight session in the red. Currency traders will look to the release of the minutes from the RBA October meeting.