Lacklustre and without clear direction was the highlight of yesterday’s US session; the S&P 500 and the Nasdaq 100 recorded marginal losses of -0.2% to -0.1%, while the Russell 2000, which comprises firms deriving the bulk of their revenue in the US, underperformed with a decline of -0.9%.
There was a stellar outperformance from the communication services sector (+1.3%), led by Google (+2.3%), Facebook (+4.2%) and Twitter (+8.4%), following positive earnings result from Snap (+28.3%). Underperformers were industrials (-1.0%) and energy (-2.0%) amid lower oil prices, where WTI crude oil futures tumbled by -4.0% to end the US session at $40.03 per barrel.
Negotiations on the much-needed second US fiscal stimulus package continued and House Speaker Nancy Pelosi reiterated that she was still optimistic of a breakthrough and wanted a deal before the 3 November presidential election.
In US Q3 earnings, Tesla reported a fifth consecutive quarter of profits and beat consensus estimates. Q3 revenue come in at $8.77bn versus $8.26bn expected, with Q3 earnings per share reported at $0.76 versus $0.55 expected. In addition, Tesla reiterated that it remained on track to deliver 500,000 cars in 2020 despite weaker sales in the rest of the global auto industry. On a side note, Tesla still relied heavily on the $397m it earned from selling electric vehicle credits to other automakers in order to meet fuel and pollution regulations, the same modus operandi as seen in the previous quarters. Nevertheless, the Tesla share price reacted positively, rallying by +3.2% in after-hours trading to $436.31.
Over to the foreign exchange market, and the US dollar continued to decline for the third consecutive session after the US Dollar Index failed to break above a major descending resistance at 93.90 in place since the 20 March high. Two main contributors of USD weakness came from the JPY, as USD/JPY tumbled by -0.8% to close yesterday’s US session at 104.58, its worst single day performance since 28 August. The next contributing pair is GBP/USD; it soared by +1.5% to close at 1.3140, its highest single day rally since 27 March, triggered by optimism over a restart to stalled Brexit talks with the aim of a deal by mid-November.
In Asia, Alibaba has agreed to subscribe to more than a fifth of Ant Group’s upcoming mega IPO, where it will buy 730m of 1.67bn Shanghai-listed A shares as part of a placement to strategic investors, according to a stock exchange filing. Major Asian benchmark stock indices retreated without any new positive catalysts, as Japan’s Nikkei 225 fell -0.7% (23,481), the Hong Kong’s Hang Seng Index dropped -0.7% (24,587), the Hang Seng Technology Index fell -1.5% (7,502), China’s CSI 300 was -1.0% (4,742) weaker, with Singapore’s Straits Times Index down -0.2% (2,520).
Events to watch
Germany consumer confidence for November; the GfK consumer climate iIndicator is expected to come in at -2.8, below the 1.6 reported for October, a sign of weakening consumer confidence due the growing risk of another round of Covid-19 lockdown measures.
US initial jobless claims for the week ended 17 October; expectations are set at 860,000 below the prior week's number of 898,000.