Usually, the US non-farm payrolls report is the most important story of the day, but the news that President Trump and the first lady, Melania Trump, have tested positive for Covid-19 captured trader’s attention. 

Europe

The US leader is in his 70s and is on the cusp of being obese, so that puts him at a higher risk with respect to the coronavirus. Dealers have been in risk-off mode today on the back of the Trump news. The jobs data from the US was mixed so that didn’t sway sentiment that much. Stocks are in the red but they are off the lows of the session.

According to the US employment report, 661,000 jobs were added last month, and that undershot the 850,000 consensus estimate. The August reading was revised up to 1.48 million from 1.37 million. It is a little concerning that there was a big drop off in the number of new jobs created between August and September, as it suggests the labour market is cooling. The unemployment rate unexpectedly fell to 7.9% from 8.4%, but keep in mind the participation rate dipped to 61.4% from 61.7%. It would appear that some people are so dismayed by the state of the economy, they are not even actively looking for work. There was also chatter going around that the unemployment rate would be 8.3%, if it was measured correctly, adjustments need to be made on account of the unique circumstances of the pandemic. Average earnings were 4.7% and that was a slight increase on the revised 4.6% reading in August.      

Rolls-Royce shares are in the red again. Yesterday, the company confirmed that it plans to raise £3 billion in funding - £2 billion from a rights issue and £1 billion from a bond issue. The firm announced plans to raise funds a few months ago, but seeing as they didn’t act quickly, that weighed on sentiment. UBS cut its price target to 149p from 265p.

Last night, TUI said it was considering raising capital but if it did look to raise funds, it would be a lot less than the £1-£1.5 billion that was speculated in the press. Given the depressed share price, the travel company doesn’t want to do a big capital raise.  

US

Traders are turning their backs on equities because of health concerns for President Trump. The US leader is said to be asymptomatic but seeing as he is older and overweight, there are worries that he is more likely to suffer from the virus, although he could easily turn out to be just fine. The Covid-19 crisis is still bubbling away in the background, and the fact that the leader of the free world caught the illness has hammered home the concerns. 

The jobs report wasn’t great but at the same time, it wasn’t awful so the Republicans probably won’t be in any major rush to make a deal with the Democrats in relation to the Covid-19 relief scheme. Nancy Pelosi, the House Speaker, and Steven Mnuchin, the Treasury have been in discussion this week. The Democrats are pushing for a $2.2 trillion package, but the Republicans are not keen on going over $1.6 trillion. There continues to be some hope for a deal being achieved.

Tesla motors inc shares are in the red even though the third quarter delivery figures were 139,300, which topped the topped the 134,720 consensus estimate. It is understood that some traders were disappointed that the reading didn’t exceed the top-end forecasts.

Walmartannounced that it is selling Asda to TDR Capital for $8.8 billion.

Amazon confirmed that 19,000 staff members tested positive for Covid-19. 

FX

The US dollar is a touch higher this afternoon on account of the wider risk-off sentiment. The greenback has been a popular play for traders seeking shelter from the fall in stocks. EUR/USD is in the red because of the move higher in the dollar but the disappointing eurozone data didn’t help either. The headline flash CPI reading for September was -0.3%, the lowest update since 2015, and that underlines the fall in demand in the currency bloc.

GBP/USD is up on the session thanks to a broad mover higher in sterling. Prime Minister Johnson will talk with Ursula von der Leyen the European Commission President, tomorrow. Tensions between the two sides have risen this week as the EU has begun legal proceedings against the UK in relation to the internal markets bill and the withdrawal agreement.  The fact that Johnson and von der Leyen are scheduled to talk tomorrow is seen as a step in the right direction. Traders are not expecting a trade deal to be agreed upon quickly, but while discussions keep going on, that should help the pound.          

Commodities

Gold-cash is largely flat on the session. The asset is in a difficult position. Historically, the yellow metal has benefited when stocks tumble, but more recently, so has the US dollar and the inverse relationship between gold and the dollar has held back the commodity’s gains. In the past week, gold has moved higher, and should the bullish move continue it might retest the 50-day moving average at $1,945.    

It was been a tough week for oil due to the ongoing health concerns and oversupply worries. At the start of the week, the news broke that more than 1 million died from Covid-19 – this chipped away at the energy market as dealers feared that demand would be hurt. The manufacturing data from China and Europe was largely respectable, while the US readings showed a small dip in activity. OPEC confirmed that output in September increased by 160,000 barrels per day. Libya and Iran were blamed for the jump, but both countries are not constrained by the group’s decision to curtail production. The overall risk-off sentiment due to the news surrounding President Trump has put even more pressure on Brent crude and WTI.        


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