Welcome to another week of trading! We’re here like clockwork to kick off your week with our unique spin on the classic trading preview. This week, we’re looking at the top potential threats to market tranquility as we approach Q4 2020. Following that, we’ll dish up the most important trading events for your calendar this week. Let’s go!
Are You Ready For This?
Just when you thought 2020 couldn’t get any worse, we’re here to bring you 3 of the potential hiccups that lie in wait as we enter the final months of the most tumultuous year in living memory. Don’t shoot the messenger, okay?
#1 Coronavirus Continues…
We thought we’d nip this one in the bud early on. We all know what the first enforced lockdown did to the global economy. Media hype around a second wave is whipping up a frenzy once again with reports of cases in Asia and Europe beginning to pick up. Should more lockdowns come into effect, businesses may fold, governments will buckle, and the crisis will continue to spiral.
COVID-19 Daily Cases
Add to this civil unrest in regions like Australia and calls to defund the police and we also risk additional economic trauma.
#2 The US Election
“Since 1932, an incumbent US president has never failed to win re-election unless a recession has occurred during their time in office.” So stated global market strategist, Maria Paola Toschi. Might this be the year?
As that 3 November date looms large, both Biden and Trump appear to be firing on all cylinders. Opinion polls are pretty pro-Joe at this point and have been for some time. Yet, we all know that opinion polls mean little in US elections. It’ll be down to a handful of key states to decide it, and they seem to be swinging blue.
Latest polling averages in battleground states
The impact that any president can have on the economy depends on their ability to actually get stuff done. To do so, control of both the House of Representatives and the Senate is necessary and both of these races currently look quite tight.
There is a chance that the Republicans could win the House in November. Although, the Democrats have a slightly lower chance of taking back the Senate. To be honest, investors will be pretty happy for the current political gridlock to continue, thus avoiding a scenario in which radical policies can be enacted. Calm is good!
With a global pandemic on your mind, you’d be forgiven for forgetting that this was even a thing. But, it is and the wheels are very much in motion. Last week, the chief EU negotiator, Michael Barnier warned the UK to start thinking of some concessions if they want to have any kind of future relationship with the EU and avoid a no-deal Brexit. Eeek!
If a deal can’t be agreed, then the UK will default to WTO terms from the 1st of January 2021 and would have to apply tariffs and quotas to goods coming into the country from the EU. Consequently, the EU would apply its own tariffs and quotas on the UK.
This all basically means the UK will be hit by really big, scary taxes when it tries to sell products to the EU market. At present, the EU’s WTO tariffs are 11.1% for agricultural goods, 15.7% for animal products and 35.4% for dairy. Not good for British farmers.
Additionally, carmakers would be hit with a 10% tariff on exports to the EU, which could amount to a not-too-insignificant €5.7bn per year. That would increase the average price of a British car sold in the EU by €3,000. Not good for British carmakers.
Not good, full stop! Will BoJo can pull a deal out of his hat?
What’s Going On This Week?
We highly recommend keeping an eye on the following events.
No major events scheduled.
● Japan will announce its Q2 GDP Growth Annualised Final figures (JPY)
● The EU will give us its estimates for Q2s QoQ and YoY GDP Growth Rates (EUR)
● China will report its August Inflation Rate YoY (CNY)
● The ECB will declare its Interest Rate Decision (EUR)
● The UK will announce its QoQ and YoY GDP figures for July (GBP)
● Finally, the US will report its YoY Inflation Rate figures for August (USD)
That’s all we have time for this week. If you like what you read here then you should contact us. We’ll be happy to discuss your specific content needs and provide you with a tailored solution.
The Contentworks team