Stocks open lower with banks under scrutiny

Stocks open lower with banks under scrutiny 150 150 Realm

Banks shares will be monitored today after media reports allege that some have been moving suspicious funds. The increasing number of coronavirus cases is also in focus again after the WHO warned that the virus is “not going away”.

 

Global Macro

  • The University of Michigan’s consumer sentiment for the US jumped to 78.9 in September from 74.1 in August, beating market expectations of 75. It is the highest reading since March, preliminary estimates showed. While the recent gain was consistent with an unchanged flat trend, the data indicated that the election has begun to have an impact on expectations about future economic prospects. September gains were primarily in the outlook for the economy, and it was Democrats that posted gains in economic prospects while optimism about the economy weakened among Republicans. The consumer expectations subindex rose to 73.3 from 68.5 and the gauge for current conditions went up to 87.5 from 82.9. Inflation expectations for the year ahead declined to 2.7% from 3.1% and the 5-year outlook went down to 2.6% from 2.7%. Over the next several months, how the election is decided and the delays in obtaining vaccinations will weigh on consumer sentiment.
  • The current account deficit in the US widened by $59 billion, or 52.9%, to $170.5 billion in Q2 2020, the biggest gap since Q3 2008. It is equivalent to 3.5% of the GDP, compared to 2.1% in Q1. It mostly reflects an expanded deficit on goods and reduced surpluses on primary income and on services. All major transactions declined in part due to COVID-19, as many businesses were operating at limited capacity or ceased operations, and the movement of travelers across borders was restricted. Exports went down mainly due to petroleum and products; civilian aircraft; parts and engines and passenger cars; and services of travel and air passenger transport. Receipts of primary income also went down mostly due to equity securities and primarily earnings. Receipts of secondary income fell due to primarily private sector fines and penalties and payments dropped on lower primarily private sector fines and penalties, and in general government transfers, primarily international cooperation.
  • The Eurozone current account surplus narrowed sharply to EUR 25.5 billion in July 2020 from EUR 34.6 billion in the corresponding period of the previous year, as the services surplus declined to EUR 8.2 billion from EUR 10.0 billion while the primary income account posted a EUR 7.2 billion deficit, compared to a EUR 3.6 billion surplus in July 2019. Meanwhile, the goods surplus increased slightly to EUR 35.6 billion from EUR 34.6 billion last year, while the secondary income gap narrowed to EUR 11.1 billion from EUR 13.6 billion.
  • Retail sales in the United Kingdom went up 0.8 percent month-over-month in August of 2020, the fourth consecutive month of growth and resulting in an increase of 4 percent when compared with February’s pre-pandemic level. Figures were slightly better than forecasts of a 0.7% rise. Spending for home improvements continued to rise in August with sales at household goods stores increasing 1.9 percent in August (vs 6.4 percent in July) and staying 9.9 percent up when compared with February. Sales at predominantly food stores rebounded (0.4 percent vs -3 percent) amid governmentsubsidized meals under the Eat Out to Help Out program. In contrast, online retail sales fell 2.5 percent, but the strong growth experienced over the pandemic has meant that sales were still 46.8 percent higher than February. Non-store retailing was 38.9 percent above February, while clothing stores were still 15.9 percent below February’s pre-pandemic levels. Year-on-year, retail sales increased 2.8 percent.
  • On Friday: European stocks ended notably lower amid rising worries about a surge in coronavirus cases across Europe and several other parts of the world, and growing uncertainty about the pace of economic recovery. US stocks initially showed a lack of direction but came under pressure over the course of the trading session. The major averages slid firmly into negative territory, extending the pullback seen over the two previous sessions. The weakness that emerged on Wall Street was partly due to a continued slump by technology stocks, with tech giant Apple (AAPL) showing a significant drop.

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