Gold slides on dollar rally as U.S. stimulus remains elusive
· Gold fell as much as 2% and silver nearly 6% on Wednesday as investors flocked to the dollar in the absence of signs of any imminent U.S. fiscal stimulus measures to ease the economic blow from the COVID-19 pandemic.
· Spot gold hit its lowest since Sept. 28 at $1,869.21 per ounce before recovering to $1,881.41. U.S. gold futures fell $32 to $1,879.20.
· Silver slumped as far as $23, its lowest since Oct. 7.
· “The metals were so dependent on more stimulus at this point and the bear camp is fully in control right here,” said Bob Haberkorn, senior market strategist at RJO Futures.
“Overall, the gold market is lower on a strengthening dollar due to the lack of stimulus measures and risk-off mentality heading into this election.”
· The dollar jumped 0.6% to a more than one-week high against a basket of other major currencies, with the prospect of fresh European lockdowns weighing heavily on the euro and accelerating a tumble in equities.
· Despite recent volatility, gold, considered a hedge against inflation and currency debasement amid unprecedented global stimulus, is still up about 25% so far this year.
· Analysts said that although precious metals prices had dipped, the move was not yet being precipitated by a rush to cover losses elsewhere and meet margin calls, as happened in March.
· U.S. President Donald Trump said on Tuesday that an economic relief deal would likely come after the Nov. 3 election.
He also questioned the integrity of the U.S. Presidential election, saying it would be “inappropriate” to take extra time to count the millions of ballots cast by mail.
· David Meger, director of metals trading at High Ridge Futures said the global pick-up in coronavirus cases was also just as important.
“All of those are responsible for the pick up in volatility and the downside in metals prices.”
· Platinum fell 0.6% to $873.33 and palladium, shed 3.8% to $2,242.56.
· U.S. goods trade deficit shrinks in September
The United States’ trade deficit in goods narrowed sharply in September as exports increased, sealing expectations for record economic growth in the third quarter.
The goods trade deficit decreased 4.5% to $79.4 billion last month, the Commerce Department said on Wednesday. Exports of goods rose $3.2 billion, while in imports fell $0.5 billion.
· Gilead’s revenue rises 17% driven by sales of coronavirus treatment remdesivir
Gilead Sciences reported stronger-than-expected third-quarter earnings on Wednesday as sales of its coronavirus treatment remdesivir touted by President Donald Trump drove revenue up by 17% from last year.
Gilead’s antiviral drug remdesivir, selling under the brand name Veklury, last week became the first and only treatment granted full approval by the U.S. Food and Drug Administration for treating Covid-19 patients. The coronavirus treatment generated $873 million in sales during the third quarter, mostly in the U.S., the company said.
Gilead’s total sales were $6.5 billion in the third quarter, up from $5.5 billion a year ago and more than the $6.3 billion analysts expected. The company reported adjusted earnings of $2.11 per share, higher than the $1.90 per share projected by analysts surveyed by Refinitiv.
· VACCINE HOPES DENTED
Hopes that new treatments might curb the spread were dented when the head of Britain’s vaccine procurement task force said that a fully effective vaccine may never be developed and that early versions were likely to be imperfect.
The European Commission called on European governments to step up their response and coordinate testing strategies and said there was still time to hold back the disease.
“The situation is very serious, but we can still slow down the spread of the virus if everybody takes responsibility,” Commission President Ursula von der Leyen told a news conference.
The economic cost is likely to be heavy, wiping out the fragile signs of recovery seen over the summer and raising the prospect of a double-dip recession. European stock markets hit their lowest levels since June on Wednesday while the euro fell against the dollar.
While leaders have been desperate to avoid the crippling cost of lockdowns, the new measures reflect mounting alarm at the galloping pace of the pandemic from Spain, France and Germany to Russia, Poland and Bulgaria.
· Traders worry vaccine complacency is the new risk to the market
Dr. Anthony Fauci, chief of the National Institute of Allergy and Infectious Disease, admits he doesn’t know how effective a vaccine will be. “We don’t know if it will be 50% or 60%,” Fauci said at a Brown University event in August. “I’d like it to be 75% or more” but that may not be realistic, he added.
Michael Yee, managing director and biotech analyst at Jefferies, is hopeful the results for one or more of the studies will be above 50% efficacy.
“The market will start to get worried if we go into November and December and we haven’t heard anything,” he said, adding that stocks were not at all set up for a failure. “If we have efficacy rates in the 40s for all the results, that would be a huge disappointment and the markets would certainly have a problem.”
· CORONAVIRUS UPDATES:
· Germany, France announce new Covid restrictions as outbreaks surge across Europe
Germany and France announced tough new restrictions on businesses Wednesday meant to curb the spread of the coronavirus as the countries respond to worsening outbreaks.
Germany reported a record spike of 14,964 new cases on Wednesday, according to its disease control agency. The country has reported an average of more than 11,100 new cases of the virus per day over the past week, up more than 61% compared with a week ago, according to a CNBC analysis of data compiled by Johns Hopkins University.
French President Emmanuel Macron announced later on Wednesday that he would impose a second national lockdown that will require people to remain in their homes except when venturing out to buy essential goods, seek medical attention or exercise.
The restrictions will begin Friday and last until Dec. 1, he said. The country has reported an average of more than 38,700 new cases of the virus per day over the past week, up over 54% compared with a week ago, Johns Hopkins data shows. Macron said he would ease the lockdowns once the country is able to suppress the daily number of cases to roughly 5,000 per day.
Italy reported a record spike of 24,991 new cases on Wednesday, its Health Ministry said. The country has reported an average of more than 18,600 new cases of the virus per day over the past week, up over 88% compared with a week ago, Johns Hopkins data shows.
“We are deeply in the second wave now,” Ursula von der Leyen, president of the European Commission, said at a news briefing Wednesday.
· ECB is set to hold fire and signal more easing in December amid lockdown fears
The Governing Council of the European Central Bank will meet this Thursday for a scheduled monetary policy meeting, and the backdrop couldn’t be bleaker.
Lockdowns are being re-imposed across Europe as Covid-19 cases are surging and the economic outlook is deteriorating by the day, which will continue to weigh on inflation. The ECB however is not yet expected to add to its stimulus, but rather to signal action for December.
“We expect a clear signal for action in December coming from the meeting,” writes Dirk Schumacher of Natixis in a note from last week. “The risk to the recovery is rising again and latest inflation data have disappointed undershooting again staff projections. All this should clear the way for an increase of the PEPP in December.” The PEPP is the ECB’s pandemic emergency purchase program, first instituted in March.
· Global economic rebound at risk from rising coronavirus cases: Reuters poll
There is a high risk the resurgence in coronavirus cases halts the global economic recovery by year-end, according to Reuters polls of around 500 economists, a majority of whom expected the rebound next year to be weaker than previously thought.
· The post-Covid ‘zombification’ of advanced economies is here to stay, EIU warns
The coronavirus pandemic is likely to cause a long-lasting “zombification” of the global economy, a prominent research firm warns.
Agathe Demarais, global forecasting director of the Economist Intelligence Unit, suggested that those “zombie” features previously associated with the “Japanese economy — slow growth, low inflation and high debt — will become common across advanced economies” following the pandemic.
· Russia’s central bank remains cautious on interest rate moves as growth forecast is lowered
In both its September and October meetings, Russia’s central bank chose to keep its key rate steady at 4.25%, a total reduction of 350 basis points since June of the previous year. Nabiullina’s emphasis was on being cautious, she said.
“The autumn Covid-19 escalation has led to some slowdown in the recovery, and that is why we revised our forecast for this year only plus half a percentage point, and we expect this year the economy will contract by between 4[%] and 5%,” Russian central bank chief Elvira Nabiullina said. That figure is still not as bad as that of the World Bank, which says that Russia’s economy could contract by 6% for 2020.
· Surge in online holiday shopping will pack 2 years of growth into one season, Adobe says
This holiday season is likely to have a whopping 18 days where digital spending tops $3 billion in a 24-hour window, Adobe said. Last year, outside of the window of Thanksgiving to Cyber Monday, there were only three such days, Adobe said. The firm expects online sales will surpass $2 billion every day from Nov. 1 to Nov. 21, as parents look to stock up on hot toys like collectible Rainbocorns, Cutetitos plush stuffed animals and new video gaming consoles.
Through Dec. 31, Americans are likely to spend $28.1 billion more using their smartphones compared with 2019. That will account for 42% of all online sales during the holidays, and mark 55% year-over-year growth for mobile devices, Adobe said.
The e-commerce gains could go even higher if consumers receive another round of government stimulus checks or if brick-and-mortar stores are forced to shut down again to curb the spread of Covid-19, said Jason Woosley, vice president of commerce product and platform at Adobe. Should those two things occur, Adobe expects consumers could spend an extra $11 billion online, pushing total holiday spending past $200 billion.
Adobe also predicts more consumers will shop online on Black Friday this year, as the appeal of standing in line before daybreak for doorbuster deals fades. Retailers are also actively courting shoppers on the web, partly via ads on Instagram and TikTok. Americans are expected to spend $10.3 billion online the day after Thanksgiving, Adobe said, up 39% year over year.
· Biden’s polling lead adds to market fears the economy will need to wait until next year for stimulus
As some market participants think they have a better handle on who is going to win the presidential race, that’s actually thrown another level of uncertainty into stocks.
National polling shows former Vice President Joe Biden holding about a 7-point lead over President Donald Trump, an advantage that has stayed fairly consistent through October. At the same time, prediction markets are giving Biden about a 63% chance of winning, a number that also has held during the month.
The possibility of a Biden victory complicates something markets have placed a high priority on, namely getting a stimulus bill through Congress sooner rather than later.
If Trump does lose, he would have less incentive to push a big spending package through during the lame-duck period. And that could leave the economy and the market in an uncomfortable lurch well into January.
While a Biden victory likely would lead to an even bigger stimulus package ultimately, that is not enough to soothe the market’s jangled nerves now.
Two months might not seem like such a long time normally, but with Covid-19 cases raging around the world and climbing sharply in the U.S., time is becoming the market’s enemy.
Many small businesses report that their cash supplies are dwindling rapidly, with tens of thousands expected to fold in the next six months absent any help from Washington. Stimulus in January could help, but economists worry about economic scarring that could occur should gridlock continue in Congress.
Investing pros anticipate that the current decline ultimately will lead to a fresh buying opportunity once a stimulus measure does get passed, though it could be a rough ride until then.
· U.S. corporate spending plans could stumble as risks rise
An expected rebound in capital expenditures for U.S. companies could be more at risk, as concerns over the economic recovery and a possible contested U.S. election mount.
· UK rejects 'Britain First' trade policy, taking swipes at U.S. and EU
· Cramer on the sell-off: ‘It’s very hard to buy a lot of stocks when you see these’ case numbers
CNBC’s Jim Cramer said Wednesday that a lack of coronavirus stimulus is making it hard for investors to buy stocks into a worsening of the United States’ Covid-19 outbreak.
“It’s very hard to buy a lot of stocks when you see these numbers,” Cramer said on “Squawk Box,” as U.S. stocks were headed to steep declines
Reference: CNBC, Reuters, Worldometers
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