NEW YORK – Wall Street had its worst session in weeks, driven by spiking virus cases globally that could mean new business-strangling containment measures, as well as the worsening prospects of new stimulus for the US economy.
Despite months of arduous talks, there appears to be little chance Republicans and Democrats will hammer out a rescue deal to help cash-strapped Americans before the November 3 election, with both sides blaming the other for the impasse.
Analysts said investors had essentially given up hope of an agreement and were now betting on Joe Biden and a Democratic sweep of Congress that would open the way for an even bigger spending package in the new year – but any other scenario could mean further deadlock.
“There will probably be gridlock if Biden wins but the Democrats don’t take the Senate,” said Gregori Volokhine of Meeschaert Financial Services.
Adding to the negative sentiment was a surge of coronavirus cases across the United States and Europe, with the World Health Organisation on Sunday reporting a third straight day of record new infections globally.
“Rising Covid cases, no US stimulus and an election next week isn’t exactly the recipe for a strong week for equity markets,” said Craig Erlam, senior market analyst at Oanda trading group.
The Dow closed 2.3% lower, the index’s worst session since early September.
Democrats and Republicans in Washington have tried for months to agree on another massive stimulus package to help the economy recover from the Covid-19 downturn.
But there has been no agreement yet, with Treasury Secretary Steven Mnuchin saying last week “significant differences” remain with Democrats.
House Speaker Nancy Pelosi spoke with Mnuchin yesterday for just short of an hour, and her spokesman said she “remains optimistic that an agreement can be reached before the election”.
Second wave fears
Meanwhile, several countries including Britain, Germany and France reimpose tough restrictions to prevent Covid-19 from spreading.
“Naturally, growth concerns are at the root of the negative bias since the resurgence of the virus threatens more lockdowns and the lack of a stimulus deal threatens to exclude many struggling businesses and households from the economy,” said analysts at Briefing.com.
The coronavirus has so far claimed 1.1 million lives and infected more than 42 million people around the world.
In Europe, Frankfurt’s DAX 30 tumbled 3.7%, weighed down by a 22% drop in the share price of SAP.
The German software giant on Sunday downgraded its outlook for 2020, saying a resurgence in coronavirus cases would weigh on demand from “hard hit” customers.
London ended the day 1.2% lower and Paris fell 1.9%.
Oil prices slumped around 3%.
“The oil market is sensitive to the perceptions about global demand, and the sharp rise in Covid-19 cases in Europe and the US has spooked traders” as further lockdowns will reduce consumption, said analyst David Madden at CMC Markets UK.
Traders are also keeping tabs on a key policy-setting meeting of China’s Communist Party this week, which is expected to set the course for the world’s second-biggest economy for the next several years. – AFP, October 27, 2020
