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European markets closed lower on Monday despite the firm open; the FTSE 100 ending –0.55% at 5,886 and the DAX off –0.41% at 12,855. The Euro Stoxx 50 declined 0.12% to 3,241. All are treading their well-worn ranges.

Wall Street had something of a drubbing after opening higher with a broad-based selloff leaving the S&P 500 and Nasdaq –1.6% lower and close to the lows of the day at the close. The S&P 500 sits comfortably above the 50-day SMA at 3,400 but another down day could test this. Futures point mildly higher this morning.

Softness is evident again today: Asian equities were mixed with Shanghai up and Tokyo down. European shares were broadly lower at the open but remain well above last week’s lows.

There wasn’t a huge lift for travel stocks despite Heathrow introducing one-hour Covid tests to enable passengers to fly in and out of the UK without needing to quarantine. IAG rose almost 2% but EasyJet and Ryanair fell. Initially it will only be available for flights to Hong Kong and Italy, which require pre-departure testing. However, it indicates that the world is slowly reopening and adapting.

In Washington, there are signs the two main parties are closer to achieving a pre-election stimulus package and are narrowing their differences.

Still, it looks like ‘fading stimulus hopes’ clearly did for stocks yesterday. House Democrat leader Nancy Pelosi’s self-imposed deadline for agreement expires today – the door of opportunity is barely even ajar.

Federal Reserve vice chairman Richard Clarida said more monetary and fiscal stimulus is required, another year for GDP to return to 2019 levels and even longer to achieve full employment. Christine Lagarde, the ECB president, echoed these comments by saying that the recovery in the eurozone would be set back by new restrictions to fight the disease.

The pound is steady despite threats of a no-deal exit from the transition period. Brexit no-deal commander-in-chief Michael Gove indicated that there is a wide gap between the sides however we know they are talking, and both the EU and UK want a deal. Michel Barnier said the EU could compromise with Britain and begin detailed discussions around the legal texts this week.

No one is walking away – it’s all part of the negotiations. GBPUSD was knocked back from the 1.30 resistance but sits comfortably above the 1.2860 support area around 1.2920 as of send time. Just a hint of weakness in early trade but still well within recent ranges.

Minutes from the Reserve Bank of Australia’s latest meeting showed rates could go lower than they are now.

Policy members discussed ‘the case for additional monetary easing to support jobs and the overall economy’ and specifically talked about ‘reducing the targets for the cash rate and the 3-year yield towards zero, without going negative, and buying government bonds further along the yield curve’.

And whilst they cautioned that ‘the transmission of easier monetary policy had been impaired as a result of the restrictions on activity’, members felt it ‘reasonable to expect that further monetary easing would gain more traction than had been the case earlier’.

Asst governor Christopher Kent followed this up by saying there is room to cut rates further. The Aussie drifted lower with AUDUSD looking to the key horizontal support at 0.70 in view.

Oil got a lift as Saudi Arabia’s energy minister said OPEC+ will do “what is necessary” to rebalance the oil market. However, rising Covid cases is weighing heavily on demand forecasts and it will likely take more than mere jawboning to support the market.

Saudi Energy Minister Prince Abdulaziz bin Salman also noted that some countries were slow in compensating for past overproduction. WTI (Dec) couldn’t break the $41.50 resistance zone and retreated to take a $40 handle, still towards the top of the Sep-Oct range. API inventories later today – shut-ins along the Gulf of Mexico due to Hurricane Delta ought to see another drawdown.

Netflix earnings are on tap today. A big focus for the market will be the number of subscribers Netflix managed to add in the third quarter. Lockdowns around the world delivered a huge boost in the first half of 2020, with paid net subscriber additions soaring to 26m from 12m during the same period a year before.

The company has forecast 2.5m paid net adds for Q3 versus 6.8m in the prior year quarter as the surge in H1 likely pulled forward some demand from the second half of the year. However, this could be a very conservative estimate and Netflix could beat this number handsomely with growth outside the US seen improving off the back of some very successful local language releases. Netflix is getting good at ‘tamping down expectations’ so I expect guidance to be conservative and I think the market understands this.

Investors will also be looking at the expected cash burn as production schedules fill up again; the investment in content is both a cost but also seen as an important lever for Netflix in overcoming rivals in an increasingly competitive space. Spending on content is set to exceed $13bn this year and Netflix continues to borrow heavily – it raised $1bn in April and has over $15bn in long-term debt.

Goldman Sachs, which has previously noted that the company’s “massive content investments, global distribution ecosystem and improving competitive position will further drive financial results significantly above consensus expectations”, recently raised its price target on the stock to $670 from $600, citing better-than-expected Q3 results as a likely bull catalyst.

Election Watch – 14 days to go

Betting markets are narrowing – in the last week Biden’s chances have come in from 67 to 61, whilst Trump’s have improved from 33 to 40. Nationally Biden leads by 8.9% but polls in key battlegrounds are far tighter and tightening, with Biden’s lead down to 4.1%. At this stage in 2016 Trump was 5pts behind Hilary Clinton in the most important swing states. The final debate takes place on Thursday – can Trump deliver a blow to the Biden campaign?

Chart: Cable remains steady despite Brexit noise

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