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Investors are once again grappling with myriad factors, hopes and fears, but U.S. stocks look set to open higher on Monday.
Coronavirus infection rates have risen in a number of countries and states yet investors appear to be shaking off those concerns, instead focusing on the economic recovery. Stock futures YM00, +0.63% ES00, +0.71% NQ00, +0.89% were all up early on Monday.
In our call of the day, UBS said the Federal Reserve’s “unambiguous” story would drive stocks higher in the medium term and said now wasn’t the time for investors to be sitting on the sidelines. The central bank unveiled plans to start buying a broad and diversified portfolio of corporate bonds last week, sending stocks higher. Other central banks, including the Bank of England and the European Central Bank, have implemented further support in recent days.
The analysts, led by chief investment officer Mark Haefele, said three narratives were currently driving markets; the ‘Fed story’ — ongoing central bank stimulus — the second-wave story, and the U.S. election story. Fears of a second coronavirus wave have come to the fore in recent days, with spikes in Beijing, Germany and a number of U.S. states. The UBS team said that U.S.-China tensions fed into the election narrative, which would come into focus over the next four months.
“Overall we see the second-wave and U.S. election stories as contributing to market volatility as headlines feed investors’ hopes and fears about the speed and strength of the economic recovery. But it is the Fed story that will endure over the medium term,” they said in a note on Monday. They said they were positive on the outlook for both equities and credit, preferring USD high yield, Asian high yield and USD-denominated emerging market sovereign bonds as well as stocks in sectors that have so far lagged behind the market.
“Against this backdrop, we think the most important thing an investor can do is to be invested, rather than sitting on the sidelines. As earnings are likely to recover in the second half of the year and excess liquidity continues to support risk assets, we see further upside potential in global equities, in particular among sectors that have lagged the rally so far,” they added.
The market
After closing 208.64 points lower on Friday as Apple AAPL, -0.57% said it would re-close some stores due to rising cases in some parts of the U.S., the Dow Jones Industrial Average DJIA, -0.80% was set to open higher on Monday. Dow futures YM00, +0.63% were 0.9% up before the open, while S&P 500 futures ES00, +0.71% and Nasdaq futures NQ00, +0.89% were both 0.8% up. European stocks SXXP, -0.44% were mixed, despite fears the coronavirus spread could force countries to reverse lockdown easing measures.
The buzz
Wirecard WDI, -37.90% shares plummeted further on Monday, as the German payments processor conceded that a missing €1.9 billion in cash probably doesn’t exist.
American Airlines AAL, -2.97% said on Sunday it plans to raise $3.5 billion in new financing to boost its liquidity amid the coronavirus pandemic and the subsequent collapse in travel demand.
U.S. President Donald Trump said he did not sanction China for building mass-detention camps for Uighurs and other ethnic minorities because doing so would have jeopardized the trade deal signed in January, Axios reported on Sunday.
Banks, including Credit Suisse CS, -0.68%, have won court orders to liquidate tens of millions of dollars in Luckin Coffee LK, -3.53% stock owned by embattled chairman Charles Lu.
More than 21,000 people have signed a petition urging Disney DIS, -3.39% to overhaul its Splash Mountain theme park ride to remove racist references. The popular ride is based on the controversial 1946 Disney film “Song of the South.” Disney didn’t respond to requests for comment.
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