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30.10.202010:47 Forex Analyse & Reviews: US stock indices recovered from negative dynamics, while the Asia-Pacific one declined

The US stock indices rose yesterday, against the background of economic data in the United States. It was reported that the number of initial claims for unemployment benefits declined last week, and the US GDP for the 3rd quarter showed significant growth.

Exchange Rates 30.10.2020 analysis

As the market reacted to this immediately, the Dow Jones Industrial Average rose by 139.16 points (0.5%) and reached 26659.11 points, breaking the consecutive decline for four days. At the same time, the S&P 500 index grew by 39.08 points (1.2%) and stopped at around 3310.11 points, while the Nasdaq Composite showed an increase of 180.72 points (1.6%) and reported 11185.59 points. Despite this, all three indexes are still likely to close the week with a significant decline.

The Cboe Volatility Index, which shows investors' expectations regarding the scale of fluctuations in the US stock market, declined yesterday, but remains close to its highest level since the summer season began.

Nevertheless, we still have clear positive dynamics due to the official data from the United States, which shows that 751,000 Americans sent initial unemployed claims. The number of similar applications last week was 791,000. This positive breakdown suggests that the labor market is slowly recovering, although the level of applications continues to remain high by historical standards.

In addition, the annual growth of US GDP in the 3rd quarter amounted to 33.1% against the previous quarter. And this despite the fact that there was a decline in GDP a few months earlier in the US in view of COVID-19 and strict quarantine measures, which caused a serious impact to the economic activity.

Following the close of trading, Alphabet, Facebook, Apple and Amazon.com posted higher-than-expected earnings figures. The reason for this is changing consumer behavior during the COVID-19 pandemic. The shares of these companies in 2020 distinguished themselves by rapid growth.

Alphabet rose the most after Thursday's closing (8.0%), as parent company Google reported an increase in ad revenue. On the other hand, apple shares declined 4.0% in view of their refusal to provide a profit forecast, while Twitter fell 15% amid slowing user base growth.

The securities of a small number of these corporations now make up a significant part of the S&P 500 base. This means that the perception of the state of these giants on the part of investors will somehow affect the overall mood of the markets and their volatility.

Speaking of volatility, many experts believe that it will continue until the end of this year and may continue next year, until the prospects for the release of the coronavirus vaccine become clearer. Analysts recommend treating today's market fluctuations calmly, explaining them by the uncontrolled growth of COVID-19 cases and the upcoming US presidential elections. In connection with the latter, many investors intend to refrain from trading larger until November 3.

It is obvious that this week's growth of the US and European markets was hindered by concerns about the rising cases of COVID-19, the tightening of existing quarantine restrictions and the emergence of new ones, which could significantly slow down the economic recovery. According to official statistics, there were about 79,000 cases of COVID-19 in the United States as per Wednesday. The number of new cases exceeds 70,000 for the second day in a row.

The situation in Europe is also quite tense. So, on Wednesday, France and Germany introduced new restrictions on the work of enterprises and public institutions – restaurants, shopping centers and bars are closed for several weeks in the hope of containing the spread of the coronavirus. The authorities of both European countries are trying to minimize the economic losses from these restrictions and state that the factories and schools will continue to operate as usual for now.

However, the sell-off that occurred this week may slightly balance the situation, prompting investors to buy shares and partially recover losses to stock markets. During a correction, market participants often come to the stock exchanges and find a good time to buy. Fortunately, investors still have enough profit, and most of them do not have problems with liquidity.

US stock market

The price of Ford Motor Co. increased by 2.6% after the automaker's report on net profit for the 3rd quarter (it amounted to about $ 2.4 billion). On the other hand, Alexion Pharmaceuticals rose 2.9%, with earnings and sales above forecasts.

Kraft Heinz also rose by 2.8% following the company's earnings report that exceeded analysts' expectations.The yield on the 10-year United States Treasury bond, in turn, rose to 0.834% from 0.780% on Wednesday.

The ICE dollar index rose 0.6%. The dollar most often increases when stock indexes decline, since it is considered a safe haven currency.

As we can see, the US stock market showed a slight positivity today, which is the first time since the week began. Meanwhile, leading stock indexes of the Asia-Pacific declined in the negative direction due to the uncertainty about global recovery of the economy.

Asia-Pacific market

In this regard, the index of the Shanghai Stock Exchange Shanghai Composite declined by 0.1% and reached 3269.45 points today, while the Shenzhen Exchange Composite fell by 0.45% (2239.42 points), followed by Hong Kong Hang Seng Index by 0.03%, (24580.22 points).

Moreover, South Korean KOSPI fell by 1% and stood at 2303.38 points, Japanese Nikkei 225 by 0.57% and showed 23199.28 points, while Australian S&P/ASX 200 rose 0.01% (5961.3 points).

The alarming growth rate of COVID-19 globally as well as the related quarantine measures are among the main factors of negative dynamics in the Asian markets.

Oil market

However, there is no positive trend in the black gold market. The price of a barrel of Brent crude oil fell by 3.8% and now costs $ 37.65.

Uitgevoerd door Irina Maksimova,
Analytische expert
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