Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
After a choppy week, European stock markets rallied on Friday on news that Gilead Sciences’ Remdesivir drug received approval from the US regulator as a treatment for Covid-19 (the first FDA approved treatment), but markets still finished the week down.
This morning, oil prices have fallen more than 2% and Asian shares are mostly down. Rising coronavirus cases around the world and new government restrictions, along with growing doubts that a US fiscal stimulus package can be passed before next week’s election, are weighing on markets.
The US has announced its highest ever number of new Covid-19 cases in the past two days and Spain has declared a state of emergency. The virus has infected more than 42 million people globally and led to 1.1 million deaths. You can read more on our coronavirus live blog here:
Brent crude, the global benchmark, has lost almost a dollar, or 2.27%, to $40.82 a barrel while US light crude is down 2.43% at $38.88 a barrel.
David Madden, market analyst at CMC Markets UK, explains:
Oil is under pressure on the back of concerns that supply from Libya will rise as rival factions have called a ceasefire and that should pave the way for an increase in output. The worries about rising coronavirus cases in Europe and the US has sparked demand concerns.
Almost half of British small businesses (48%) fear the impact of the second coronavirus wave, far more than they fear the impact of Brexit (24%), according to research from business finance provider Nucleus Commercial Finance released today.
Small and medium-sized firms are also concerned about how their business will survive reduced consumer spending due to lack of financial confidence (28%) and their ability to recover from the impact of coronavirus (25%). In contrast, nearly a fifth (18%) of SMEs said they were not fearful of anything.
Businesses have adapted by shifting teams to remote working (27%), offering their products and services online (19%), and a further 13% have started offering new products and services.
One more week to go in the US presidential race. Markets have moved to price in the chance of a Democratic president and Senate, which would probably mean more government spending and borrowing. This has driven up US 10-year Treasury yields to their highest levels since early June.
Analysts at NatWest Markets said:
We have raised the probability of a Democratic sweep, already our base case, from 40% to just over 50%, and have increased our expectation of Biden to win from 65% to 75%. We see steeper US yield curves and a weaker US dollar as likely to prevail in our base case.
The Democrats face a tough challenge to reclaim control of the Senate. They are up against the Republicans’ 53-47 majority. With 35 seats up for re-election it will probably come down to seven key races.
In Beijing, the central committee of China’s ruling Communist party led by president Xi Jinping is meeting this week to map out an economic plan for the next five years. Markets are wondering whether China’s leaders will be more flexible in terms of growth targets, after dropping this year’s target because of the pandemic.
The economic calendar is light today, with the German business confidence survey from the Munich-based Ifo Institute for Economic Research the main event.
Later in the week, the Bank of Canada, Bank of Japan and European Central Bank hold their monthly meetings. Markets are not expecting much action this week, but the ECB could pave the way for more stimulus in December.
9am GMT: Germany Ifo business confidence for October (forecast: 93; previous: 93.4)
2pm GMT: US New Home sales for September (forecast: 2.8% month on month)