Markets in Asia and Europe are largely being driven down by news on COVID-19 and dampened US stimulus hopes.
With global coronavirus cases passing 40 million mark, governments around the world have been imposing restrictions again.
In the UK, 18,803 cases were reported on Monday as Wales announced a two-week “firebreak” that will commence from Friday (23 October) evening. People will be expected to stay at home, apart from certain exceptions, while pubs, restaurants and non-essential shops will be closed.
Prime minister Boris Johnson faces increasing pressure to follow a similar move in England, with opposition leader Keir Starmer leading the calls.
COVID-19 cases are also rising across Europe. Ireland is to go into lockdown from Wednesday night. Austria has changed its limit on gatherings to six people indoors and 12 outdoors, while Slovenia has announced a 9pm-6am curfew from Tuesday.
Meanwhile, UK and EU chief negotiators met on Monday for Brexit talks. Later Michel Barnier confirmed on Twitter that “the EU remains available to intensify talks in London this week, on all subjects, and based on legal texts. We now wait for the UK’s reaction.”
On Friday (16 October) Johnson had announced that the UK should get ready to leave the transition period without a trade agreement in place.
“A bit like the US fiscal stimulus, this is now a political dance,” said Deutsche Bank analysts in a note. “We hope no one stumbles!”
Watch: Brexit talks intensify this week
In the US, weekly COVID-19 cases are set to rise above 400,000 for the first time since August, with the majority of outbreaks in regions that have already experienced heavy caseloads or had moderate first waves. The US Centers for Disease Control and Prevention issued a “strong recommendation” for masks to be worn by passengers and operators on planes, trains, buses and taxis.
US biotech firm Moderna (MRNA) said overnight that the US government could authorise emergency use of its COVID-19 vaccine by December if it gets positive interim results in November from a large clinical trial. However, AstraZeneca (AZN), Johnson & Johnson (JNJ) and Pfizer (PFE) have had their trials paused.
US Treasury secretary Steven Mnuchin and US House speaker Nancy Pelosi spoke late on Monday on stimulus package, but the latter told fellow Democratic lawmakers afterwards that significant areas of disagreement continue to stand in the way of achieving a deal.
“Even if there is a deal with the White House on this final day of negotiation, it might not be accepted by Republicans in the Senate,” said Sebastien Galy, senior macro-strategist at Nordea Asset Management.
“The odds of a deal being low, this tells us much about the battle between hope and the reality of an economy still under severe shock but recovering. Such tripping stones identify an anomaly such as a change of behavior but alone do not easily reveal the shape of the problem as we postulated it. Looking at the sub-sectors of the S&P 500, the worst performing are previously well performing ones and cyclicals such as consumer staples/discretionary which would fit our thesis.”
Asian markets were also also mixed.
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