A mixed day for Europe, while Wall Street is heading for its worst week since March as election day nears.
The downside risks that have been evident in these markets for weeks are slowly materializing and the next big uncertainty - the US election - is now upon us. It's little surprise investors are heading for the havens, there's hardly an abundance of good news out there.
The breakdown of stimulus talks on Capitol Hill was a bitter blow - and, bizarrely, seemingly an unforeseen one - and its been downhill since. The surging number of Covid cases and lockdowns in Europe has seriously taken its toll as well and stoke memories of March when the walls were closing in and it became a matter of when, not if, we'd be next.
The lockdowns may not be quite as severe as earlier this year but when they arrive they will be very restrictive with some businesses forced to close, others seeing a fraction of the footfall and the rest of us spending most of our time at home as social gatherings are discouraged or banned altogether. It's going to take a significant toll on the economy.
The election is up next and, whatever the result, investors will surely be hoping for the smoothest possible outcome. It obviously won't be straightforward and there will be controversy but a challenge to the result will create the uncertainty this market - and the US itself - desperately needs to avoid. A bit of good news will be very welcome.
Oil back under pressure
Oil couldn't hang on to earlier gains, slipping back into negative territory as the session wore on. WTI is closing in on $35 again and further losses are looking likely. The next key level is $33, a particular area of interest back in May when crude was trading around these levels.
This also coincides with $35 in Brent, a break of which could be the tipping point as far as OPEC+ are concerned. There's a couple of weeks until the next JMMC meeting and the next full meeting of OPEC and its allies isn't until the end of November/start of December. Can they afford to wait that long? A move back towards $30 may force them to act sooner, in some form or another. A postponement of January's two million barrel increase may be enough for now.
Gold bounce nothing to get excited about
Gold prices are bouncing back a little at the end of the week but I'm not particularly encouraged. The yellow metal has come under pressure this week as risk appetite has deteriorated and the dollar has come back into favour. This may just be a bit of a technical bounce after gold fell back to the Augst and September lows around $1,850.
Gold continues to look vulnerable and a break below $1,850 is now looking increasingly possible, especially if this week's risk aversion carries into next. The first couple of days in particular will be interesting as Covid news over the weekend isn't going to be positive, barring a shock vaccine announcement. A break of $1,850 will potentially open up a move back towards $1,800.