U.S. and European Stocks Traded in the Red on Monday

U.S. and European stock markets ended on bearish territory on Monday. New reports showed that the coronavirus pandemic is hurting business. Furthermore, investors doubt that Washington lawmakers will reach an economic stimulus package soon. As a result, sentiments turned negative, and stocks declined.

Futures on the S&P 500 Index plummeted down by 1% while the Stoxx Europe 600 Index plunged by 0.7%. Meanwhile, the MSCI Asia Pacific Index lowered by 0.2%, and the MSCI Emerging Market Index tumbled down by 0.4%.

German software maker SAP SE collapsed by 21%, suffering its biggest intraday decline since 1999. The company cut its revenue forecast, stating that the pandemic will continue to hurt business through mid-2021. This news triggered its decline. Furthermore, the announcement caused losses across other tech stocks. As a result, Europe’s Stoxx Tech Index experienced its biggest one-day drop since March.

As usual, investors turned to haven assets for protection. Treasuries surged forward, sending yields on the 10-year lower. The U.S. dollar also strengthened versus most other major currencies, while gold changed insignificantly.

Meanwhile, Turkey’s lira weakened through 8 per U.S. dollar after the country’s central bank rattled traders last week by unexpectedly keeping rates on hold. Geopolitical risks have also sapped interest in Turkish assets.

Despite all turbulence, investors remain focused on the prospect of a U.S. economic stimulus package even though time is running out to finish a deal before the election. According to House Speaker Nancy Pelosi, President Donald Trump needs to push forward on stimulus talks. On the other hand, Treasury Secretary Steven Mnuchin announced that there’d been significant progress. However, he blames Pelosi for holding up an agreement. 

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What do the experts think?

Peter Rosenstreich, the head of the market strategy at Swissquote Bank SA, stated that the current mood in the market is bracing and non-committal. Still, the worries around the coronavirus pandemic and U.S. fiscal stimulus are dominating the market. According to him, everyone is talking up the Blue Wave. But behind the scenes ‘what if 2016 repeats?’ is keeping traders cautious.

After U.S. infections hit a record for the second day, the World Health Organization’s director stated that some countries in the northern hemisphere are facing a “dangerous moment.” European countries are already tightening restrictions on businesses. Italy introduced its strongest measures since May while Spain has announced a nationwide curfew.

In other markets, oil futures in New York tumbled down below $39 a barrel. The MSCI Asia Pacific Index also plunged by 0.2%, while Japan and South Korea posted declines.