CNN Business/Julia Horowitz
Lockdowns in Europe are a warning to the United States
The coronavirus is surging again in Europe, forcing harsh new restrictions in London and Paris as governments carefully weigh their next steps. That’s bad news for the region’s economic recovery — and puts the United States on notice ahead of a difficult winter.
What’s happening: Paris has imposed an overnight curfew. In London, people from different households are banned from meeting indoors. The measures are an attempt to stem the rapid rise in Covid-19 cases across the continent as hospital capacity again becomes a concern.
Stocks in London, Paris, Milan and Frankfurt sold off sharply on Thursday before rebounding Friday. Markets aren’t tanking like they did in March, but the quick change in climate still presents a cautionary tale.
Bank of America’s economists in Europe put it simply in a note to clients on Friday: “Yes, it is bad.”
Big picture: There’s little reason to think that the challenge facing leaders in Europe — act decisively and try to stave off a worsening health crisis, or take moderate steps that could protect fragile economic gains — is purely a local phenomenon.
See here: New York City is grappling with a Covid-19 resurgence in some neighborhoods in Brooklyn and Queens by closing non-essential businesses and schools in certain areas, an attempt to avoid broader shutdowns for now.
Fox Business/Jonathan Garber
Biden blue wave sends bearish signal to stocks
A Democratic sweep in the upcoming election may not be the bullish event for the stock market that some investors are betting on, according to one Wall Street strategist.
While no sure thing, traders on the prediction market website Predictit are pricing in a 56% chance that Democrats take both houses of Congress as well as the presidency, allowing them to ram through bills including tax increases they say will fund their ambitious legislative agenda.
Former Vice President Joe Biden has promised to reverse at least some of President Trump’s corporate tax cuts on day one of his presidency. He has also promised to raise taxes on the highest earners and raise the capital gains levy to as high as 40%, up from 15%, for the wealthiest Americans.
Fears of a higher capital gains tax would cause “serious selling to take place in November and December,” Matt Maley, a Boston-based chief market strategist at Miller Tabak & Co., told FOX Business, noting the huge gains that have occurred in mega-cap tech stocks.
High-fliers like Apple Inc., Amazon Inc. and Microsoft Corp. have all climbed at least 250% since President Trump’s inauguration on Jan. 20, 2017. Those gains have been fueled by earnings generated under the president’s Tax Cuts and Jobs Act, which dropped the top U.S. corporate rate from 35% to 21%, among the lowest in the world.
Taking away those tax cuts is “going to hurt earnings,” Maley said.
Oil prices decline after China economic data disappoints
Oil prices fell on Monday after reports that China’s third-quarter economic growth did not rise as much as expected, underscoring concerns that surging coronavirus cases globally are impacting demand in the world’s largest oil importer.
The world’s second-largest economy in the third quarter expanded by 4.9% from a year earlier, missing analyst expectations, government data showed. Refiners in China, the world’s second-largest oil user, slowed their processing rates in September and industrial metal imports, underpinned by government stimulus, were lower.
Brent crude for December slipped 15 cents, or 0.4%, to $42.78 a barrel by 0405 GMT. U.S. West Texas Intermediate crude for November was at $40.70 a barrel, down 18 cents. The contract will expire on Tuesday.
Brent rose 0.2% last week while WTI gained 0.7%, after crude and oil product inventories in the United States, world’s top oil consumer, fell.
The Chinese data showed growth in goods and services is softening while the data on crude processing and industrial metals output, given a lifeline from fiscal stimulus, were “disappointing”, said Howie Lee, an economist at Oversea-Chinese Banking Corp (OCBC).
Last week’s meeting of the OPEC+ Joint Technical Committee reported a gloomier fuel demand outlook because of fears that a prolonged second wave of the COVID-19 pandemic and that a jump in Libyan output could push the oil market into surplus next year.
USA Today/Jessica Menton
More than 6M households missed their rent or mortgage payment in September
Persistent layoffs are slowing momentum in the labor market, which bodes poorly for the broader U.S. recovery as millions of out-of-work Americans delay their mortgage and rent payments.
More than 6 million households failed to make their rent or mortgage payments in September, according to the Mortgage Bankers Association’s Research Institute for Housing America, a sign that the economic fallout from the coronavirus pandemic is weighing on jobless Americans as Congress stalls on relief measures.
In the third quarter, the percent of homeowners and renters behind on their payments fell slightly from the prior quarter. Still, the overall amount remains high, experts caution.
Over the summer, rent and mortgage payment collections improved as states resumed business reopenings and more Americans returned to work. High unemployment, however, continues to place hardships on millions of U.S. households.
The unemployment rate fell to 7.9% from 8.4% in August, the Labor Department said earlier this month. Overall, the economy is still recouping jobs in outsize fashion after shedding a record 22.1 million in early spring, but the recovery is slowing.