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Dow Futures Gain As Markets Eye Stimulus 'Deadline', Rising Coronavirus Infections

Markets continue to track progress in stimulus talks between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin, but are paying closer attention to a weeks-long surge in coronavirus infections that is now triggering lockdown orders in Europe.

The Tuesday Market Minute

  • Global stocks edge higher as markets eye a self-imposed deadline on a stimulus agreement from House Speaker Nancy Pelosi.
  • Talks with Treasury Secretary Mnuchin will continue today, but any deal must also find favor with a Republican-controlled Senate.
  • European coronavirus infections rise by another record amount, with new lockdown orders issued in Ireland and Italy; U.S. cases are now running 10% higher than 10 weeks ago, with surges in at least 38 states. 
  • Procter & Gamble, Lockheed Martin and Travelers highlight an active morning for earnings, with IBM trading lower following last night's revenue beat.
  • Wall Street futures suggest a firmer open after softer-than-expected September housing starts data.

U.S. equity futures traded higher Tuesday as markets looked to a self-imposed deadline from House Speaker Nancy Pelosi on a stimulus agreement with Republicans while tracking the ongoing rise in coronavirus infections just two weeks away from the November Presidential election.

Stocks pared gains, however, after a weaker-than-expected reading for September housing starts, which rose 1.9% from last year compared to a 3.8% forecast. 

A spokesperson for Pelosi, the highest-ranking elected official in the Democratic party, said differences with Treasury Secretary Steve Mnuchin had narrowed following negotiations yesterday, and noted talks would continue later today on bridging the gap between rival coronavirus relief bills that -- crucially -- could find support in a Senate controlled by Mitch McConnell.

Pelosi set a 48 hour deadline on Sunday for any deal that could potentially be agreed and enacted before the November 3 elections.

Prior to any potential breakthrough, which analysts have suggested will be difficult if not impossible in the two weeks that remain before the November 3 elections, markets will navigate a batch of corporate earnings Tuesday, including updates from Procter & Gamble  (PG) - Get Procter & Gamble Company Report, Lockheed Martin  (LMT) - Get Lockheed Martin Corporation (LMT) Report and Travelers  (TRV) - Get Travelers Companies, Inc. Report, as well as reports of a formal antitrust lawsuit against Google  (GOOGL) - Get Alphabet Inc. Class A Report by the U.S. Department of Justice.

All of this will come amid a backdrop of rising coronavirus infections, which are 10% higher than levels seen two weeks ago and surging in at least 38 states around the country. In Europe, where new cases reached another record high yesterday, fresh lockdown orders have been imposed in Ireland as well as the Lombardy region of Italy.

Britain's decision to forego further talks on a trade deal with the European Union, following months of contentious negotiations, could also blunt investor sentiment as it raises the prospect of a market-disrupting 'hard Brexit' when the United Kingdom leaves the bloc at the end of this year.

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Wall Street futures, however, look set to claw back at least some of last night's losses at the start of trading Tuesday, with contracts tied to the Dow Jones Industrial Average suggesting a 100 point opening bell gain and those linked to the S&P 500, which is up 1.5% for the month of October, indicating a 14 point advance.

IBM  (IBM) - Get International Business Machines (IBM) Report shares were a notable early market mover, falling 3.25% after the iconic computing group declined to publish current-quarter revenue forecasts last night despite topping Street estimates on sales and earnings for the three months ending in September.

European stocks edged higher in early trading, boosted by better-than-expected earnings from Swiss banking giant UBS as well as news that Pfizer  (PFE) - Get Pfizer Inc. Report and its Germany based partner, BioNTech  (BNTX) - Get BioNTech SE Sponsored ADR Report, had started late stage trials of its developing coronavirus vaccine in Japan.

The Stoxx 600, however, quickly gave back those gains to fall 0.3% by mid-day trading, while Britain's FTSE 100 gained 0.1% in London.

Asia shares, too, were able to claw their way into positive territory despite concerns linked to the rise in global COVID infections, which topped the 40 million mark on Sunday, and the broader market caution linked to the impending U.S. elections.

The region-wide MSCI ex-Japan benchmark bumped 0.01% into the green heading into the close of trading, while the Nikkei 225 in Tokyo ended the session 0.11% higher at 23,567.04 points.

Away from equities, the U.S. dollar index extended declines against its global currency peers to trade 0.1% lower on the session at 93.305, while benchmark 10-year Treasury note yields were little-changed at 0.774%.

Global oil prices were also on the back foot, with traders citing reports from a meeting of OPEC officials that suggested the cartel had made no decision on reversing an earlier plan to increase supply at the end of the year, a move that, when coupled with ebbing demand amid coronavirus lockdowns will likely add further downward pressure to a market already awash will excess crude.

WTI contracts for November delivery, the U.S. benchmark, traded 16 cents lower from their Monday close in New York and were changing hands at $40.90 per barrel in early European dealing while Brent contracts for December, the global benchmark, were seen 23 cents lower at $42.39 per barrel.