Good morning,

It was a bit of a shocker for markets yesterday, with downtrends across Europe and the US. The moves were expected with the continued increases in Covid cases and the chatter of lockdowns. Germany’s Dax had a particularly bad day, falling nearly 4%, but this was largely driven by software giant SAP falling almost 25% following a profit warning. Adding to that, a story in newspaper Bild said that Angela Merkel might impose ‘lockdown light’, by where bars, restaurants and public events close but schools and shops remain open. The FTSE was down more than 1% and the US S&P500 close to 2% lower on the day, though this has virus concerns as well as election uncertainty in the mix.

The European slowdown and possible lockdown has got many wondering just when the ECB might signal that they’re ready to act again. The data due this week and next are likely to confirm what we already know; the recovery is stalling. With the ECB already so heavily invested, they’ve not really got any choice but to double down and try and ride things out. There’s a central bank meeting this week and though we’re not likely to get any explicit action, markets would probably be soothed enough by some words of support from Christine Lagarde that her team (and money machine) will be there when it needs to be. As it stands, the ECB still has plenty of money still in the original pot that it allocated for bond buying, so they could accelerate purchases if needs be, but this is more an exercise in market stability than it is in spurring consumption. As such we’re sure Ms Lagarde will be dropping some hints that countries might want to take some more radical fiscal stimulus steps too.

In the UK, there are calls growing for the PM to make clear what the criteria is for a region to be moved out of tier three. This comes as more areas in the north and midlands are being put into the category, which will place more than 8 million people under the tightest of lockdown measures. At the moment there is little more being said than ‘the restrictions will be reviewed after 28 days’ and calls for local improvements to test and trace have largely been left unanswered by Whitehall. 54 MP’s have written to the PM, warning him that his pledge to level up the North is being undermined by the measures and have urged him to prioritise investment projects there. The Times has more.

US Supreme Court Judge Amy Coney Barrett was confirmed yesterday in a vote that saw the opposition Democrats unanimously vote against her appointment – the first time that has happened in 150+ years. The Senate Republican majority won the day, with only one dissenting voice, Susan Collins of Maine who crossed the aisle and voted with the Democrats. Ms Barrett could now be getting to work as early as today and she will undoubtedly be called upon to rule in any election disputes that may arise next week.

In what now seems like a fairly trivial piece of news: China are set to miss their year one US product purchase targets, which were agreed upon as part of the phase one trade agreement. China are falling well below targets in just about every category, even agriculture which would be the easiest area to ramp up purchases in. There are mixed signals over whether this is intentional by China, or whether because of Covid and other factors China’s best efforts have still fallen short. However, it is a two year deal and this does mean that they can catch it back up – though the numbers for 2021 product purchases ramp up significantly versus what was expected this year. The Wall Street Journal has the story.

Ant financial is probably the biggest company that you’ve never heard of, and is set to debut on the public markets with the largest IPO on record. It’s the parent company behind Alipay, the financial services spin off of Alibaba and will raise almost $35bn when it goes public, which will value the entire business at more than $300bn. The company is the predominant financial services provider to the Chinese consumer, with mobile payments, loans, credit cards, insurance and wealth management services all rolled into one app! The Company has 1.3billion users – dwarfing that of the only marginally comparable company, PayPal, which has 350 million – and is going to make a dual listing on both Shanghai and Hong Kong stock markets next week. The location of the listing makes perfect sense given the location of the customer base, but it’s also a bit of a coup for China who will have managed the largest float in history, something they’ll have taken away from New York.

Overnight we’ve seen Asia’s equity markets follow the rest of the world lower and Europe’s early trading also looks like there is a continuation of that theme. Data today is limited in the European session and the US data this afternoon isn’t of enough interest to warrant a wholesale change in sentiment, even if it does beat expectations.

Have a great day.

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