Mark Lister, 2 November 2020

It was a rough week for global sharemarkets, with sentiment turning sharply cautious in the wake of fresh partial lockdowns in Europe and the UK, as well as rapidly rising COVID-19 case numbers in the US. The looming US election and an increasing regulatory spotlight on technology companies also weighed on markets.

The S&P 500 in the US fell 5.6%, its worst weekly performance since March, when markets were in the depths of the 2020 bear market. The index is now 8.7% below the record high from early September, although it remains in positive territory (up 1.2%) year to date.

European shares were down 5.6%, the FTSE 100 in the UK fell 4.8% and the Australian ASX 200 declined 3.9%. The more defensive local market held up better than most, falling just 3.1% for the week. However, this was still the biggest weekly decline we’ve seen since April. The top performers in the NZX 50 last week were Fonterra (+5.0%), Skellerup (+3.7%) and Freightways (+1.2%), while Kathmandu (-9.3%), Air New Zealand (-7.2%) and SkyCity (-6.7%) lagged.

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The upcoming week will be very busy. The main event this week will be the US presidential election on Tuesday 3 November. Polls have tightened in recent weeks, although Joe Biden is still ahead by 7.8 points, according to realclearpolitics. PredictIt odds also point to a Biden victory, suggesting the former Vice President has a 67% chance of winning. However, Donald Trump has proved the doubters wrong before, so it would be brave to rule him out completely. Few will be surprised if Trump performs better than many polls suggest, although there does appear to be a large gap to bridge if he is to cause an upset like he did four years ago. Similarly, most forecasters expect the Democrats to take control of the Senate as well (although by a narrow margin), which would give the party more control over executing its agenda.

Outside of the election, there are plenty of economic releases to follow. A highlight will be the Institute for Supply Management (ISM) manufacturing index for October, which is due on Monday. Last month, the ISM index slipped slightly, falling back from August's 21-month high of 56.0 to a still impressive 55.4. This was the fourth consecutive month of expansion for the US manufacturing sector, which accounts for 11% of the economy. The new orders sub-index, which is a good indicator of future growth, also slowed. It fell from 67.6 in August (which was the highest since 2004) to 60.2 in September.

The global reporting season continues, with dozens more companies set to announce results. Some of the highlights this week will include Clorox, PayPal, Qualcomm, Alibaba, Zoetis and CVS Health.

On the local front, the September employment report will be of most interest, while markets will also be watching the latest dairy auction results and the RBNZ survey of expectations. Several companies are reporting earnings, including Pushpay, Z Energy and TrustPower, while Chorus and Spark will hold annual meetings.

Across the Tasman, the Reserve Bank of Australia (RBA) could announce further monetary stimulus on Tuesday, which is Melbourne Cup day. After a dovish speech last month, some economists are expecting the RBA to cut the cash rate from 0.25% to 0.10% and unveil a large scale asset purchase programme at this meeting, while others believe the RBA will hold off given the positive reopening developments in recent weeks. Investors across the ditch will also be watching earnings releases from Westpac, National Australia Bank and Macquarie Group, as well as annual meetings from Amcor, Coles and James Hardie.