By Geoffrey Smith
Investing.com -- Stocks fall as a rising coronavirus wave threatens fresh lockdowns, Microsoft (NASDAQ:MSFT) earned $1 billion a week in the third quarter, Turkey heads toward a currency crisis and oil slumps as U.S. crude stockpiles rise. Here's what you need to know in financial markets on Wednesday, October 28th.
1. Virus prompts global sell-off
Global stock markets sold off sharply as various countries again tightened restrictions on social gatherings in an attempt to break the trend of rising coronavirus infections.
Various German reports suggested that Chancellor Angela Merkel will try to close bars and restaurants for the whole of November at a meeting with state governors in Berlin on Wednesday.
The news comes only two weeks after the government’s council of economic experts revised down their growth forecasts for the next two years.
The DAX index led European stocks lower, falling nearly 3% to a four-month low. The yield on the German 10-Year government bond fell four basis points to -0.64%, its lowest since March. The Stoxx 600 index fell 1.8% to a five-month low.
2. Microsoft results stoked by Cloud, gaming
Microsoft earned $1 billion every week in the three months through September, riding a sustained wave of demand for Cloud-hosting, computers and video gaming.
Revenue rose 12%, thanks largely to a 48% gain at Azure, the company’s Cloud-hosting service, whose growth has been accelerated by the trend to remote working and restrictions on real-life socializing. The gaming content business, which revolves around the Xbox product, wasn’t far behind with a 30% gain.
The Redmond-based giant was the first of the so-called “gigacaps” to report earnings for the third quarter after the closing bell on Tuesday. Ominously perhaps, the stock sold off 1.5% in after-hours trading after failing to match expectations with its forecast for revenue in the current quarter.
3. Stocks set to open sharply lower
U.S. stocks are set to open sharply lower, with concern about the spread of the virus by no means confined to Europe. The U.S. posted another 74,000 new cases of Covid-19 on Tuesday, while hospital admissions are up 50% from a month ago at over 44,000, according to data from Covidtracking.com.
Some of the biggest surges in infections are in the upper Midwest, in electoral battleground states such as Michigan, Wisconsin and Ohio, which were largely spared the first two waves of the pandemic. Johns Hopkins University estimates that nearly 227,000 Americans have now died of the virus, more than in any other country in the world.
By 7:15 AM ET (1115 GMT), Dow futures were down 474 points, or 1.8%, S&P 500 futures were down 1.4%, while NASDAQ futures were down 1.1%.
VIX futures meanwhile, which track the level of market volatility, rose 5.7% to a three-week high.
In earnings, Boeing (NYSE:BA), Mastercard (NYSE:MA) and General Electric (NYSE:GE) lead a cast of thousands too numerous to mention, while Visa (NYSE:V) and Gilead Sciences (NASDAQ:GILD) top the billing after the bell.
4. Turkey spirals towards currency crisis
Turkey’s lira slid to a new record low against the dollar for the fifth day in a row, as investors lost faith in the ability of the central bank to prop it up against the dollar, which is now rising again due to safe haven flows in global currency markets. By 7:05 AM ET, the dollar was at 8.2962 lira, up 1.4% on the day and up over 20% from where the central bank was holding it in August.
The currency has been in freefall since the central bank chose not to raise interest rates at its meeting last week, and on Wednesday, the bank raised its inflation forecast for the year to 12.1% from 8.9%.
It hasn’t helped that President Recep Tayyip Erdogan has appeared intent on antagonizing all of Turkey’s most important international partners with its foreign policy in recent weeks: his government has upset the U.S. by advancing the purchase of sophisticated Russian missile defense systems, and is supporting Azerbaijan’s war with Russian-backed Armenia over the enclave of Nagorno-Karabakh. Erdogan has also ratcheted up tension with the EU in a dispute over oil and gas reserves in the eastern Mediterranean.
5. Oil slumps on demand fears, stockpile surge; Zeta looms
Oil prices fell to a three-week low in line with other risk assets as the surge in coronavirus cases across the northern hemisphere stoked fears of fresh demand destruction.
By 7:05 AM ET, U.S. crude futures were down 4.5% at $37.81 a barrel, while the international benchmark Brent was down 3.8% at $40.05 a barrel.
Sentiment had turned sour after the American Petroleum Institute reported the biggest weekly increase in U.S. stockpiles in over three months on Tuesday, at nearly 4.6 million barrels. The official government data are due at 10:30 AM, as usual.
Hurricane Zeta is due to make landfall later Wednesday as a category 2 storm, with the Alabama-Mississippi border set for the worst storm surges.