Global stocks fall, dollar rises as stimulus talks fade and COVID cases spike

Good morning. We are a mere eight days to Election Day. Curfews, COVID and crumbling stimulus talks are conspiring to create a deeply risk-off mood, dragging down global stocks and U.S. futures.

Reminder: it’s a packed calendar for corporate earnings this week. Will that be enough to lift investors’ spirits?

Let’s check in on the action.

Markets update

Asia

• The major Asia indexes are mostly lower in afternoon trading with Shanghai down 0.8%.
• The recent rally in global solar and wind producers can primarily be pinned to China’s pledge to go carbon neutral by 2060. The S&P Global Clean Energy index is up more than 20% since President Xi Jinping’s big carbon-cutting vow on Sept. 22, the Financial Times reports.
• Samsung Group chairman Lee Kun-hee, one of Asia’s most influential businessmen, passed away at 78. He transformed the Korean conglomerate into a giant in tech, shipping and insurance. His death, however, may create something of a headache for his heirs who now face a $10 billion inheritance tax bill.

Europe

• The European bourses sank out of the gates with Germany’s DAX down a whopping 2.7% at the open on COVID concerns and weak corporate earnings news. SAP reported a giant miss that saw its stock fall 20% in early trading.
• Italy and Spain introduced new measures to try to combat the brutal second wave of COVID cases. In Spain, there’s now a nationwide 11 p.m. curfew while Italy will shut bars and restaurants every evening and is urging Italians not to travel through Nov. 24.
• Shares in AstraZeneca were up 0.7% at the open on promising news that its COVID vaccine, being developed by Oxford University, has produced “a robust immune response” in the elderly, the FT reports, citing unnamed people in the know.

U.S.

• U.S. futures are solidly in the red this morning. That’s after the major exchanges all closed lower for the week last week. They’re still positive for the month, however.
• COVID cases are again spiking in the United States with a second straight day of record infections reported. That’s an ominous sign for the Trump campaign. It’s uncanny how Trump’s standing in the polls align with the ups and downs of the pandemic. Fortune has charted the correlation, dating back to March.
• For the few of you wondering about stimulus talks… The only development this weekend was more finger-pointing between the White House and House Speaker Nancy Pelosi.
• It’s a huge earnings week with reports coming from all five FAAMG stocks, plus Pfizer, Caterpillar, AMD and Chevron. Thursday is a particularly busy day for Big Tech shares.

Elsewhere

• Gold is down, trading around $1,900/ounce.
• The dollar is up.
• Crude is down with Brent futures trading below $41/barrel.

***

Our uncertain path to normal

Pandemic economics is a tough field, even for the pros. That’s mainly because we all have a different level of risk we’re willing to tolerate. That makes sense. You may have cut back on eating out and refuse to get on an airplane while your neighbor is proceeding as if it’s still 2019. These differing attitudes towards risk, taken across an entire economy, can make forecasting the recovery anything but straightforward.

I spoke last week with Chris Murphy, President & Global Lead of Market and Brand Strategy at Ipsos, the polling and consumer sentiment specialists. They’ve been tracking since the early days of the pandemic public attitudes towards COVID—specifically, whether people are ready to return to some level of normalcy, or whether they prefer to hunker down and limit contacts in an effort to keep themselves and their families COVID-free. Ipsos tracks these attitudes weekly across 16 countries, including the U.S., Germany, France, China, Brazil and the U.K.

No matter where you look, it’s not a pretty picture. In the Ipsos chart below, you see that virus is still front and center in the minds of most panelists. The percentage of respondents who say that they’re adapting to the restrictions of life with COVID is the most prominent grouping, as represented by the big hump in the center of the chart. Nearly one-third (31%) of respondents would put themselves in the “acclimation” grouping.

Everything to the right of that “acclimation” point reflects a trend line towards greater confidence in reopening/re-starting/returning to normal. In other words, if the economy were truly on the no-looking-back road to recovery we would see relatively high response rates here. Instead, we see the responses at fairly deflated levels, and even growing more pessimistic over time, since the summer.

Back in March, Murphy notes, 80% of U.S. respondents expressed their confidence that the pandemic threat would all but fade away by June. Remember those days? “Now,” he says, “the return to normal just keeps extending. It just withdraws further and further into the future.”

As second and third waves grip much of the developed world, many of us are are filled with a sense of foreboding and uncertainty. Will things improve by Christmas? By the spring? Should I put off that business trip? When will they reopen the schools? When can I start going back into the office?

These questions come up time and again as new lockdown measures are announced, and we have to recalibrate when things will be safe enough to embark on a new normal.

In reviewing IPSOS’ findings, I thought about something UBS chief economist Paul Donavan wrote a few weeks ago as the COVID numbers started spiking again across Europe last month and new curfews and restrictions were reintroduced. “The economic impact of fear of the virus,” he wrote, “is greater than restrictions.”

That’s not meant to be a knock on this latest round of tightening measures. It’s just that the longer the pandemic goes on, the greater the uncertainty in the minds of the public. And that’s the thing that usually keeps market-based economies from growing to their full potential.

***

Postscript

It’s that time of year again. 

At dinner last week, the girls broke the news to my wife and me that the school headmaster had laid down the law: there will be no Halloween celebrations at the school this year. 

The headmaster, Padre Giulio, is fighting a losing battle. And he must know it. Romans are crazy about Halloween. 

In the 15 or so years I’ve been living here I’ve seen the holiday grow from a fringe curiosity celebrated by American expats to a full-blown cultural phenomenon. In fact, I struggle to think of an American cultural import that’s grown quite so big so fast. All manner of businesses—hairdressers, dry cleaners, hardware stores, pasta shops—in my neighborhood are decorated in some variation of the ghost-goblin-witch-pumpkin schtick these days. The bakeries sell orange-tinged jack-o-lantern cookies. Despite COVID, the kids on the street plan to trick-or-treat, I overheard a bunch saying the other day.

(In Italy, the kids tend shout at whomever answers the door, “dolcetto, scherzetto!” It comes out as an order, not a this-or-that question).

In casa Warner, the only Halloween tradition we faithfully keep is that of carving the pumpkin. There’s usually a crowd of cheering children egging me on. In a town full of Bernini masterpieces, the modest jack-o-lanterns I sculpt—their crooked smiles and woefully off-center eyes—are hailed as true wonders. This always baffles me. More baffling still, I typically get repeat requests from parents the following year. “Faraí la zucca ancora quest’anno?,” they ask, code for: Can we come to your house this year to see you do your Halloween thing?

A few years ago, when my daughter was recovering in the hospital from a tricky surgery, I smuggled pumpkins and knives into the nephrology ward, thinking I could put on a little pumpkin-carving show for the kids. Word spread fast and a film crew showed up to shoot my handiwork. It was one of my worst efforts, but my daughter was over the moon excited. (You can view what they shot here. Just don’t judge my carving skills, or the production team’s musical choice for the score.) 

Back to Padre Giulio … if the girls were disappointed by the headmaster’s order, they did a decent job of concealing it. Or, at least they weren’t nearly as bothered by the news as my wife. She’s no flag-waving fan of Halloween, but she hates the misinformation that many devout Italian Catholics attach to the event—that it’s some demon-worshipping American pagan holiday. Halloween’s roots are Celtic, and historians credit Irish Catholics in the 19^th Century for popularizing it in America. Eventually, it took off and became a global hit. 

Truth is my kids are as much Irish-American as they are Roman. And so it’s important they understand the real story behind Halloween, my wife tells them in Italian over a meal of pasta Amatriciana. 

I can’t see my girls publicly challenging Padre Giulio on his edict. They adore him, partly because he’s hardly the dogmatic type. I don’t know him all that well, but the girls tell me he’d get a kick out of watching me carve a pumpkin.

Maybe next year.

***

Have a nice day, everyone. I’ll see you here tomorrow. 

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's reads

Lost generation. Which demographic has been hardest hit by the COVID-19 pandemic? You could start with recent college graduates and their peers. The unemployment rate for Americans aged 20 to 24 was 12.5% in September, the highest among adults. Their job prospects are dismal, and if the Great Recession of 2008-2010 is any indicator, it could be years before they find decent employment and can begin to pay off their student loans.

EV bubble? There's been a veritable traffic jam of electric vehicle startups to have gone public this year, scoring multi-billion-dollar valuations despite never coming close to reaching profitability. Should investors be nervous about these high-flyers? Fortune's David Z. Morris examines the IPO frenzy and waves a caution flag.

Crash position. Nobel laureate Robert Shiller has for years presided over a number of investor sentiment gauges, and some of them are beginning to flash red. "An overwhelming majority of investors said there was a greater than 10% probability of an imminent crash—really, a remarkable indicator that people are quite worried," Shiller writes in his New York Times column.

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Market candy

Quote of the day

“Our recent performance sucks. And our record over most of the last five years has been so sucky that even if we outperformed mightily over the next five, we would still have—at best—a drab return looking back over those 10 years.”

That's Ted Aronson, legendary investor and founder of the the Philadelphia-based value-investing firm, AJO, speaking to the Wall Street Journal. He recently decided to give back $10 billion to his clients and shut down his firm, a bad sign for value-investing advocates.