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Stock markets sell off on renewed uncertainty over COVID-19 and U.S. election – CBC.ca

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Stock markets around the world sold off on Monday as surging coronavirus infections prompted a new wave of fear and uncertainty, barely a week before a U.S. election that could reshape global geopolitics.

The Dow Jones Industrial Average finished the day at 27,685, down 689 points or 2.3 per cent. At the lowest point, the benchmark group of 30 large U.S. companies was off by more than 900 points.

The broader S&P 500 and technology-focused Nasdaq fared slightly better, but both closed down by almost two per cent.

The reason for the selling was a new wave of fear washing over markets as COVID-19 infections are rising to record levels in many places.

Spain’s government declared a national state of emergency on Sunday that includes an overnight curfew, while Italy ordered restaurants and bars to close each day by 6 p.m. and shut down gyms, pools and movie theatres.

Numerous Latin American nations also set their own daily case records over the weekend.

After two record days of more than 80,000 new cases over the weekend, the seven-day average of new cases in the U.S. is now at 68,767, according to data compiled by Johns Hopkins University. 

“And nobody is quite sure about what the response is going to be,” said Colin Ciezinsky, chief market strategist with SIA Wealth Management. “Are we going to see widespread lockdowns or more targeted rollbacks? Markets are like a deer caught in headlights.”

TSX down, too

Canadian stocks got swept up in the gloom, although on the whole they held up comparatively better.

The TSX’s main index lost 257 points, down 1.6 per cent on the day. 

Travel-related companies were hit hardest, with shares in Air Canada losing more than $1 to close at $15.91. Those same shares were valued at more than $50 apiece in January, but that was before COVID-19 wiped out demand for air travel.

Energy companies were battered too, as the price of oil lost more than three per cent with a barrel of the North American benchmark known as WTI closing at $38.52 US.

Oil’s sell off was mainly due to COVID-19, said Judith Dwarkin, chief economist at Enverus. “COVID’s second wave or third wave has enveloped Europe and prompted a new raft of travel restrictions,” she said. “It’s not surprising there’s heightened volatility in the market.”

Surging coronavirus infections have prompted a new wave of uncertainty on stock markets. (Lucas Jackson/Reuters)

Shares in three of the biggest oil companies in Canada — Cenovus, CNR Limited, and Suncor — all fell. Cenovus plunged by eight per cent to $4.47 despite news the company was planning to take over smaller rival Husky in a $23 billion deal.

U.S. election impact

Renewed coronavirus fears were the main thing roiling markets, but the U.S. election was also a contributing factor, Ciezinsky said.

“People are starting to take money off the table,” he said. “They aren’t sure what the result might be or if it is disputed [so] this is about fear and uncertainty. People don’t know what’s going to happen.”

Hopes are also fading that Democrats and Republicans will come together on another stimulus package, but Esty Dwek, head of global market strategy at Natixis Investment Managers, said some sort of deal is likely once the uncertainty of the election can be settled.

“It’s going to be a little bit volatile in the next week depending on the results, but we’re not expecting weeks of uncertainty,” she said.

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Canada's economy bounced back at record 40% pace in third quarter — but GDP still below pre-COVID level – CBC.ca

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Statistics Canada said Tuesday the economy grew at a record annualized pace of 40.5 per cent in the third quarter as businesses came out of COVID-19 lockdowns.

The previous record for quarterly growth in real gross domestic product was 13.2 per cent in the first quarter of 1965, the agency said.

As historic as the rebound was, it fell short of expectations.

Financial data firm Refinitiv said the average economist estimate was for an annualized growth rate of 47.6 per cent for the quarter.

The rebound over July, August and September was a sharp turnaround from the preceding three-month stretch, which saw a record drop.

Driving the rebound were the further rolling back of public health restrictions that allowed businesses to reopen.

Statistics Canada also said there was a substantial increase in the housing market owing to low interest rates, as well as household spending on goods like cars.

GDP still lower than it was in February

Despite the overall increase, the national statistics office said real gross domestic product still remains shy of where it was before the pandemic.

The third quarter ended with the fifth consecutive monthly increase in real GDP after the steepest monthly drops on record in March and April when widespread lockdowns were instituted to slow the spread of COVID-19.

September saw a 0.8 per cent increase in real GDP, Statistics Canada said, a slight slowing from the 0.9 per cent recorded in August.

The agency also provided a preliminary estimate for October’s figures, saying early indicators point to a 0.2 per cent increase in the month. The figure will be finalized at the end of this month.

“The fourth quarter of 2020 is still beginning with some growth, though less than we had anticipated,” CIBC senior economist Royce Mendes wrote in a note.

“Looking ahead, the economy faces a December with harsh restrictions that will likely see another contraction in economic activity.”

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Statistics Canada says economy grew at a record pace in Q3 – CityNews Toronto

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Statistics Canada says the economy grew at a record annualized pace of 40.5 per cent in the third quarter as businesses came out of COVID-19 lockdowns.

Financial data firm Refinitiv says the average economist estimate was for an annualized growth rate of 47.6 per cent for the quarter.

The rebound over July, August and September was a sharp turnaround from the preceding three-month stretch saw a record drop.

Driving the bounce-back were the further rolling back of public health restrictions that allowed businesses to reopen.

Statistics Canada also says there was a substantial increase in the housing market owing to low interest rates and household spending on goods like cars.

Despite the overall increase, the national statistics office says real gross domestic product still remains shy of where it was before the pandemic.

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China’s factories crank up output, but jobs, debt remain concerns – Aljazeera.com

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China’s factory activity expanded at the fastest pace in more than three years in November, while growth in the services sector also hit a multi-year high, as the country’s economic recovery from the coronavirus pandemic stepped up.

Upbeat data released on Monday suggest the world’s second-largest economy is on track to become the first to completely shake off the drag from widespread industry shutdowns, with recent production data showing manufacturing now at pre-pandemic levels.

But companies are still not expanding their payrolls, the figures show, and some analysts point to rising debt levels among state-owned firms as another possible headwind for the economy.

China’s official manufacturing Purchasing Manager’s Index (PMI) rose to 52.1 in November from 51.4 in October, data from the National Bureau of Statistics showed. It was the highest PMI reading since September 2017 and remained above the 50-point mark that separates growth from contraction on a monthly basis. It was also higher than the 51.5 median forecast in a Reuters poll of analysts.

“The latest official PMI surveys show that the pace of economic growth picked up in November on the back of a broad-based improvement in both services and manufacturing,” Julian Evans-Pritchard, senior China economist at research firm Capital Economics, said in a note sent to Al Jazeera.

China’s blue-chip share index hit a 5-and-a-half-year high following the data release.

Acceleration

The robust headline PMI points to solid fourth-quarter growth, which analysts at Nomura expect to quicken to 5.7 percent compared with the same period last year, from 4.9 percent in the third quarter, an impressive turnaround from the deep contraction earlier this year.

China’s official Purchasing Managers’ Indices [Bloomberg]

The economy is expected to expand by about 2 percent for the full year, the weakest in more than 30 years but still much stronger than other major economies that are struggling to bring their coronavirus outbreaks under control.

The official PMI, which largely focuses on big and state-owned firms, showed the sub-index for new export orders stood at 51.5 in November, improving from 51.0 a month earlier. That bodes well for the export sector, which has benefitted from strong foreign demand for medical supplies and electronics products.

Also helping activity in November were aggressive e-commerce shopping promotions, which unleashed solid consumer demand and bolstered confidence for small and medium firms.

But a surging yuan and further lockdowns in many of its key trading partners could pressure Chinese exports, which have been surprisingly resilient so far.

More companies have reported the impact from currency fluctuations, compared with a month ago, said Zhao Qinghe, senior statistician at the NBS.

“Some firms have flagged that as the yuan continues to rise, corporate profits are under pressure and export orders are declining,” said Zhao.

He added that the recovery across the manufacturing industry remained uneven. For example, the PMI for the textile industry has stayed below the 50-point threshold, pointing to weak business activity.

Consumer comeback

In the services sector, activity expanded for the ninth straight month. The official non-manufacturing Purchasing Managers’ Index rose to 56.4, the fastest since June 2012 and up from 56.2 in October, as consumer confidence gathered pace amid few COVID-19 infections.

Railway and air transportation, telecommunication and satellite transmission services and the financial industry were among the best-performing sectors in November.

A sub-index for construction activity stood at 60.5 in November, improving from 59.8 in October, as China steps up infrastructure spending to revive its economy.

Monday’s data also showed that the labour market is still facing strains. Services firms reduced payrolls at a faster clip in November, while factories slashed staff for the seventh straight month, although at a slower pace.

“The continued recovery reduces the need for further monetary easing, but any shift to tightening is also unlikely given continued labour market pressure,” said Erin Xin, Greater China economist at HSBC.

Another factor that could prove problematic for China is rising levels of debt among regional governments and state-owned enterprises (SOEs).

“The recent wave of SOE debt defaults has contradicted the overall data improvement, including the latest PMI,” wrote Daiwa Capital Markets economists Kevin Lai and Eileen Lin in a research note sent to Al Jazeera.

“Many of these companies should have benefited from a nascent recovery since the economy reopened. However, most of these companies are owned and controlled by local governments,” they said.

“They have been allowed to raise more funds from the bond market and run bigger fiscal deficits when the pandemic began to hit the local economy. Hence, when domestic demand indicators turn better, it is usually a result of more debt-driven stimulus being injected into various industrial sectors.”

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