Daily Briefing: Stock market rally hits pause

Knife-edge Brexit talks dragging on (new deadline: Sunday) and deadlocked U.S. discussions over a coronavirus aid package are no good premise for stock market bulls. European and U.S. equity futures are in the red, following pullbacks in Asia.

Some of that is also down to the hit U.S. tech suffered on Wednesday, when Facebook was hit by lawsuits which could force it to sell prized assets WhatsApp and Instagram. EV maker Tesla, set to join the S&P 500 next week, also came under pressure after JPMorgan’s warning the firm was “dramatically” overvalued.

On the bright side, the European Central Bank is expected to announce an enhanced and extended pandemic stimulus programme, though that’s already baked into markets. And a two-day EU summit kicks off and will likely unblock a stalled 1.8 trillion-euro spending package.

Meanwhile IPO frenzy continues. Food delivery firm DoorDash rose over 80% in its debut, valuing it at $71.3 billion, boding well for home rental startup Airbnb, which makes its own highly-anticipated market debut on Thursday. The year has generally been a bonanza for IPOs, as the following chart shows:

Finally, notwithstanding growth doldrums and the grim COVID-19 death toll, inflation expectations as represented by U.S. breakeven rates have climbed almost to the Fed’s approximate 2% threshold.

Key developments that could provide more direction to markets on Thursday:

-ECB meeting

-EU starts two-day summit

-Central bank meetings in Serbia, Peru, Ukraine

UK RICS housing survey

UK GDP rose 0.4% in October (vs 1.1% in September)

-U.S. data on core CPI/weekly jobless claims