A wave of selling has hit European indices this morning, as disappointment over possible US stimulus combines with new lockdowns across Europe.

  • Investors take flight from risk after Munchin comments.

  • Greater restrictions in Europe hit equities.

  • Airlines fall on Ryanair news.

A broader risk-off tone has enveloped markets this morning, as yesterday’s losses in the US are amplified in Europe where lockdown restrictions are spreading once again. Steve Mnuchin’s comments about a US stimulus bill now looking unlikely before the election were perfectly placed to unseat a market that had rallied hard on hopes of such stimulus, perhaps naively. While talks are set to continue today this looks very much like both sides are going through the motions so as to appear reasonable to floating voters, as all eyes turn to the impending election. After a straight-line move higher last week US markets have finally edged back, but unsurprisingly it is in Europe where the losses have really taken hold, as the implementation of new lockdowns in key European capitals underscore the magnitude of the task facing governments and health authorities. European risk assets have been sold in an unseemly rush, with the FTSE 100 already back to the 5800 level that marked the low in September. US futures however point towards a weak open there as well, with the optimism of the recent rally now giving way to widespread risk aversion that could turn into a bigger selloff ahead of the election, a perfect excuse to unload some risk and then start reaccumulating once the result is known, assuming that the contest is swiftly decided of course.

Investors in airlines are very jumpy at present, and Ryanair’s news this morning has prompted another flurry of selling in the sector. easyJet, Ryanair and IAG have all tumbled, with airlines on the continent feeling the pressure too. It looks like we have a tough winter ahead of us, with commensurate pressure on airlines as travellers cancel bookings and consumers think twice about a winter getaway.

Ahead of the open, we expect the Dow to start at 28,262, down 252 points from Wednesday’s close.

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