Market snapshot: banking sector results and stimulus worry

Results from US banks have not been an overwhelming success, and UK Plc remains out of favour too.

With stimulus hopes fading fast and a mixed set of performances from the US banks, markets have succumbed to a bout of profit taking.

Goldman Sachs (NYSE:GS) has proved to be the exception rather than the rule for the banking reporting season over the last few days, with disappointing showings from Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) adding to the casualty list. The cautionary comments on likely loan defaults, which have not yet come through in force, and the subsequent negative share price reactions does not bode well for the UK banks, who begin reporting at the end of next week with Barclays (LSE:BARC).

Meanwhile, hopes of a fiscal stimulus before the election seem to have evaporated. Indeed, the current impasse on negotiations for an immediate fiscal package has potentially turned the issue from being a pre-election vote winner to the post-election justification of a new appointment.

Investor nervousness has brought the Dow Jones back into negative territory for the year, albeit by a marginal 0.1%. Gains in the other indices were also shaved, although the S&P 500 remains ahead by 8% and the Nasdaq up by 31% in the year to date.

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Markets across the globe have most recently reacted to an increasing number of renewed lockdowns, with Covid-19 resurfacing uncomfortably in some areas and with hopes of an imminent vaccine in some doubt.

The UK has been similarly affected, with localised lockdowns piling further pressure on a beleaguered economy. As the latest Brexit deadline approaches, seemingly without sufficient progress, it appears that the optimal outcome for now would be an extension to the talks in a mutual effort to avoid a no-deal outcome.

In the meantime, the FTSE 100 index has slipped once more and is currently down by 22% in the year to date. With no obvious catalyst emerging in the shorter term, it is an investment destination which many overseas investors will likely continue to avoid.