Take Five: US election countdown, a Chinese plenary session and the ECB

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1 / ALMOST DA

FILE PHOTO: Campaign signs are posted near the Supervisor of Elections Office polling station as people line up for early voting in Pinellas County ahead of the election in Largo, Florida. USA October 21, 2020. REUTERS / Octavio Jones

The final week of the 2020 U.S. presidential race will test the persistence of the Biden trade – assets believed to be sensitive to the political fate of Democratic challenger Joe Biden, who has expanded his lead over President Donald Trump in recent weeks.

Signs of Biden reaching a strong end could benefit alternative energies, cyclical stocks, and cannabis companies. The Invesco Solar ETF TAN.P, for example, is up 10% this month on hopes of a possible democratic victory.

But a comeback in Trump’s polls could boost conventional energy companies and technology stocks, which would mean a drop in profits from Biden’s proposed tax hikes.

– The Biden tax hike might not be that bad for big banks

– Trump-Biden conflict over climate change is adding to cloud over oil stocks

For a graph on Trump stocks vs. Biden stocks:

2 / CONCLAVE

China’s Communist Party leaders will meet in Beijing October 26-29 to agree on the next five-year economic plan. The conclave is a closed-door affair, but it is clear that shifts are underway.

Sources suggest China is poised to lower its growth targets. Goldman Sachs says there may be no destination at all; China has already abolished one for 2020. Commodity traders believe trade tensions could fuel inventory plans, especially for materials that China is not locally available, such as copper.

Still, the markets are viewed with optimism as investors bet that regardless of China’s political attitudes, they are unlikely to be as accommodative as the United States’. That means the yawning yield differential between the US and China remains wide and the yuan remains strong.

– China’s blueprint for copper stocks expected in the 5-year plan

– China leaders advocate lower growth target for 2021-2025 at key meetings – Sources

A graphic of the political differences that are driving yield hunters to China:

3 / WHEN, NOT WHEN

The European Central Bank will meet on Thursday and there is a key question for the markets: will the ECB provide further stimulus in December?

There is no immediate pressure to act as the emergency stimulus was raised not long ago. But the case for more action is getting stronger every day as a second wave of COVID-19 brings new restrictions and economic pain.

Many economists expect the ECB to step up quantitative easing in December when their latest forecasts are due. Preliminary Eurozone inflation data for next week could also provide guidance for investors. Any signals from the ECB that the outlook has worsened would reinforce the case for a stimulus package in December – perhaps an early Christmas present to the markets.

– Eurozone POLL recovery at serious risk as COVID-19 cases escalate

– New virus-related restrictions increase uncertainty, says Lagarde of the ECB

For a graphic on the ECB’s QE policy:

4 / PAYMENT PERIOD

Europe’s banks, whose stocks have hit record lows, are on a mission to restore dividend payments to win back investors.

Healthier lenders were a reliable source of payments to shareholders – until the ECB and Bank of England put the kibosh on it. Both will review their bans in the coming months.

UBS, which has just been forced to stagger its dividends, promised a shareholder return of $ 2.5 billion for next year this week. Santander will ask shareholders next week to approve a cash dividend in 2021.

With HSBC, Credit Suisse, Lloyds, Natwest, and BBVA set to deliver results in the coming days, investors will be looking closely at what type of repayments are offered.

-Barclays beats earnings forecasts but warns of difficult times

-Ermotti hands over a $ 1.5 billion repurchase stock to Hamers after UBS lost profits

A chart on the bank dividends in the euro zone:

5 / Guess who’s back?

Bitcoin is back in the spotlight. The original crypto BTC = BTSP was up around 75% this year as investors looked to its supposedly anti-inflation properties and quick profit reputation.

On Wednesday, it hit the highest level on PayPal’s news since July 2019 PYPL.O will open its network to cryptocurrencies. That’s a big breakthrough for Bitcoin, crypto fans say – the payments heavyweight embrace could herald wider usage.

However, it is questionable whether PayPal’s move will help in the long term. Bitcoin has seen similar boosts in the past and then lost steam. It rose over 50% in eight days last year after Facebook released its still-to-be-launched Libra token – before plummeting 35% within a month. Will it be different this time?

– Is PayPal’s crypto move a game changer for Bitcoin? Probably not

– PayPal to open the network to cryptocurrencies

For a graphic on Bitcoin’s quiet rally:

Reporting by Tom Westbrook in Singapore, Ira Iosebashvili and Megan Davies in New York and Tom Wilson, Karin Strohecker and Dhara Ranasinghe in London; compiled by Dhara Ranasinghe; Larry King

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