Futures Rebound From Monday's Plunge On Strong Earnings, Mega Merger Tyler Durden Tue, 10/27/2020 - 08:10 U.S. index futures and European stocks rebounded on Tuesday following the S&P 500’s worst day in a month as investors parsed through strong corporate earnings which offset Monday's SAP shocker, while bracing for volatility ahead of Election Day, assessing rising coronavirus cases across the globe and conceding that a fiscal stimulus deal just won't happen now that the Senate has closed for recess after rushing through the appointment of Amy Coney Barrett to the SCOTUS late on Monday night, which was also Hillary Clinton's birthday. AMD's $35 billion acqusition of Xilinx also helped boost trader optimism. The S&P 500 and Nasdaq hit three week lows on Monday as record number of new coronavirus infections in the United States and some European countries and a lack of agreement in Washington over the next U.S. fiscal stimulus raised worries about the economic recovery. The chances are "very, very slim," Appropriations Chairman Richard Shelby said talking about a stimulus, pointing out the patently obvious. Differences between the two sides “have narrowed,” but “the more it narrows, the more conditions come up on the other side,” White House economic adviser Larry Kudlow told reporters. Of course, Nancy Pelosi remains optimistic, her spokesman said, but she's used similar language throughout three months of talks as she does not want to take the blame for the continued gridlock. Also on Monday, the VIX spiked to its highest closing level in nearly two months on "concerns" about President Donald Trump's unexpected victory or the uncertain election outcome we first reported on Sunday night. As we also reported, while Joe Biden leads the official polls, the race is much tighter in battleground states which determine the election outcome. In premarket trading, Drugmaker Eli Lilly fell 4% after it reported a fall in quarterly profit. Industrial companies 3M Co and Caterpillar Inc were also slightly lower after results. Investors are looking forward to results from Apple, Amazon.com, Alphabet and Facebook Inc in an earnings-heavy week as the technology giants have managed to stand out during the coronavirus pandemic. Chipmaker Xilinx soared after AMD announced a $35BN takeover offer, while Merck climbed after the drugmaker boosted its guidance. At 8am S&P 500 E-minis rose 0.47% to 3,409.5 points. The Stoxx Europe 600 Index erased most of its decline after earlier heading toward its lowest close since June amid concern about the relentless spread of coronavirus. Declines in miners and energy firms offset positive earnings from banking powerhouses HSBC Holdings and Banco Santander, which both signaled a brighter outlook for dividends. Following two tumultuous quarter, HSBC said it would consider paying a 2020 dividend after the bank unveiled a better-than-expected third quarter profit on lower provisions for bad loans. The bank on Tuesday reported a 36 per cent year-on-year drop in pre-tax profits to $3.1BN for the third-quarter, which was above analysts’ forecasts. Noel Quinn, HSBC’s chief executive, labelled the results “promising." Energy giant BP Plc warned of many challenges ahead as the pace of recovery in oil demand remained uncertain. Meanwhile, Europe took a step closer to the strict rules imposed during the initial wave of the pandemic, with leaders struggling to regain control of the spread while confronting growing opposition to restrictions. Earlier in the session, Asian stocks fell, led by the energy and finance sectors, after falling in the last session. Most markets in the region were down, with Australia's S&P/ASX 200 dropping 1.7% and South Korea's Kospi falling 0.6%, while India's S&P BSE Sensex Index increased 0.5%. The Topix was little changed, with Nintendo climbing and Nidec slipping. As Bloomberg notes, with time effectively over to finish an aid package before Americans vote, investors are looking for market catalysts later on Tuesday from data and earnings. Durable-goods orders and consumer confidence reports are due, as well as results from Microsoft Corp. and AMD after market. In rates, Treasuries were steady overnight, holding Monday session gains despite gains in S&P 500 e-minis amid poor volumes, trading around 60% of recent average during Asia, early Europe. Preliminary open interest data shows some unwind of long-end short positions into Monday’s rally. Yields were mixed, although within a basis point of Monday’s close across the curve; 10-year steady at around 0.80%, trading inline with bunds and outperforming gilts by ~1bp. Treasury auctions kick-off with $54B 2-year note sale today, followed by 5- and 7- year sales Wednesday and Thursday, respectively. On Monday, BlackRock strategists downgraded U.S. Treasuries and upgraded their inflation-linked peers ahead of the U.S. election on a growing likelihood of significant fiscal expansion. They said Covid infections in Europe threaten to derail a fragile recovery as they recommended investors hold a neutral position on bunds to hedge a downturn. “As Covid infections have picked up, the focus on further policy response has shifted to more monetary easing including additional asset purchases,” said strategists Mike Pyle, Scott Thiel and Beata Harasim. In Fx, a gauge of the dollar’s strength edged lower after Monday's bounce, while the euro and the pound were little changed; cable slipped earlier with strategists predicting limited gains in the currency on a Brexit trade-deal breakthrough. The Norwegian krone and the Japanese yen led G-10 currency gains, while the Swiss franc and the Swedish krona weakened the most. China’s currency weakened after Reuters reported the country’s central bank asked lenders to suspend a key factor used to calculate the yuan’s daily reference rate. Elsewhere, crude oil nudged higher while gold remains largely unchanged. Market Snapshot S&P 500 futures up 0.2% to 3,3400.50 STOXX Europe 600 down 0.4% to 354.57 MXAP down 0.2% to 175.21 MXAPJ down 0.3% to 581.84 Nikkei down 0.04% to 23,485.80 Topix down 0.09% to 1,617.53 Hang Seng Index down 0.5% to 24,787.19 Shanghai Composite up 0.1% to 3,254.32 Sensex up 0.6% to 40,372.74 Australia S&P/ASX 200 down 1.7% to 6,051.02 Kospi down 0.6% to 2,330.84 Brent futures up 0.7% to $40.75/BBL Gold spot down 0.1% to $1,900.30 U.S. Dollar Index little changed at 93.07 German 10Y yield unchanged at -0.581% Euro down 0.04% to $1.1805 Italian 10Y yield fell 1.9 bps to 0.536% Spanish 10Y yield fell 0.2 bps to 0.184% Top Overnight News from Bloomberg The world’s biggest money manager is shorting the dollar on expectations that unprecedented fiscal and monetary stimulus will prolong its losses -- regardless of who wins the U.S. election Turkey’s banking regulator took another step to slow lending after a massive credit boom contributed to a currency rout U.S. President Donald Trump’s push for a second poll-defying victory is relying on a hallmark of his first -- raucous campaign rallies that Trump sees as a crucial sign of voter enthusiasm but that pollsters say may only be cementing his defeat More than 50 of Boris Johnson’s own Conservative members of Parliament have demanded a clear route out of lockdown for parts of northern Britain that helped give his party a majority in last year’s election. In a letter to the prime minister, the MPs warned that his pandemic strategy of targeting local areas with restrictions is disproportionately damaging the economies of northern regions of the country