Equity markets are trading just off the overnight session’s lows as the set up into next week’s US election becomes a convoluted web of confusion.

The 2nd and 3rd wave spread of Covid-19 is possibly triggering a point of no return for some industries as the economic damage borders on irreversible and, even worse, adding insult to injury. The Covid-19 induced downward spiral continues accelerating.

Risk aversion is high on the to-do list in what has been a very broad pullback after the market turned better for sale out of the gate in Asia yesterday.

Corporate earnings gloom from Europe

In Europe and possibly a foreshadowing of more earnings gloom to come in what was thought to be a Covid-19 impervious market sector. SAP, one of Europe’s largest tech companies, issued a profit warning shocker overnight and highlights the risk for further cuts to Q4 numbers for the broader tape, especially in a backdrop of increasing lockdown measures.

As risk-off peculates, no one seemingly wanted to get their hand caught in the buy the dip cookie jar overnight with some big Tech earnings ahead amid some very crowded trades. But let us hope it will be an all you can indulge “Thursday Night Special” with AAPL, AMZN, GOOG, and FB all reporting.

It feels like the market is finally taking the global surge in Covid-19 cases a bit more seriously this week. With the imposition of curfews across Europe, economic dangers now lurk in the dark.

In the US, the tightening presidential race and the lack of progress on a fiscal deal, although I suspect the market did not attribute too high a probability of any real progress is also providing investors some angst as the odds of a clean sweep lesson somewhat.

For the record, S&P 500 e-minis dipped through 3400 after White House economic adviser Kudlow to the media there are several areas in the Pelosi coronavirus plan that Trump cannot accept.

Vaccine noise increases

On the constructive side, joyous vaccine noise increases, although one could argue this is well seasoned. As well, Brexit negations seem to be stumbling along to some face-saving resolution.

Like the back end of last week, Monday has felt more like de-risking than market blowdown. So, we should expect price action to remain choppy in the days ahead, with investors very reluctant to put on any significant risk ahead of what promises to be a headline heavy week or two.

Oil prices tumble

Oil has fallen over 5% from Friday’s peak as sentiment was hit by the apparent lack of progress on a US stimulus package and surging coronavirus numbers in the US, Europe, and around the globe.

News that Libya has lifted force majeure at the El Feel field, the last major field to remain “shut-in” after conflict escalation in January this year, added to supply concerns.

Together with associative waning US gasoline dependencies at the pump, pressures on both the supply and demand are pushing oil ever so closer to a Covid-19 induced tipping point.

Markets have the end-November OPEC+ meeting to lean on. And while there are several variables to consider, I would expect the conclusion to be neutral at worst and likely positive for oil in the medium term.

But OPEC compliance is only providing support at margins (deep dips) and far from a bullish catalyst, especially with gnarly 2nd and 3rd wave spreader headlines feeling like a led weight around the market’s neck.

Equity and Oil markets analysis and insights from Stephen Innes, Chief Global Market Strategist at Axi