In the latest review of the markets, Ian Slattery reports that equities were flat as sovereign bonds fell during a mixed week.
Economic data began the week with several positive readings, before the nonfarm payroll numbers in the US disappointed slightly. Payrolls rose 156,000 in September, versus an anticipated consensus figure of 172,000.
However, the market was less sensitive to this report versus previous readings as there are still two further readings before the December Federal Reserve interest rate meeting – where the probability of a rate rise is roughly 64%.
Oil moved above $50 for the first time in three months. Last week’s OPEC deal, coupled with fears over the impact of Hurricane Matthew on supply, helped to drive the price action.
Sterling was subject to a ‘flash-crash’ in Asian trading late last week, falling over 10% versus the dollar before recovering. Some speculate that it was the result of a trading error whilst others pointed to comments from both Teresa May and Francois Hollande, which stoked fears of a hard Brexit.
The global index was nearly flat for the week, edging up 0.05% with Hong Kong the best performing of the major indexes, returning 2.7% in euro terms. Oil had another positive week, returning over 3%, and remains up nearly 35% year-to-date.
Copper slipped over 2%, but is still in positive territory for the year. Gold (-4.5%) and silver (-8.5%) extended their short-term decline.
The US ten-year bond lost value, as the yield, which moves inversely to price, moved from 1.59% to 1.72% over the course of the week. In the eurozone, the German equivalent also saw a yield increase to finish the week in positive territory at 0.02%.
Sterling was subject to a ‘flash-crash’ in Asian trading, falling over 10% versus the dollar
The big currency moves of the week involved Sterling, which weakened against the US dollar and also the euro, where the rate finished at 0.90p per euro.
THE WEEK AHEAD
Wednesday October 12th
Although data released since the meeting will diminish their usefulness, the FOMC minutes will be examined to see if the perceived widening divisions in the committee’s policy stance are evident.
Friday October 14th
US retail sales figures for September will be released where the consensus is for an expansion of roughly 0.4% (month-on-month), following a negative reading of -0.3% in August.
US earnings season also begins, with the impact of negative interest rates on bank profitability a particular focus. The results of JP Morgan and Citigroup late on Friday will be ones to watch.
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