Markets update: Markets oscillate in stand off between economy and pandemic

Stocks fluctuated between positive and negative territory last week, as investors continue to weigh rising pandemic concerns with encouraging economic data, writes Ian Slattery.

Ian Slattery, Zurich Investments

In the US, September retail sales rose as consumer prices also rose for the fourth month in a row following the sharp falls seen in the first half of the year. The optimism was tempered by an unexpected rise in unemployment claims and ‘high frequency’ data continues to be somewhat erratic as the effects of the economic response to the pandemic continue to be distilled.

Stimulus talks in the US are also ongoing as comments over the weekend raised hopes that there could be a deal agreed prior to the election. However, the highly politicised nature of the negotiations means an agreement may yet prove elusive, as localised outbreaks begin to return across the US.

Eurozone stocks fell as the lockdown debates, we are seeing here in Ireland, were echoed across the continent

Eurozone stocks fell as the lockdown debates, we are seeing here in Ireland, were echoed across the continent with Italy the latest country to announce measures yesterday. The fears over a winter spike in cases pushed German Bund yields (which move inversely to price) to their lowest levels since March.

ECB Chief Economist, Philip Lane, commented that ‘the next phase is going to be tougher’ in terms of the evolution of the eurozone economy. For the week ahead, Brexit negotiations are set to continue, over 30 S&P 500 companies are reporting earnings and the final US presidential debate takes place on Thursday.

Equities

Global markets fell last week up by -0.7% in euro terms and -1.5% in local terms. Year to date the UK market is down -28.1% in euro terms and -23.2% in local terms. The influential US Market was down -0.6% in euro terms and -1.3% in local terms.

Fixed Income & FX

The US 10-year yield remained at 0.77% last week. The German equivalent finished at -0.62%. The Irish 10 year bond yield finished at -0.27%. The Euro/US Dollar exchange rate finished at 1.17, whilst Euro/GBP finished at 0.90.

Commodities

Oil finished the week at $41 per barrel. Gold finished the week at $1,909 per troy ounce up 25.8% year to date in local terms and 20.4% year to date in Euro terms. Copper finished the week at $6,724 per tonne.

The week ahead

Wednesday 21^st October

The latest UK inflation data is released

Thursday 22^nd October

Eurozone consumer confidence figures for October are published.

Friday 23^rd October

US, eurozone and UK PMIs all go to print.