In a quiet week on the economic data front, markets instead focused on potential policy developments in the US, writes Ian Slattery
Ian Slattery, Zurich Insurance
Brexit negotiations continued over the weekend with Boris Johnson holding separate calls with Emmanuel Macron and Angela Merkel
In a quiet week on the economic data front, markets instead focused on potential policy developments in the US, writes Ian Slattery.
Fiscal stimulus hopes rose and fell throughout the week as negotiations continued between Democrats and Republicans. Fed Chair Powell reiterated the importance of additional fiscal stimulus and there appears to be a genuine willingness on both sides of the House to get a deal done. However, with election campaigning ongoing and Senate hearings for the Supreme Court position to begin, the outlook is less than certain.
US lawmakers also published a report into competition and potential market manipulation in the Tech sector. The report outlined a number of criticisms of Amazon, Apple, Facebook, and Google, and brought renewed speculation that a partial break up of some of these names might be on the horizon. However, such talk is still speculation at this time.
Brexit negotiations continued over the weekend with Boris Johnson holding separate calls with Emmanuel Macron and Angela Merkel
US bond yields (which move inversely to price) did rise on the potential stimulus news and also the expectation of increased spending under a Biden presidency. The 10 year Treasury yield hit a four month high, but remains sharply lower than it was pre-pandemic.
As mentioned, economic data was thin on the ground last week, but there were positive readings from a number of PMI releases, including Services data in the US.
Brexit negotiations continued over the weekend with Boris Johnson holding separate calls with Emmanuel Macron and Angela Merkel. A deal appears to be moving closer as progress has been made on the key sticking points of fishing and state aid, with more reconciliatory tones in respect to Northern Ireland also helping.
Equities
Global markets rallied last week up by 1.7% in euro terms and 1.8% in local terms. Year to date the UK market is down -27.0% in euro terms and -21.8% in local terms. The influential US Market was up 1.9% in euro terms and 2.0% in local terms.
Fixed Income & FX
The US 10-year yield finished at 0.77% last week. The German equivalent finished at -0.54%. The Irish 10 year bond yield finished at -0.21%. The Euro/US Dollar exchange rate finished at 1.18, whilst Euro/GBP finished at 0.91.
Commodities
Oil finished the week at $40 per barrel. Gold finished the week at $1,922 per troy ounce up 26.6% year to date in local terms and 20.3% year to date in Euro terms. Copper finished the week at $6,767 per tonne.
The week ahead
Tuesday 13th October
US inflation data for September goes to print
Thursday 15th October
The latest Chinese CPI data is released.
Friday 16th October
US retail sales and consumer confidence are both published.
