Markets update: Global geopolitical situations impact the market

It was a week that felt all too familiar as another French prime minister resigned (before subsequently returning) and US stocks fell sharply following another tariff announcement.

Sébastien Lecornu became the fifth French prime minister to resign in two years on Monday, causing French stocks to sink and bond yields to rise. However, just days after accepting the resignation, French President Emmanuel Macron reappointed Lecornu as prime minister and tasked him with forming a new government. 

On Friday, the day after the six-month anniversary of ‘Liberation Day’, US stocks pulled back sharply after US President Trump threatened an additional 100% tariff on Chinese imports. Trump accused Beijing of “becoming very hostile” after it tightened its export controls on rare-earth metals. 

US equities took a tumble, particularly in the more growth-oriented and cyclical sectors. This came as the US government shutdown entered its third week. T

here were further geopolitical developments across the globe. In the Middle East, a US-brokered ceasefire was agreed upon between Israel and Hamas, prompting oil prices to fall. 

Japan was thrust into political disarray after its decades-old ruling coalition collapsed late last week. This came following the election of Sanae Takaichi as head of the ruling Liberal Democratic Party (LDP), which set the stage for her to become Japan’s first-ever female prime minister. Japanese stocks initially rallied on Monday in response to Takaichi’s election due to expectations for more accommodative policymaking and greater investment, but gave back gains on Friday amid the political turmoil. 

Uncertainty, given the precariousness of global geopolitical situations, helped gold achieve another positive week. The yellow metal surpassed the $4,000/oz mark for the first time ever, just over six months after first hitting $3,000/oz. 

In economic news, the University of Michigan’s Consumer Sentiment Index showed that consumer confidence in the US decreased marginally in October, with the index falling from 55.1 to 55.0, beating forecasts of 54.2. Meanwhile, German industrial output declined by -4.3% in August compared to July, the largest monthly decrease in over three years, and well below estimates of -1%

Equities

Global stocks finished down -0.9% in euro terms and down -2.3% in local terms last week. Year-to-date, global markets are up by 3.4% in euro terms and up by 15.6% in local terms. The US market, the largest in the world, finished down at -1.1% in euro terms and down -2.4% in local terms.

Fixed Income & FX

The US 10-year yield finished at 4.0% last week. The German equivalent finished at 2.6%. The Irish 10-year bond yield finished at 2.9%. The Euro/US Dollar exchange rate finished at 1.16, whilst the Euro/GBP finished at 0.87.

Commodities 

Oil finished the week at $59 per barrel and is down -26.8% year to date in euro terms. Gold finished the week at $4,018 per troy ounce and is up 36.4% year-to-date in euro terms. Copper finished the week at $10,487 per tonne and is up 8.0% year-to-date in euro terms.

The week ahead

Tuesday 14th October

UK unemployment rate for August is reported.

Wednesday 15th October

US CPI data for September is released.

Thursday 16th October

US retail sales for September are published.