Market Update

Markets Update: Stocks pull back as sentiment shifts

By Business & Finance
04 October 2021

Stocks fell for only the second month in 2021 as fears in relation to inflation and interest rates roiled equity and bond markets. A rally late on Friday reduced the losses but growth stocks underperformed, with energy the only sector to notch gains for the week, writes Ian Slattery.

Ian Slattery Zurich

Pictured: Ian Slattery, Zurich Investments

Concerns from both a monetary and fiscal perspective in the US were evident. US treasury yields rose as the policy path of the US Federal Reserve is seen as increasingly hawkish – albeit from a very loose base. 

From a fiscal perspective Treasury Secretary Yellen once again warned that the debt ceiling would have to be raised for the US government to meet its obligations, and Biden’s infrastructure plan faltered once more as an approval vote was delayed. Concerns were somewhat eased on Thursday as 15 Republican Senators joined Democrats to avert a government shutdown, in a separate issue to the debt ceiling.

In US data, PCE (the Fed’s preferred measure of inflation) came in at a consensus annualised rate of 3.6% whilst durable goods orders rose 1.8% in August, well above a consensus estimate of 0.7%. Both measures suggest that an economic expansion is continuing, although newswires are littered with consistent reports of supply chain blockages affecting individual company prospects.

Chinese PMI data was mixed, as the services measure rose back above 50 in September whilst the manufacturing figure dropped to 57.5 (albeit still in expansion territory).

Eurozone equities and bonds took their lead from the US last week, with both major asset classes posting negative returns

Eurozone equities and bonds took their lead from the US last week, with both major asset classes posting negative returns. Inflation rose to 3.4% in September, with the German component rising to a 29-year high. EU Finance Ministers meet this morning with the item certain to be top of the agenda.

Equities

Global stocks were down last week by -1.4% in euro terms and -2.3% in local terms. Year-to-date global markets are up 19.9% in euro terms and 13.7% in local terms. The US market, the largest in the world, was down -1.1% in euro terms and -2.0% in local terms.

Fixed Income & FX

The US 10-year yield finished at 1.49% last week. The German equivalent finished at -0.22%. The Irish 10-year bond yield finished at 0.15%to remain in positive territory. The Euro/US Dollar exchange rate finished at 1.16, whilst Euro/GBP finished at 0.86.

Commodities

Oil finished the week at $76 per barrel and is up 64.6% year-to-date in euro terms. Gold finished the week at $1,752per troy ounce and is down-2.9% year to-date in euro terms. Copper finished the week at $9,135 per tonne.

The week ahead

Monday 4th October

OPEC meets to discuss additional oil output. 

Tuesday 5th October

Eurozone and UK PMIs for September go to print.

Friday 8th October

The closely watched US non-farm payrolls data is published.

About: Zurich Investments

The team at Zurich Investments is a long established and highly experienced team of investment managers who manage approximately €26.9bn in investments of which pension assets amount to €15.7bn. Find out more about Zurich Life’s funds and investments here.

The team at Zurich Investments is a long established and highly experienced team of investment managers who manage approximately €26.9bn in investment of which pension assets amount to €15.7bn. To find out more about Zurich Life’s funds and investments

w: zurichlife.ie/funds

Twitter: @ZurichLife

LinkedIn: linkedin.com/company/zurich-life-assurance-plc

Warning: Past performance is not a reliable guide to future performance. Benefits may be affected by changes in currency exchange rates. The value of your investment may go down as well as up. If you invest in these funds you may lose some or all of the money you invest