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Weekly Market Report

19 Oct 2020

19 October 2020


The Market Last Week

Global equities ended mixed last week, as upbeat US corporate results overshadowed concerns related to the US stimulus package.

UK Markets ended the week in negative territory, amid ongoing Brexit concerns and as British Prime Minister Boris Johnson introduced new lockdown restrictions.

UK’s Rightmove house price index rose in October.

In the UK, average earnings including bonus recorded a flat reading in August.

In the UK, the BRC retail sales climbed less than market forecast in September.

UK’s ILO unemployment rate advanced in August.

Bank of England (BoE) Governor, Andrew Bailey, in his speech, indicated that the central bank is not yet ready to implement negative interest rates. Moreover, he stated that country’s economic risks are all on the downside.

European Markets ended the week on a negative footing, amid new restrictions across Europe due to the resurgence in coronavirus cases.

In the Eurozone, seasonally adjusted trade surplus unexpectedly widened in August.

Eurozone’s ZEW economic sentiment index dropped in October.

In the Eurozone, industrial production grew at a slower pace in August.

Eurozone’s final consumer price index (CPI) dropped for the second straight month in September.

In Germany, the ZEW current situation index advanced in October.

Germany’s final CPI fell on an annual basis in September.

In Germany, the ZEW economic sentiment index declined to a five-month low level in October.

European Central Bank (ECB) President, Christine Lagarde, in her speech, indicated that the ECB is "very seriously” considering the creation of a digital euro. However, she stated that, a digital euro will only be a “supplement” to cash, and would never replace it. Meanwhile, Lagarde called on Eurozone governments not to suddenly withdraw the stimulus implemented over the last months.

ECB President, Christine Lagarde, in her latest speech, stated that the central bank would be prepared to impose further emergency measures to tackle the economic fallout from the coronavirus crisis, with the region confronting a rapid surge in Covid-19 infections. Further, she indicated that economic indicators in the Euro-zone are pointing to a “strong rebound in activity” in Q3, but the rebound is “uneven across sectors and regions”. Lagarde expects inflation to “remain negative over the coming months”, but turn positive again in early 2021.

US Markets ended the week in green, following positive corporate earnings report.

In the US, the Michigan consumer sentiment index advanced in October, marking its highest level since March.

Advance retail sales grew in September.

In the US, the CPI advanced at par with market expectations on an annual basis in September.

The NFIB small business optimism index jumped in September, recording its highest level since February.

US producer price index (PPI) advanced more than market anticipations on an annual basis in September.

The Philadelphia Fed manufacturing index unexpectedly climbed in October.

The MBA mortgage applications dropped on a weekly basis in the week ended 09 October 2020.

US initial jobless claims unexpectedly rose on a weekly basis in the week ended 09 October 2020.

The NY Empire State manufacturing index dropped more-than-expected in October.

US monthly budget deficit narrowed less than market consensus in September.

In the US, manufacturing production unexpectedly fell on a monthly basis in September.

US industrial production unexpectedly declined on a monthly basis in September.

Business inventories advanced less than estimated in August.

Asian Markets ended mostly firmer last week, tracking gains in their US counterparts.

Australia’s Westpac consumer confidence index climbed in October.

In Australia, the consumer inflation expectations advanced in October.

Australia’s seasonally adjusted unemployment rate rose in September.

China’s industrial production increased more than market forecast in September.

In China, retail sales grew more-than-anticipated in September.

China’s unemployment rate dropped in September.

In China, consumer price inflation slowed in September.

China’s PPI fell more than market consensus in September.

In China, trade surplus unexpectedly narrowed in September.

China’s economic growth expanded less than market forecast in 3Q20.

In Japan, adjusted merchandise trade surplus widened in September.

Japan’s industrial production advanced less than market expectations on a monthly basis in August.

Reserve Bank of Australia (RBA) Governor, Philip Lowe, in his speech, hinted at the possibility of another interest rate cut to support the country’s economic recovery from the coronavirus recession. Moreover, he stated that the board has been considering what more it can do to support jobs, incomes and businesses to help build the “road to recovery,” though a decision has not yet been made.


Currency Update

The EUR ended lower against the USD last week, after Eurozone's inflation dropped in September and as some European nations extended lockdown restrictions.
The British Pound ended weaker against the greenback last week, amid uncertainty surrounding the Brexit trade deal.
The US Dollar ended mostly stronger against its major counterparts last week, as hopes for fresh US fiscal stimulus dampened increasing demand for the safe-haven currency


The International Monetary Fund lifts global growth outlook

The International Monetary Fund (IMF) raised its 2020 global growth outlook to a 4.4% contraction from its previous revised forecast of a 5.2% drop but warned of a “long, uneven and uncertain” recovery. Moreover, the fund has projected “only limited progress” going forward and cut its gross domestic product growth (GDP) expectations for next year to 5.2%, from an estimate of 5.4% made in June. Meanwhile, the US economy is set to fall by 4.3% this year, but the economic contractions in the UK, France, Italy and Spain are around 10%.


The Week Ahead

Going ahead this week, investors will keep a tab on the US building permits, housing starts, Federal Reserve’s (Fed) Beige Book, Fed’s Chairman Jerome Powell’s initial jobless claims, existing home sales, the Markit manufacturing and services PMIs for further direction. Additionally, Eurozone’s current account balance, ECB President Christine Lagarde’s speech, the consumer confidence index along with Germany’s PPI, the GfK consumer confidence index, the Markit manufacturing and services PMIs across the Eurozone will keep investors on their toes. Also, UK’s CPI, the retail price index, the PPI, the CBI industrial trends surveys, the GfK consumer confidence index, the retail sales, the Markit manufacturing and services PMIs would garner significant amount of investor attention.


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