This Week’s Economic Calendar
02 Nov 2020Key events on the calendar this week are as follows:
• Tuesday 03 November 2020 US Non-Manufacturing PMI (Oct)
• Wednesday 04 November 2020 China Services PMI (Oct)
• Wednesday 04 November 2020 Italy Composite PMI (Oct)
• Wednesday 04 November 2020 Germany Composite PMI (Oct)
• Wednesday 04 November 2020 Eurozone Composite PMI (Oct)
• Friday 06 November 2020 US Unemployment (Oct)
Note: PMI stands for Purchasing Managers’ Index.
Virus second wave surge weighs on risk sentiment
02 Nov 2020Sentiment in equity markets is facing headwinds from a rising number of coronavirus cases in a second wave for many countries around the world. This kept equities from rallying last week despite encouraging third quarter economic data from both Europe and the US as well as generally good earnings announcements from S&P 500 companies. Further uncertainty holding equities back relates to the upcoming US presidential elections and US fiscal stimulus. Risk assets will benefit from a quick and clear result of the election and progress on the fiscal stimulus.
Volatility ticks up as equities await stimulus
02 Nov 2020An uptick in the CBOE Volatility Index (VIX) is indicative of market participants seeking protection for their equity exposures. With virus cases continuing to rise, the VIX edged up to its highest level since June crossing 40 on October 28. VIX spikes are normally short-lived. A sustained rise over several days, however, would normally reflect a shift in market sentiment.
Equity markets await the stimulus boost
26 Oct 2020Last time a US fiscal stimulus was introduced in March, it proved to be an important factor in causing the markets to turn. Markets are waiting in anticipation for the next round of fiscal stimulus which will, yet again, be a crucial driver for asset prices going forward – whether it comes before or after the US elections. With markets becoming increasingly fixated on daily developments on the stimulus deal, delays before a concrete announcement is made may drive volatility in equity markets in the short term.
Gold’s dynamic nature revealing itself
26 Oct 2020Despite pulling back from record highs in August, gold is still up around 25% year-to-date as of 26 October. So far this year, investors have turned towards gold as a hedge against economic and financial market uncertainty. With inflation now on the rise, gold’s inflation hedging properties are becoming increasingly relevant. Gold, therefore, not only has a role to play in protecting against downside risks, it is a pertinent tool in an upside – given inflation is a property of an economic upswing.
This Week’s Economic Calendar
26 Oct 2020Key events on the calendar this week are as follows:
• Thursday 29 October 2020 US GDP (Q3)
• Thursday 29 October 2020 ECB Interest Rate Decision (Oct)
• Friday 30 October 2020 Eurozone inflation (Oct)
• Friday 30 October 2020 Eurozone GDP (Q3)
Note: GDP stands for gross domestic product and ECB stands for the European Central Bank.
Treasury yields rise modestly on stimulus hopes
26 Oct 202010-year US Treasury yields rose above 0.8% on October 21 for the first time since June with bond markets beginning to price in the impending US fiscal stimulus. To contextualise this, 10-year Treasury yields were around 1.9% at the start of 2020 and around 2.7% at the start of 2019. Low long duration yields signify that markets expect monetary policy from the US Federal Reserve to be accommodative for a long period. An effective fiscal injection and positive third quarter economic data for the US could cause yields to rise from very low levels currently.
Volatility relatively subdued as markets remain optimistic
26 Oct 2020Over the last couple of weeks, we have seen President Trump walk away from fiscal stimulus talks before swiftly resuming negotiations. Markets have also heard deadlines being announced by House Speaker Nancy Pelosi on reaching a deal. Given the developments, markets are remaining relatively calm with the CBOE Volatility Index (VIX) only rising slightly to just under 30 on 26 October – up from around 25 on 12 October.
Chinese stocks helping lift emerging market equities
19 Oct 2020Chinese equity markets are adding positive momentum in October as sentiment on the country’s recovery from the pandemic and its resulting economic damage continues to improve. The Chinese economy grew by 4.9% year-on-year in Q3 – compared to 3.2% in Q2, and -6.8% in Q1. Chinese equities are helping lift emerging market equities with the MSCI Emerging Markets Index up almost 4% in October (in USD as of 19 October).
Sugar makes gains as demand outlook improves
19 Oct 2020Sugar prices have appreciated by over 11% since the end of August as the commodity has now more than offset its losses from the first quarter of the year. Prices dropped sharply in March as demand fell suddenly at the peak of the global pandemic. Equally, very low energy prices meant that producers in Brazil – one of the largest producers of raw sugar cane in the world – opted to produce more sugar instead of ethanol. Ethanol, which is also produced from sugar cane, is used in flex-fuel cars, and became less lucrative to produce when fuel demand had collapsed. As energy prices have risen, this added supply pressure on sugar has gradually waned.