This Week’s Economic Calendar
05 Oct 2020Key events on the calendar this week are as follows:
• Wednesday 07 October 2020 FOMC Minutes
• Friday 09 October 2020 Japan GDP
• Friday 09 October 2020 UK GDP
• Friday 09 October 2020 WASDE report
Note: FOMC refers to the US Federal Reserve’s Federal Open Market Committee, GDP refers to Gross Domestic Product and WASDE refers to World Agricultural Supply and Demand Estimates.
US treasury yields continue sideways
05 Oct 2020US treasury yields continue to remain broadly unmoved in September with 10-year yields now hovering around 71bps. Despite the improvement in economic indicators in recent months, treasury yields remain low due to the US Federal Reserve’s (Fed) highly accommodative monetary policy. With the Fed now targeting average inflation and expected to keep rates low until 2023, the US treasury yield curve has not shifted materially in the last month and remains significantly below where it was at the start of the year.
European equities retreat as virus risks abound
28 Sep 2020Following a steady recovery since April – in line with generally improving economic fundamentals – European equities have retreated in September as second wave pandemic concerns in Europe begin to emerge. Daily new cases in Europe have seen a material increase in August and September raising the possibility of stricter curbs from governments. The retreat in European stocks has, however, been less severe compared to the sell-off in US equities this month. The Euro Stoxx 50 Index is down around 2.4% (as of 29 September in EUR on a total return basis).
Gold’s retreat in September reminiscent of March
28 Sep 2020After rallying to new highs on 6th August 2020 of over US$2070/oz intraday, gold prices have fallen close to 10% by September 28th 2020. Year-to-date, gold is still up over 22% and most importantly it is one of the very few assets posting gains during the worst of the COVID-19 pandemic driven crisis. The recent drawdown of gold comes at a curious time when inflation expectations are rising, the US dollar has been weak and when we haven’t really escaped the economic uncertainty that the COVID-19 pandemic has brought about. The cyclical market drawdowns we have seen in the past month may be placing downward pressure on defensive assets like gold and Treasuries, just as we saw back in March 2020. At that time investors were redeeming liquid assets due to pressure in other parts of their portfolio. If gold is viewed as only a defensive asset, then a cyclical recovery may hurt prices. However, historically gold has not just been a defensive asset. Its price tends to rise with inflation which is generated during periods of stronger economic growth. So long as recovery is not met by an aggressive tightening of monetary policy, gold is likely to do well.
Italian BTP yields remain low despite rising infections
28 Sep 2020Italian BTP yields have dropped considerably since the peak of the pandemic in March as the economic outlook for the country has improved since then. 10-year BTP yields had exceeded 2.3% in March this year but have, since then, dropped to around 0.88% as economic indicators have painted the picture of a steady economic recovery. The rising number of virus cases in Italy since the end of August has, so far, not caused Italian BTP yields to start rising again.
This Week’s Economic Calendar
28 Sep 2020Key events on the calendar this week are as follows:
• Tuesday 29 September 2020 Germany inflation (Sep)
• Wednesday 30 September 2020 China PMI (Q2)
• Wednesday 30 September 2020 UK GDP (Q2)
• Wednesday 30 September 2020 Eurozone inflation (Sep)
• Wednesday 30 September 2020 US GDP (Q2)
• Thursday 01 October 2020 US Manufacturing PMI
• Friday 02 October 2020 US Non-farm payrolls
Note: PMI refers to Purchasing Managers Index and GDP refers to Gross Domestic Product.
Copper makes further gains on improving demand
21 Sep 2020Copper has continued to make gains in September adding to its strong run since the end of March. One of the main drivers of copper price recently has been higher than expected refined copper imports by China. Copper’s initial rebound after its sharp dip in March was partly the result of coronavirus related supply disruptions. Improving demand, however, as manufacturing activity gathers pace in China and elsewhere, is adding additional momentum to copper’s price.
Emerging Markets equities in positive territory
21 Sep 2020Emerging market equities took a deep plunge in March when global risk assets were caught in the grip of the coronavirus pandemic. Since then, equities have recovered their losses rebounding gradually in line with improving economic data. The fate of the MSCI Emerging Markets Index is intertwined with the economic and market outlook for China which has improved in recent months. The index is now up 1.42% (on a total return basis in USD. Source: Bloomberg as of 18/09/2020).
This Week’s Economic Calendar
21 Sep 2020Key events on the calendar this week are as follows:
• Wednesday 23 September 2020 Japan Manufacturing PMI (Sep)
• Wednesday 23 September 2020 Spain GDP (Q2)
• Wednesday 23 September 2020 Germany Composite PMI
• Wednesday 23 September 2020 Eurozone Composite PMI
• Wednesday 23 September 2020 US Composite PMI
Note: PMI refers to Purchasing Managers Index and GDP refers to Gross Domestic Product.
UK Gilt Yields remain low as Brexit uncertainty looms
21 Sep 2020UK Government Bond (Gilt) yields have dropped significantly since the start of the year. Investors have turned to government bonds in the wake of the sharp economic contraction in the first half of the year causing the entire curve to shift downwards. While economic data is showing signs of recovery, the UK still faces considerable uncertainty given the lack of clarity on Brexit and the country’s future trade relationships. With the Bank of England indicating last week that it was open to the possibility of negative interest rates, 10-year UK gilt yields have fallen to around 15bps compared to around 82bps at the start of the year.