Weekly Market Insight

Latest Economic & Market Update 21st October 2020

21st October 2020

Good afternoon, it is October 21st 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • European stocks fall as governments tackle the rise in cases.
  • European Fiscal Board calls on EU to overhaul budget rules.

US stocks rose in spite of Congress’ lack of agreement on fiscal stimulus with the deadline looming. The S&P500, Dow Jones & Nasdaq all climbed 0.47%, 0.40% and 0.33% respectively. In Europe, the sharp rise in coronavirus cases and lockdowns imposed pushed stocks lower with the Stoxx Europe 600 falling -0.35%. The dollar index fell -0.39% and the yield on the 10-year treasury climbed two basis points to 0.7857%. Source: Bloomberg

As a result of the crisis, the EU suspended its budgetary rules to allow governments to inject unprecedented amounts of fiscal stimulus into their economies. If these rules were applied, they could have pushed the bloc into a deeper recession as it would have restricted government support. Fiscal stimulus has been vital so far in supporting the economy with output and employment falling. Figures calculated by the Financial Times using draft budget plans on the European Commission website showed that bloc members will run a deficit of nearly €1 trillion this year. In a new report, the European Fiscal Board have now called for the EU to review and overhaul the budget rules before they are imposed again and want talks to be held this year or in early 2021. The crisis has dramatically changed the landscape of public finances. Debt levels are much higher. The debt to GDP ratio in the EU was 79.5% in Q1 2020 and is expected to climb to 91% in 2021. The suspended rules impose a limit of a debt-to-GDP ratio of 60% for governments of member states. The current levels of debt will make it even more difficult to reconcile against the current rules if they are to be re-imposed. Currently, with the rising cases in Europe and lockdowns, countries in the Eurozone are at risk of a double dip recession and fiscal stimulus will continue to be required to support the economy as long as the pandemic persists. Source: FT.com

Best & Worst Performers of Large Cap US Stocks on Tuesday
Click image to enlarge

Global Market Update
(as at close of markets 20/10/2020)