Weekly Market Insight

Latest Economic & Market Update 22nd October 2020

22nd October 2020

Good afternoon, it is October 22nd 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • Brexit trade deal inches closer, Sterling climbs
  • European and US stocks weaker, US Treasury 10-year yield highest since June

The Brexit deal or no deal saga took another turn yesterday, this time in a positive direction. The EU’s chief negotiator Michel Barnier said an agreement between the EU and the UK on Brexit trade talks was still “within reach”. A joint statement was also issued last night announcing that talks would “take place daily including weekends” in a bid to have an agreement by the end of the year. Last Friday, UK Prime Minister Boris Johnson stated that Britain would end the transition period on January 1st with no trade deal unless the EU made a “fundamental change of approach”. Markets were undeterred by Johnson comments and there was little change in Sterling prices. The UK’s currency movement is usually seen as the barometer for the Brexit outcome. Yesterday, however, traders were impressed with the announcement of increased trade talks. Sterling rallied as a result, gaining 1.7% against the dollar and 1.2% against the Euro trading at $1.31 and €1.108 respectively. This will be well received by the Irish Government and businesses alike, although both are likely to be wary that talks have appeared to go down this road before only to eventually veer off track. The coronavirus economic havoc adds pressure on both sides to compromise on outstanding issues and agree on a trade deal. 2 days after the Irish Government announced 6 weeks of level 5 lockdown, estimating to cost €1.5 billion, Minister for Foreign Affairs Simon Coveney said the resumption of talks was “very welcome”. The Central Bank of Ireland and the Department of Finance have assumed a No Deal Brexit as the base case, with the Central Bank of Ireland expecting GDP growth of 3.4% in 2021.

European equities closed lower for the third consecutive day. With earning season underway, and heightened virus fears on the continent, Stoxx Europe 600 Index decreased by 1.3%. In the US, the indexes fluctuated throughout the day, still unsure of the outcome of the US stimulus package negotiations. The S&P 500 closed -0.22% while the Nasdaq ended the day -0.28% lower. The bond market appeared to more convinced that a US fiscal deal will be agreed based on US treasury movement. The 10-Year note broke the 0.8% mark for the first time since June. Possible reasons for this is that bond investors are looking to move out of the safe-haven US treasury and allocate to move riskier assets, on the basis of a fiscal deal being struck. However, we did not see an uptick in equities to suggest as much. It is quite likely that investors are slowly taking their money off the table ahead of some pre-US election turbulence. The election will take place on November 3rd. The final debate between President Donald Trump and former Vice President Joe Biden will be held on Thursday evening. It has been reported that while one candidate is speaking, the opponent’s microphone will be muted to avoid interruption. US jobless claims will also be released Thursday.

Data source: Bloomberg

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

Global Market Update
(as at close of markets 21/10/2020)