Weekly Market Insight

Latest Economic & Market Update 6th November 2020

06th November 2020

Good afternoon, it is November 6th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • European Commission – Ireland domestic economy forecast to grow 7.25% in 2021.
  • Powell stresses need for further fiscal stimulus in the US.

In their latest European Economic Forecast report, the European Commission noted that Irelands real GDP fell less than many of its European peers as Real GDP declined -2.1% in Q1 and -6.1% in Q2. Business service sectors and exports from multinational corporations, especially pharmaceuticals, performed well and cushioned the fall in GDP. The report also noted that the introduction of a new six-week lockdown would slash prospects of a swifter economic recovery however the extension of income support schemes accompanied by accumulated savings provide scope for consumption smoothing in 2021. They forecast that private consumption would shrink by 8% in 2020 but this is expected to rebound by 11% in 2021 and 6.5% in 2022. The European Commission forecast that Irelands GDP will contract by 2.25% in 2020 but will grow 3% in 2021 and 2.5% in 2022. The projected growth in GDP in 2021 will recover 2019 levels. Modified domestic demand provides a better understanding of the domestic economy and this is expected to fall by 6.5% in 2020 however this is forecast to grow by 7.25% in 2021 and 4.5% in 2022. (Source: European Commission).
In a statement on Thursday, the Federal Open Market Committee stated it would continue to keep the federal funds rate at its lowest level and pledged to keep it there until the US economy reached full employment with higher inflation. The Fed Funds rate is currently between 0% and 0.25%. Mr Powell highlighted his concerns over the increase in Covid-19 cases on economic activity and consumer spending as he stated that the rise in cases could cause consumers to retrench just as consumers started returning to bars and restaurants even in the absence of lockdowns. Mr Powell was reluctant to comment on the election however he highlighted the importance of Congress and the White House supplying the economy with further fiscal stimulus. He stated that he thinks the US will have a stronger recovery if there is more fiscal stimulus provided. Regarding the asset purchase programme, the Fed will continue at its current rate of asset purchases as they feel this is right for now and “it is doing a lot of good”. (Source: Financial Times)

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

Global Market Update
(as at close of markets 05/11/2020)