Weekly Market Insight

Latest Economic & Market Update 7th December 2020

07th December 2020

Good afternoon, it is December 7th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • Ireland’s GDP increases 11.1% in Q3.
  • Demand for Eurozone peripheral bonds remain strong as investors bet on ECB support.

Seasonally adjusted real GDP in Ireland grew by 11.1% in the third quarter of 2020 following the easing of Covid-19 restrictions. Significant increases in profit outflows drove a 1.9% fall in real GNP in Q3. In comparison to the second quarter of 2020, the value added by the construction sector (in volume terms) recorded an increase of 53.4% in Q3. Distribution, Transport, Hotels & Restaurants grew by 46.9% in Q3. On the expenditure side of the accounts, Personal Consumption Expenditure climbed by 21.3%. This followed a serious decline of PCE in Q2 as a result of the Covid-19 restrictions. Nearly 48% of Final Domestic Demand in Q 3 was accounted for by PCE. Exports of goods and services grew by 5.7% and government expenditure slightly increased by 0.1%. In comparison to Q3 in 2019, GDP increased by 8.1%. The information & Communication (+33.6%), industry excluding construction (+13.2%) and Agriculture (10.6%) sectors grew in comparison to the same quarter in 2019, all other sectors declined year-on-year. (Source: CSO).

In March, Christine Lagarde stated that it was not the job of the ECB to narrow the gap in borrowing costs between the eurozone’s stronger and weaker economies. These comments triggered a bond market sell off at the time. Now investors believe that the President of the ECB has changed her mind as investors have been snapping up bonds with spreads in the eurozone’s periphery being squeezed by strong demand. The demand for bonds saw Portugal’s 10-year yield fall below zero for the first time last week and Spain’s 10-year yield is closing in on zero with the yield currently sitting at 0.055%. Italy’s 10-year yield has also narrowed to 0.513%, nearing its lowest level since the regions debt crisis a year ago. The ECB is expected to increase its emergency asset purchase programme on Thursday and despite the massive increase in debt levels since the crisis began, demand for peripheral bonds is holding up strong and investors are comfortable holding these investments due to the expected support from the ECB and their desire to keep borrowing costs low. (Source: Financial Times)

Best & Worst Performers of Large Cap US Stocks on Friday
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Global Market Update
(as at close of markets 04/12/2020)