Weekly Market Insight

Latest Economic & Market Update 7th October 2020

07th October 2020

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

Today’s focus:

  • Dublin prime office yields remain stable at 4% – CBRE, Q3 Report
  • US equities close lower after Trump dampens stimulus enthusiasm

Prime office yields in the capital showed resilience by remaining at 4% according to CBRE’s Q3 Dublin Marketview. The report also notes that 54% of city centre take-up occurred in the Dublin 2/4 postcode while the computer and technology sector accounted for 33% of Dublin’s Q3 take up. These findings support BlackBee’s outlook on the Dublin commercial real estate market. 4% yield is attractive both in an Irish and international context. Irish sovereign debt yields are in negative territory (10 year: -0.16%) while there is continued volatility in the global equity markets. In Knight Frank’s 2019 review, Dublin prime office investments were yielding, as they are in Q3 2020, 4%. Dublin’s stable yield is not only encouraging but also attractive when compared with other European cities. In Q4 last year, the only other major European cities that were yielding 4% or more were Brussels, Budapest, Prague and Warsaw. With Dublin’s relatively close proximity to the US, UK and EU markets, as well as current tech inhabitants including Amazon, Google and Facebook, prime office space will remain, in BlackBee’s view, a value-enhancing investment. With higher yields available when compared to cities such as Amsterdam, Frankfurt and Madrid, we believe that Dublin commercial real estate will remain appealing to international investors.

S&P 500 and Nasdaq Composite yesterday closed -1.4% and -1.57% lower respectively. It was another day that displayed how sensitive the equity markets are to the outcome of the US fiscal stimulus negotiations. It is seen by investors and Fed Chairman Jerome Powell as crucial to the US’s economic recovery from the Coronavirus shock. The S&P 500 dropped just over 1% in the space of 4 minutes yesterday when Donald Trump indicated that a stimulus package will not be approved until after November’s Presidential election. He tweeted “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major stimulus bill that focuses on hardworking Americans and small business”. 10-year US Treasury yields drop by 4 basis points to 0.75%. This is a clear “risk off” move, where investors sell out of their equity positions and seek a safe-haven asset such as US treasuries and, traditionally, gold. Yesterday’s Update noted how equity markets closed higher on Monday thanks to a previous tweet from the US President where he indicated his eagerness for fiscal support to be approved. Trump appears to be prioritising the appointment of a new Supreme Court judge over the approval of fiscal stimulus package before the election. Another tweet, after US markets had closed, appeared to show that the President was willing to sign a support package for airline and small business payroll. US equity futures subsequently went green and continue to be so on Wednesday morning. (Data Source: Bloomberg)

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

Global Market Update
(as at close of markets 06/10/2020)