The Weekly Wrap – Economic Data, COVID-19, and U.S Politics Drove the Markets
It was another busy week on the economic calendar, in the week ending 23rd October.
A total of 56 stats were monitored, following 56 stats from the week prior.
Of the 56 stats, 30 came in ahead of forecasts, with 21 economic indicators came up short of forecasts. 5 stats were in line with forecasts in the week.
Looking at the numbers, 39 of the stats reflected an upward trend from previous figures. Of the remaining 17 stats, 16 reflected a deterioration from previous.
For the Greenback, it was a 3rd week in the red out of 4. The Dollar Spot Index fell by 0.98% to 92.768. In the week ending 16th October, the Dollar Spot Index had risen by 0.67% to 93.682.
Market sentiment towards COVID-19 and a lack of progress towards a U.S stimulus package weighed on the Dollar. Senate Republicans talked of plans to scupper any deal ahead of the U.S Presidential Election.
Economic data largely took a back seat for the Dollar in the week.
Out of the U.S
It was a relatively busy week on the economic data front.
A quiet start to the week left housing sector figures in focus ahead of a busier end to the week.
The stats had a muted impact, however, ahead of the weekly jobless claims and private sector PMIs for October.
In the week ending 16th October, initial jobless claims stood at 787K, which was down from a previous week 842K. The lower number was still high by historical standards, however, raising further concerns over labor market conditions.
At the end of the week, October’s prelim private sector PMIs provided some comfort.
The manufacturing PMI rose from 53.2 to 53.3, with the services PMI rising from 54.6 to 56.0.
While the stats were skewed to the positive, the U.S Presidential debate on Thursday evening drew greater interest, as did updates from Capitol Hill on the stimulus package.
In the equity markets, the NASDAQ fell by 1.06%, with the Dow and S&P500 seeing losses of 0.95% and 0.53% respectively.
Out of the UK
It was also a relatively busy week on the economic data front.
In the early part of the week, September inflation figures were in focus ahead of a busy Friday.
A pickup in inflationary pressures provided Pound support mid-week.
On Friday, retail sales and private sector PMI numbers for October failed to provide support, however.
In September, retail sales rose by 1.50%, following a 0.90% rise in August, with core retail sales increasing by 1.60%.
Private sector PMIs disappointed, leading to the pullback in the Pound on Friday. The Manufacturing PMI fell from 54.1 to 53.3, with the Services PMI sliding from 56.1 to 52.3.
From a monetary policy perspective, the stats coupled with COVID-19 containment measures supported sentiment towards further policy easing.
On the Brexit front, however, there was support for the Pound, with negotiations continuing by phone.
In the week, the Pound rose by 0.97% to $1.3040. In the week prior, the Pound had fallen by 0.93% to $1.2915.
The FTSE100 ended the week down by 1.00% following on from a 1.61% loss from the previous week.
Out of the Eurozone
It was a relatively busy week on the economic data front.
Consumer confidence figures for Germany and the Eurozone were in focus on Thursday.
Market attention then shifted to prelim October private sector PMIs from France, Germany, and the Eurozone on Friday.
The stats were skewed to the negative, with the jump in new COVID-19 cases weighing on confidence and service sector activity.
Germany’s GfK Consumer Climate Index fell from -1.6 to -3.1 with the Eurozone’s consumer confidence indicator falling from -13.9 to -15.5.
For the private sector, things were not much better. Service sector activity in France, Germany, and the Eurozone contracted at a faster pace. Manufacturing sector activity picked up, however, which supported the EUR.
The Eurozone’s manufacturing PMI rose from 53.7 to 54.4, while the services PMI slid from 48.0 to 46.2. That led to a fall in the composite from 50.4 to 49.4 in October.
For the week, the EUR rose by 1.21% to $1.1860. In the week prior, the EUR had fallen by 0.91% to $1.1718.
Away from the economic calendar, the continued rise in new COVID-19 cases was negative for the major bourses.
For the European major indexes, it was another bearish week. The CAC40 and EuroStoxx600 fell by 0.53% and by 1.36% respectively, with the DAX30 sliding by 2.04%.
For the Loonie
It was a busier week on the economic data front.
Key stats included August retail sales and September inflation figures.
It was a mixed bag for the Loonie. While there was a pickup in inflationary pressures, retail sales came up short of expectations.
The stats ultimately had a muted impact on the Loonie, however. The continued spike in new COVID-19 cases and slide in crude oil prices weighed on the Loonie in the week.
In the week ending 16th October, the Loonie rose by a modest 0.49% to end the week at C$1.3125. In the week prior, the Loonie had fallen by 0.52%.
It was a bullish week for the Aussie Dollar and the Kiwi Dollar.
In the week ending 23rd October, the Aussie Dollar rose by 0.82% to $0.7139. The Kiwi Dollar rallied by 1.35% to end the week at $0.6691.
For the Aussie Dollar
It was a particularly quiet week on the economic calendar.
There were no material stats in the week to provide the Aussie Dollar with direction.
On the monetary policy front, the RBA minutes failed to rein in the Aussie Dollar. Talk of further monetary policy easing limited the upside in the week, however.
For the Kiwi Dollar
It was a relatively quiet week on the economic calendar.
Key stats included business confidence and 3rd quarter inflation figures.
The stats were skewed to the positive for the Kiwi.
In the 3rd quarter, business confidence improved, with consumer prices reversing a slide from the 2nd quarter.
Year-on-year, the annual rate of inflation softened from 1.5% to 1.4% in the 3rd quarter, however.
The softening was not enough, to shift sentiment towards the RBNZ’s monetary policy outlook.
For the Japanese Yen
It was a relatively busy week on the economic calendar.
In the first half of the week, trade data drew attention ahead of inflation and private sector PMIs on Friday.
It was a mixed bag on the economic data front.
In September, the trade surplus widened from ¥248.6bn to ¥675.0bn. While positive, it was a larger fall in imports than exports that led to the widening.
While exports fell by 4.9%, imports tumbled by 17.2%.
By contrast, private sector PMIs and inflation figures were skewed to the positive at the end of the week.
Core consumer prices fell by 0.3%, year-on-year, in September, following a 0.4% decline in August.
Manufacturing sector activity contracted at a slower pace in October, with the PMI rising from 47.7 to 48.0.
The services sector continued to struggle, however, with sector activity contracting at a quicker pace. According to prelim figures, the PMI fell from 46.9 to 46.6 in October.
In spite of the mixed stats, the Yen found support. A lack of progress on Capitol Hill towards a stimulus package and COVID-19 delivered the upside.
The Japanese Yen rose by 0.65% to ¥104.71 against the U.S Dollar. In the week prior, the Yen had risen by 0.21%.
Out of China
It was a particularly busy week on the economic data front.
Key stats included October industrial production, retail sales, and unemployment figures. More importantly, 3rd quarter GDP numbers also influenced.
The stats were skewed to the positive.
Industrial production rose by 6.9%, year-on-year, in October, following a 5.6% rise in September. Retail sales jumped by 3.3%, following a 0.5% rise, with the unemployment rate falling from 5.6% to 5.4%.
China’s economic recovery also continued through the 3rd quarter. Year-on-year, the economy grew by 4.9%, following 3.2% growth in the 2nd quarter. Quarter-on-quarter, the economy expanded by 2.7%, following an 11.5% rebound in the 2nd quarter.
On the monetary policy front, the PBoC left 1-year and 5-year loan prime rates unchanged, which was in line with expectations and forward guidance.
In the week ending 23rd October, the Chinese Yuan rose by 0.16% to CNY6.6868. In the week prior, the Yuan had fallen by 0.04%.
The CSI300 fell by 1.53%, while the Hang Seng gained 2.18%.