The Weekly Wrap – Trump and U.S Politics Drove Demand for Riskier Assets

The Stats

It was a quieter week on the economic calendar, in the week ending 9^th October.

A total of 43 stats were monitored, following 74 stats from the week prior.

Of the 43 stats, 23 came in ahead of forecasts, with 17 economic indicators came up short of forecasts. 3 stats were in line with forecasts in the week.

Looking at the numbers, 26 of the stats also reflected an upward trend from previous figures. Of the remaining 17 stats, 14 reflected a deterioration from previous.

For the Greenback, it was a 2^nd consecutive week in the red, with the Dollar Spot Index falling by 0.84% to 93.057. In the week ending 2^nd October, the Dollar Spot Index had fallen by 0.84% to 93.844.

Market risk appetite returned, with the U.S President returning to the Oval Office from the hospital. Stimulus was the key area of focus upon Trump’s return to the White House. Late in the week, Trump stated that stimulus talks with the Democrats had become productive. Nancy Pelosi was also upbeat, stating that she wanted a big deal.

On the U.S political front, there was also hope that a blue wave in the election would remove any contest over the outcome of the election.

Out of the U.S

It was a relatively busy week on the economic data front.

Key stats included September’s ISM Non-Manufacturing PMIs, August JOLT’s job openings, and the weekly jobless claims figures.

A pickup in non-manufacturing sector activity was the only positive on the data front. The PMI increased from 56.9 to 57.8.

Employment figures raised more red flags, however. Job openings came up short of expectations and July levels in August.

The weekly jobless claims figures also suggested a possible stall in the labor market recovery.

In the week ending 2^nd October, initial jobless claims came in at 840k, down marginally from 849k from the week prior.

For riskier assets, however, U.S politics and the continued hope of a COVID-19 relief Bill delivered support.

Concerns over a lengthy contest over the outcome of the U.S Presidential Election also eased in the week.

As things stand, the polls suggest a clean sweep for Biden and the Democrats. An orderly transition of power and easing political uncertainty was market positive in spite of Biden’s tax plans.

On the monetary policy front, the FOMC meeting minutes had a muted impact. FED Chair Powell, speaking mid-week, called on Congress to deliver more stimulus else face a slower economic recovery.

The comments had come ahead of Trump’s mid-week announcement to end stimulus negotiations until after the election.

In the equity markets, the NASDAQ rallied by 4.56%, with the Dow and S&P500 gaining 3.27% and 3.84% respectively.

Out of the UK

It was a busy week on the economic data front.

In the 1^st half of the week, September PMIs were in focus. Upward revisions to the composite and services PMI and a pickup in construction sector activity were Pound positive.

The markets then had to wait until Friday, for GDP, trade, industrial production, and manufacturing production figures.

In August, Manufacturing production rose by just 0.7%, following a 6.9% jump in July. Economists had forecast a 3% increase.

The economy grew by 8% over the 3-months to August, reversing a 6.8% contraction in the 3-months to July.

There was a marked slowing in growth in August, however, with the economy growing by 2.1%. In July, the economy had grown by 6.4%.

Other stats including industrial production, which disappointed, and a mixed set of trade data that had a muted impact.

While the stats influenced, Brexit remained the key driver in the week. News of progress in talks and a possible willingness by Michel Barnier to compromise supported the Pound.

COVID-19 remained negative for the Pound, however. Expectations are for an announcement of more restrictions and further government support to limit the damage.

In the week, the Pound rose by 0.78% to $1.3036. In the week prior, the Pound had risen by 1.48% to $1.2935.

The FTSE100 ended the week up by 1.94%, following on from a 1.02% gain from the previous week.

Out of the Eurozone

It was another busy week on the economic data front.

In the early part of the week, September’s private sector PMIs for Italy and Spain and Eurozone retail sales figures were in focus.

Finalized PMIs for France, Germany, and the Eurozone also influenced, however.

The PMIs were skewed to the positive, with better than expected numbers from Italy. There were also upward revisions to Germany and the Eurozone’s services and composite PMIs.

Over the remainder of the week, the focus was on Germany. August factory orders, industrial production, and trade data were in focus.

While factory orders impressed, industrial production and trade data disappointed. The impact was muted, however, with the jump in factory orders aligned with Germany’s PMI numbers for September.

On the monetary policy front, the ECB monetary policy meeting minutes provided little influence late in the week.

For the week, the EUR rose by 0.94% to $1.1826. In the week prior, the EUR had risen by 0.73% to $1.1716.

For the European major indexes, it was another bullish week. The CAC40 and EuroStoxx600 rose by 2.53% and by 2.11% respectively, with the DAX30 gaining by 2.85%.

For the Loonie

It was a relatively busy week on the economic data front.

Key stats included August trade data and September Ivey PMI and employment figures.

The stats were mixed in the week.

While the trade deficit narrowed marginally, the Ivey PMI tumbled from 67.8 to 54.3 in September.

The disappointing PMI number came ahead of the all-important employment figures.

In September, 378.2k jobs were added following 245.8k jobs in August. Economists had forecast a 156.6k increase in employment. The jump in employment brought the unemployment rate down from 10.2% to 9.0%. Economists had forecast a fall in the unemployment rate to 9.7%.

Adding to the upside for the Loonie was a jump in crude oil prices in the week. WTI rallied by 9.58%, with Brent up by 9.12%.

The Loonie rose by 0.87% to end the week at C$1.3121. In the week prior, the Loonie had risen by 0.58%.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 9^th October, the Aussie Dollar rose by 1.10% to $0.72400. The Kiwi Dollar ended the week up by 0.38% to $0.6666. A bullish end to the week delivered the upside for the pair.

For the Aussie Dollar

It was a relatively quiet week on the economic calendar.

Key stats business confidence and trade data.

It was a mixed bag, with business confidence improving, while the trade surplus narrowed.

While the stats did provide direction, the RBA’s monetary policy decision was the main event of the week.

The RBA stood pat on policy while continuing to assure the markets of further support should the need arise. Some positive views on the recovery in labor market conditions provided the Aussie Dollar with support.

At the end of the week, the RBA Financial Stability Review also painted a relatively robust picture. The positive views on Australia’s financial stability added further support to the Aussie Dollar.

For the Kiwi Dollar

It was a quiet week on the economic calendar.

Key stats included business confidence figures for October.

The ANZ Business Confidence Index rose from -28.5 to -14.5 according to prelim figures.

Another widespread improvement in forward-looking indicators supported the improvement in confidence.

For the Japanese Yen

It was a relatively quiet week on the economic calendar.

September’s finalized services PMI and August household spending figures were in focus.

While there was an upward revision to the services PMI, the sector continued to contract at a marked pace.

Household spending also failed to impress. While spending up by just 1.7% in August, spending was down by 6.9% year-on-year.

The figures continued to reflect a weak economic recovery.

The Japanese Yen fell by 0.31% to ¥105.62 against the U.S Dollar. In the week prior, the Yen had risen by 0.27%.

Out of China

It was a quiet week on the economic data front, with China on Holiday for 4 of the 5 days.

Key stats included September’s private sector PMIs, which were positive for market risk sentiment.

September’s Caixin Service PMI at the end of the week was the only major start for the markets to consider.

An increase from 54.0 to 54.8 continued to support the positive sentiment towards the economic recovery.

The upside came from domestic demand, as overseas orders continued to decline.

In the week ending 9^th October, the Chinese Yuan rose by 1.42% to CNY6.6947. In the week prior, the Yuan had risen by 0.48%.

The CSI300 rose by 2.04%, with the Hang Seng gaining 2.81%.