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Weekly Market Focus 22 October 2018

Markets

WEEKLY FOCUS - Incremental change in economic data matters to risk assets                            22 October 2018
 

As we approach the release of data for GDP growth indicators, it is worth noting that equity indices may tend to react to what happens at the margin. The chart above shows the GDP growth data which is solid at above 2% during this year and corporations operating in such an environment have been posting good revenue and earnings numbers. The fact is however that the equity indices, as measured by the EuroStoxx 50 ETF is negative in the year to date; an explanation to this is that year on year growth in the Eurozone decreased sequentially during that period. Leading economic indicators are being watched for a change in the pattern.


The earnings season currently under way in the US is proving solid but investors are keeping an eye on the sequential growth of GDP to determine whether any tactical allocation within portfolios is warranted.
The Italian budget which has not been approved by its own Parliamentary budget office on account of optimistic revenue forecasts is likely to suffer the unprecedented step of being returned back by the European Commission and this could have a bearing on the Euro as the spread between Italian yields and the bund widens. Before the weekend Moody’s downgraded the rating of the country to BBB- but with a stable outlook, alleviating investor fears that Italy may lose its investment grade status. Mario Draghi, the ECB Chair will face the press this week and should confirm that he does not forecast any rate hikes before next summer, a move which will provide comfort to investors that the bank is supporting growth policies. Any reference to the Philipps curve will be scrutinized.


The US GDP growth has surprised many analysts and a possible fall in the deflator for Q3 should be another positive and a tailwind for equities. Although the comparative base effects steepen, growth remains strong so far

 

 

Value

Week

YTD

Equity Indices

 

 

 

S&P500

2,768

0.02%

3.52%

S. Africa

3,125

-2.65%

-17.58%

FTSE100

7,050

0.77%

-8.30%

DAX

11,554

0.26%

-10.56%

CAC40

5,085

-0.22%

-4.29%

Swiss Mkt.

8,872

2.44%

-5.14%

FTSE MIB

19,080

-0.91%

-12.69%

Shanghai Comp

-3.72%

-3.72%

-17.86%

BSE Sensex

34,316

-1.20%

0.76%

Nikkei

22,532

-0.72%

-1.02%

Major currencies

 

 

 

USDZAR

       14.42

-0.69%

16.54%

EURUSD

         1.15

-0.42%

-4.03%

GBPUSD

         1.31

-0.63%

-3.28%

USDCHF

         1.00

0.49%

2.27%

EURCHF

         1.15

0.08%

-1.85%

USDJPY

     112.55

0.31%

-0.12%

EURGBP

         0.88

0.22%

-0.78%

USDAUD

         1.40

-0.03%

9.57%

Dollar Index

       95.44

0.56%

3.93%

 Commodities 

 

 

 

Brent

       79.78

-0.81%

19.31%

WTI Oil

       69.12

-3.11%

14.40%

Copper

         2.77

-0.90%

-15.61%

Aluminum

 2,008.50

-0.86%

-11.73%

Platinum

     833.90

-0.94%

-10.77%

Sugar

       13.89

6.27%

-8.38%

Corn

     367.00

-1.81%

4.63%

Coffee

     122.10

4.76%

-3.25%

Gold

 1,230.00

0.98%

-6.06%

Cotton

       77.91

-0.57%

-0.71%

 Sovereign Yields

 

 

 

US10Y

         3.20

0.03

0.79

UK10Y

         1.58

(0.05)

0.39

Germany10Y

         0.46

(0.04)

0.04

 
Contact: DBN +27 ( 0 ) 31 566 3365 | CPT +27 ( 0 ) 21 851 0920 | JHB +27 ( 0 ) 11 017 7230 | Email:enquiries@pegasuswm.com
Disclaimer: The research report has been prepared for information purposes and does not constitute an offer. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and the company accepts no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this report.
 

 



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