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Weekly Market Focus - 21 October 2019

Weekly Focus                                                21 October 2019

A more aggressive ECB could spark a synchronized global recovery
 

 

The S&P500 moved to within 0.65% of its all-time highs on Tuesday after the start of earnings season on Wall Street. Sentiment was bullish after Goldman Sachs, JPMorgan Chase and United Health group reported better results than analysts’ expectations. However the technology sector underperformed after IBM missed revenue estimates. Economic data remained mixed after industrial production declined for the fifth time in nine months but overall building permits suggested resilience in the sector even if housing starts were below estimates.

 

Across the pond, the German DAX rose by over 1% but GDP growth for Germany for 2020 was lowered to 1% from 1.5%. The estimate for the current year is a modest 0.5% due to trade conflicts and Brexit uncertainties. The IMF also lowered global growth for 2019 to 3% from 3.2% citing a drag from trade tensions.

 

Mrs. Lagarde, the incoming ECB President, will face the resurgent threat of declining inflation expectations based on data from the survey of professional forecasters (chart above). The ECB did announce a large scale asset purchase program of EUR 20 billion a month as from November but this is insufficient to boost growth decisively. For comparison purposes, the ECB monthly purchases when faced with the threat of deflation in 2016 was EUR 80 billion a month. Addressing the issue of a lack of securities to buy which is the main cause of the low volume will be key if the ECB wants to prolong the business cycle. In the UK, there seems to be no consensus in parliament on the Brexit agreement secured by Prime Minister Johnson last Friday. It is therefore likely that we are moving towards an extension of the October 31st deadline. In Asia, Chinese manufacturing PMI should show continued signs of bottoming but a sustained recovery is not yet apparent.

 

 

Value

1 week

Year to date

Equity Indices

 

 

 

S&P500

2,986

0.68%

19.12%

S. Africa 40

5,574

0.84%

6.03%

Stoxx50

3,586

0.93%

19.59%

FTSE100

7,181

-0.46%

6.72%

DAX

12,679

1.62%

20.17%

CAC40

5,636

-0.07%

19.21%

SMI Index

9,988

0.31%

18.57%

FTSE MIB

22,409

1.43%

22.32%

Shanghai Comp

2,940

-2.27%

17.87%

BSE Sensex

39,298

2.84%

8.96%

Nikkei

22,549

3.44%

12.66%

Major currencies

 

 

 

USDZAR

14.79

-0.30%

2.91%

EURUSD

1.12

1.15%

-2.74%

GBPUSD

1.29

2.50%

1.29%

USDCHF

0.99

-1.20%

0.37%

EURCHF

1.10

-0.05%

-2.37%

USDJPY

108.52

0.13%

-0.96%

EURGBP

0.86

-1.31%

-3.97%

USDAUD

1.46

-1.26%

2.77%

Dollar Index

97

-1.12%

1.40%

 Commodities 

 

 

 

Brent

59.38

0.10%

10.43%

WTI Oil

53.96

0.75%

18.89%

Copper

2.63

-0.04%

-0.49%

Platinum

898.50

-0.06%

12.06%

Sugar

12.32

-1.60%

2.41%

Corn

390.62

-1.79%

4.17%

Gold

1,494.35

-0.25%

13.82%

 Sovereign Yields

 

 

 

US10Y

1.79

4.08%

-33.54%

UK10Y

131.38

-0.89%

6.65%

Germany10Y

-0.36

-21.37%

-245.12%

 Deposit rates with selected banks

 

Investec Bank 32 days CCM – USD  1.20%

 

     

Contact us: Durban +27 (0) 31 566 3365 | CPT +27 ( 0 ) 21 851 0920 | JHB +27 ( 0 ) 11 017 7230 | Email: enquiries@pegasus-wm.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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