Global Markets Update – Monday 12 October 2020

Green Technology

The IMF urged countries to focus on public investment to spur growth, with an emphasis on green technology and digital infrastructure.


The FTSE 100 gained 1.9% over the week.

With the prime minister expected to follow Scotland in announcing tougher measures to control Covid in England, Chancellor Rishi Sunak set out plans for the government to pay 66% of the wages of those whose businesses are forcibly closed in the local lockdown.

UK GDP expanded 2.1% in August, less than half the bounce back that had been expected. The UK economic output remains around 9% below its pre-Covid levels.

The latest IHS Markit/Cips purchasing managers’ indices for the UK showed that construction activity accelerated to 56.8 in September, compared to 54.6 in August and the fastest pace of growth in nearly five years, with housing mostly driving the boom. Activity in the UK’s dominant services sector activity was revised higher to 56.1 in September 2020, from a preliminary estimate of 55.1 and compared to an over five-year high of 58.8 hit in August, but manufacturing activity was revised lower to 54.1 in September 2020, from a preliminary estimate of 54.3 and compared with August’s two-and-a-half year high of 55.2.


The S&P 500 rallied 3.9% over the week, boosted by rising hopes that Republicans and Democrats can agree on a further stimulus package. The tech heavy Nasdaq rose 1.4%, with big tech groups Apple, Amazon, Facebook and Google’s parent Alphabet accused by Congress having abused their dominant economic positions.

Presidential contender Joe Biden appears to have extended his lead over Donald Trump in the opinion polls, boosting hopes that his party, which has put forth and passed in the House of Representatives a $2.2tn plan to revitalise the pandemic-scarred economy, could open the spending taps soon after the election.

Just hours after leaving hospital and shelving talks on further fiscal stimulus, President Trump proposed a new support package, later increasing the size to $1.8tn. However, the package could still face resistance from both Senate Republicans, who have only been receptive to a package below $1tn, and Democrats, who have been jockeying for a $2.2tn deal.

The ISM manufacturing purchasing managers’ index missed forecasts, coming in at 55.4 in September, compared to 56.0 in August. The reading for the services sector rose to 57.8 per cent in September, from 56.9 in August and its fourth consecutive month of growth.

Ahead of the start of the third-quarter earnings season, companies listed on the S&P 500 are expected to report a 21% drop in earnings year-over-year, according to FactSet. This would be their worst performance since the second quarter of 2009, but it is better than the 25% decline that had been projected at the beginning of summer. It is also a substantial improvement from the first quarter, when earnings plunged nearly 32%.


The FTSEurofirst 300 rose 2.0% over the week.

The final reading of the eurozone composite purchasing managers’ index slipped to a 3-month low of 50.4, with activity in Spain’s services sector falling to a 4-month low of 42.4 in September. Economic activity was strongest in Germany and data from Italy was also better than had been expected, but France disappointed.

French industrial production rose less than expected in August, improving 1.3% on July. Italy’s industrial production surged 7.7% in August whereas German industrial production contracted slightly.


The Nikkei 225 increased 2.6% over the week.

Pacific Basin

Indonesia rushed through a bill that will overhaul several dozen tax and labour market laws ahead of the start of a national strike against the reforms called by trade unions. The bill is an attempt to attract foreign investment and revive the economy.


The yield on the 10-year US Treasury bond closed the week at 0.79%, up 10bps over the week. During the week, yields touched their highest level since June on expectations that the growing likelihood of the Democratic Party taking control of both Congress and the House of Representatives.

The yield on the 10-year German Bund closed the week at -0.53%, up 1bps over the week.


Oil prices rallied, with Brent Crude breaching $43 a barrel as strikes in Norway threatened to curtail output.

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