Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for October 19, 2020.
China’s economy continued to recover rapidly from the pandemic in Q3, expanding 4.9% year-on-year, adding to the positive signs around the world of numerous economies returning to growth rapidly.
The expansion in gross domestic product missed expectations but was still well ahead of a 3.2% increase in the second quarter, as the country’s industrial production drive helped stoke up the wider economy.
Industrial production was up 6.9% in September, with China emulating positive signs from other countries seen last week.
On Friday, the US Commerce Department reported that retail sales increased 1.9% in September versus the previous month, the fifth straight month of retail sales growth. That was more than double the rate of growth anticipated, with sales of clothing and sporting goods soaring despite the unemployment rate remaining elevated. The positive economic data came at the end of a mixed week for major US stock indices, which all finished marginally higher. Rising Covid-19 case numbers in the US and abroad are giving investors pause, with a “tug of war between rising concerns and encouraging economic data” according to analysts at financial advice firm Edward Jones.
Last week kicked off third-quarter corporate earnings season in the US, with the financials sector dipping by 0.9% after most of the big banks delivered their Q3 updates. While some banks’ profits were buoyed by spikes in trading and investment banking revenues, and loan loss provision were nowhere near as severe as last quarter, there is uncertainty about whether government stimulus has prevented heavy loan delinquencies from hitting entirely, or merely delayed the inevitable.
Pelosi sets 48-hour deadline on stimulus negotiations
The S&P 500, Dow Jones Industrial Average and Nasdaq Composite all made it through the first week of Q3 corporate earnings relatively unscathed, despite an expected 20% decline in S&P 500 company earnings year-over-year (according to FactSet). US Covid-19 cases also surged back to the 60,000-a-day mark, heading back towards July’s peak levels after dropping below 35,000 in mid-September.
Notable over the weekend was a 48-hour deadline set by House Speaker Nancy Pelosi for an agreement on a new stimulus package to be agreed in order for it to be passed before the November 3 presidential election. There remains a substantial gap between Democrat and Republican lawmakers on the contents of a deal, such as the strength of Covid-19 testing and tracing requirements. Markets have swung significantly on the rising and falling prospects of a stimulus package in recent weeks, and the two-day deadline will be watched with interest.
- S&P 500: 0% Friday, +7.8% YTD (+0.2% last week)
- Dow Jones Industrial Average: +0.4% Friday, +0.2% YTD (+0.1% last week)
- Nasdaq Composite: -0.4% Friday, +30.1% YTD (+0.8% last week)
FTSE 100 sinks despite Friday rally
London-listed stocks slumped last week; despite a 1.5% rally for the FTSE 100 on Friday the index closed out the week 1.6% lower. International Consolidated Airlines Group was the week’s biggest loser, falling double digits, while Associated British Foods, BP and Barclays also sank by more than 5% over the course of the week.
The FTSE 250 ended the week 1.4% down, dragged lower by hospitality and travel names that are most at risk from new lockdown restrictions with Covid-19 cases surging. Pub chain JD Wetherspoon, Cineworld and easyJet all fell, with the trio part of a dozen or so names that suffered double-digit losses.
There were some bright spots in the FTSE 100 during the week, however, with online takeaway service Just Eat and airliner engine maker Rolls-Royce both enjoying double-digit gains. Just Eat reported surging online orders in a trading update, while investors have responded positively to Rolls-Royce shoring up its finances.
- FTSE 100: +1.5% Friday, -21.5% YTD (-1.6% last week)
- FTSE 250: -0.1% Friday, -18.6% YTD (-1.4% last week)
