With the influential US market closed last Monday for Labor Day, there was no one single catalyst for weakness in the sector. Technical indicators, rising case numbers, a lack of a fiscal deal and valuation concerns have all been cited by various market commentators.
Vaccine sentiment took a hit early in the week as AstraZeneca was compelled to pause its trials following the news that a participant had developed a neurological disorder. However, it was announced over the weekend that trials are to recommence.
There has been little development on a US fiscal stimulus package, as the latest ‘skinny’ Republican deal, as expected, failed to get through the House.
US inflation data for August was the big economic release last week, and saw prices tick up from the previous reading. However, the consensus is that it will still be some time before meaningful inflation figures compel the US Federal Reserve to act.
ECB President Christine Lagarde gave little away in her latest statement following the ECB meeting last Thursday. The text was very similar to the July issue, with the ECB seemingly adopting a ‘wait-and-see’ approach.
Economic data from Europe last week disappointed with retail sales and services PMI for August missing expectations. Virus cases within the single currency bloc also continue to rise.
Finally, Brexit tensions flared last week as the UK government conceded that some aspects of a draft bill would breach international law. Negotiations are continuing but time to construct a comprehensive exit deal is running out.
Global markets were down last week by -1.7% in euro terms and in local terms. Year to date the UK market is down -21.3% in local terms and -27.9% in euro terms. The influential US Market led global markets down this week by -2.6% in local terms and -3.0% in Euro terms.
Fixed Income & FX
The US 10-year yield finished at 0.66% last week. The German equivalent finished at -0.49%. The Irish 10 year bond yield finished at -0.11%. The Euro/US Dollar exchange rate finished at 1.19, whilst Euro/GBP finished at 0.92.
Oil finished the week at $37 per barrel. Gold finished the week at $1,946 per troy ounce up 28.3% year to date in local terms and 21.2% year to date in Euro terms. Copper finished the week at $6,770 per tonne.
The week ahead
Wednesday 16th September
The US FOMC meets for the latest interest rate decision.
Thursday 17th September
No change in policy is expected as the Bank of England meets.
Friday 18th September
US consumer confidence and UK retail sales data goes to print.