Key Points – Week in Review

Global equitiesrecorded their weekly declines as investors grew increasingly worried about rapid increasesin new coronavirus infections across the US and Europe and after fiscal stimulus talks between Treasury Secretary Mnuchin and House Speaker Pelosi broke down on Thursday, with Mnuchin accusing Pelosi of pulling a “political stunt” by refusing to offer compromises. Markets also braced for the US presidential election as Trump and Biden campaigned intensively during the week and across the key battleground states. On the coronavirus front, Johns Hopkins University reported that the number of confirmed Covid-19 cases in the US surpassed 9mn on Thursday with a daily average of new infections hovering around 80K. Continental Europe announced more restrictions and the UK is preparing for a second nationwide 1-month lockdown. The yield on the 10-year Treasury climbed to 0.87% from 0.84% in the previous week, while volatility, measured by the Cboe Volatility Index (VIX), closed the week sharply higher reaching its highest level since June (up +38% to 38.02%). Brent crude futures declined -10.3% on the week (USD 37.46) on prospects of new lockdowns and decline in demand. The US Dollar traded stronger against a basket of major currencies (94.03), while the Euro remained under pressure as investors worried about the impact of renewed lockdowns across the continent and after the ECB set a dovish tone following its policy meeting on Thursday. Gold prices closed the week lower, at USD 1,878.81 per troy ounce.

Key Market Developments – North America

• The major US benchmarks fell sharply on the week led by losses in the small-cap Russell 2000 (down -6.22%). All the major benchmarks with the exception of the large-cap S&P 500 Index, fell into correction territory as a downward move from their recent highs extended -10% or more.
• Sector wise, within the large-cap index, all 11 sectors closed the week in negative territory and declines were broad-based. Utilities, a defensive sector fared best, down -3.7%, while Information Technology and Industrials fell -6.47% and -6.52%, respectively. The week marked the peak of Q3 reporting season with 180 of the S&P 500 companies reported earnings so far. As FactSet Research reports, with around 63% of the large-cap having reported for Q3, blended earnings per share shows that earnings growth is running at – 9.8%, while sales fell -2% compared with the same quarter a year ago. About 86% of reporting companies have exceeded analysts’ expectations.
• The PCE price index rose +0.2% MoM in September, following a +0.3% gain in August, boosted by an increase in services costs. Meanwhile, goods prices fell -0.1% led by a -0.3% drop in nondurable goods. Q3 GDP accelerated at an annualized rate of +33.1% versus consensus estimate of +30.9% – rebounding from the plunge of -31.4% in Q2.
• Personal income rose by +0.9% MoM in September, rebounding from a revised -2.5% slump in August and beating market consensus of a +0.4% increase. Personal spending increased +1.4% in the same period. Manufacturing PMI rose to 53.3, missing market estimate of 54.3, while services PMI reached 56 – beating market expectations of 54.6.
• The number of workers filing for unemployment benefits declined to 751K in the week and below market expectations of 775K. Initial claims were at their lowest level since late March but remained well above pre-pandemic levels. Continuing claims continued to fall sharply, from 8.5mn to 7.8mn.
• The Commerce Department reported that durable goods orders rose more than expected in September (+1.9%), with core capital goods orders reaching a six-year high.
• The University of Michigan’s consumer sentiment was revised slightly higher to 81.8 in October, reaching the highest level since March.
• New home sales rose to 959K in September, missing market expectations of 1025K.
• The Bank of Canada maintained its key policy rate at the effective lower bound of 0.25%. The central bank plans to keep interest rate near zero until 2023 and will maintain its extraordinary forward guidance and quantitative easing programme.
• The Federal Reserve lowered the barriers on its lending program for smaller businesses and will reduce a minimum loan size to USD 100K from USD 250K. The central bank will also ease restrictions on debt for companies already participating in the Paycheck Protection Program.
• In the US presidential race, with just days to go until the 3 November election, Trump and Democratic rival Biden rallied supporters across the key states. Trump questioned the integrity of the US election again saying it would be “inappropriate” to take extra time to count the tens of millions of ballots cast by mail. He showed different approaches to the resurgent Covid-19 pandemic by urging states to reject lockdowns. Democratic challenger Biden accused Trump of surrendering to the pandemic and said the pandemic could not be stopped by “flipping a switch”.
• The Real Clear Politics average of national polls shows that Biden leads Trump by 7.3%, down from 7.9% a week ago. Biden’s lead in the battleground states of Arizona, Florida, Michigan, North Carolina, Pennsylvania and Wisconsin declined to 3.2% from 4.1%. As it stands, Biden’s chance of election is 63.6% while Trump’s odds of reelection are 35.3%.
• Dr. Anthony Fauci said in the week that a coronavirus vaccine will not be available before January 2021 and that a return to normal is unlikely until 2022.
• In the week of the big tech earnings show, Alphabet rallied as much as +8% on Thursday as the company’s ad sales bounced back sharply from a pandemic slump. Facebook slipped nearly -3% amid a user decline and “a significant amount of coronavirus related uncertainty,” though revenues were up more than 20% despite ad boycotts. Amazon also fell -1.5% after predicting USD 4bn in pandemic costs next quarter, while Apple declined -4% as iPhone sales missed estimates due to customers holding off on purchases before the release of the iPhone 12.

Key Market Developments – Europe

• Equity markets across Europe ended the week sharply lower as investors grew increasingly worried about rapid increases in new coronavirus infections and double-dip recessions across the region. The Europe 600 and the UK’s FTSE All-Share Indexes declined – 5.56% and -4.81%, respectively.
• Preliminary data compiled by Eurostat show the Eurozone economy rebounded more strongly than expected in Q3 with GDP growing +12.7% after contracting -11.8% in Q2. Year-on-year, growth shrank by -4.3%, easing from a record contraction of -14.8% in the Q2. Across the Euro block, all major economies posted record GDP expansions in Q3: France +18.2% vs -13.7%, Spain +16.7% vs – 17.8%, Italy 16.1% vs -13.0% and Germany +8.2% vs -9.8%.
• Eurozone CPI fell -0.3% YoY in October for a second consecutive month and in line with economists’ expectations. Spanish CPI declined by -0.9% YoY, missing economists’ expectations of -0.6% decline.
• The Eurozone consumer confidence indicator was confirmed at -15.5 in October, the lowest since May, amid a resurgence in coronavirus cases. The economic sentiment was unchanged at 90.9 in October 2020, beating market expectations of 89.5 but remaining well below pre-pandemic levels.
• German Ifo business climate index reached 92.7, closely missing market expectations of 93.
• The ECB left monetary policy unchanged during its October meeting. Policymakers took a wait-and-see approach until a new round of economic projections is unleashed in December. This is when a thorough reassessment of the economic outlook and the balance of risks will be made. The central bank’s main refinancing rate was held at 0% while the deposit rate remained at a record low -0.5%.
• The ECB announced it will recalibrate its instruments as appropriate, to respond to the unfolding situation and to ensure that financing conditions remain favorable to support the Eurozone economic recovery. The central bank stated that it would “carefully assess the incoming information, including the dynamics of the pandemic, prospects for a rollout of vaccines, and developments in the exchange rate.”
• The ECB will continue its purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of EUR 1.35tn.
• The BoE’s request in March for banks to restrain dividend payments will not change the number of payouts over the longer term, according to its executive director for financial stability.
• The EU chief negotiator Barnier resumed talks in London with his British counterpart as the two sides tried to strike a last-minute trade agreement less than 10 weeks before the UK leaves the EU. He said “time is very short” to bridge the significant remaining gaps on key issues in negotiations. The EU Commission President Ursula von der Leyen said Brexit talks are making good progress, with two main sticking points left to be resolved: level playing field and fisheries. France’s Macron and Germany’s Merkel ordered their countries back into lockdown as a massive second wave of coronavirus infections threatened to overwhelm Europe and authorities struggled to contain the resurging pandemic. In a televised speech, Macron ordered a nationwide lockdown until December, with limitations on outdoor movement and mandatory working from home.vGermany announced sweeping restrictions, shutting bars, restaurants, and theaters for a month. Italy ordered bars and restaurants tovstop serving in the evening and closed gyms, swimming pools, cinemas, and theaters. Greece ordered Thessaloniki, its second-biggest city, and two other regions to move into lockdown, while Spain extended the state of emergency for six months, enabling the regions to curb residents’ mobility, impose curfews, and shut their borders.

Key Market Developments – Asia-Pacific/Emerging Markets

• Stock markets across Asia-Pacific ended the week in negative territory. Mainland Chinese equities, measured by the CSI 300 Index, retreated -0.48% on the week, the Hang Seng Index fell -3.25%, while Japan’s Nikkei 225 Index declined –2.29% in the same period.
• China’s official NBS manufacturing PMI came at 51.4 in October, little-changed from a seven-month high of 51.5 in the previous month. The latest reading pointed to the eighth straight month of growth in factory activity, amid ongoing recovery in the economy from the pandemic shock. China’s official NBS non-manufacturing PMI increased to 56.2 in October from 55.9 a month earlier, signaling the fastest growth in the service sector since October 2013.
• Retail sales in Japan fell -8.7% in September YoY, marking the seventh straight month of declines. Industrial output increased +4% in the same period, beating market expectations of +3.2%.
• The unemployment rate in Japan remained unchanged at 3.0% in September compared to the prior month, missing market expectations of 3.1%. This is the highest jobless rate since May 2017.
• Australia CPI grew 1.6% in Q3 QoQ, beating economists’ expectations.
• As expected, Japan’s BoJ kept interest rates unchanged at the policy meeting in October, with the short-term policy rate set at -0.1%. The central bank said it will continue purchases of 10-year Japanese government bonds to keep the longer-term benchmark close to 0%. The central bank lowered its growth outlook for the remainder of fiscal year 2020 saying that a recovery in demand for services may take longer than it forecasted in July. The central bank also noted that inflation expectations remain to be negative in the near term as a result of the pandemic.
• China’s PBoC injected CNY 120bn into financial system via seven-day reverse repos at an interest rate of 2.2%. The move was intended to maintain reasonably ample liquidity in the banking system.
• Japan’s government is considering a Yen 10tn extra budget to offset some of the economic drag resulting from the pandemic.
• China’s Communist Party held its fifth plenum in Beijing from 26-29 October during which party leaders outlined their 14th five-year plan for the country’s longer-term economic and social development. Party leaders released modernization targets for the next 15 years until 2035, including per capita GDP. The ruling elite also announced it will prioritize domestic demand expansion, upgrading supply chains, and own development of the country’s key technologies as ways to hedge against external uncertainties.
• The US and India signed an agreement that would allow New Delhi to access US satellite data crucial for targeting missiles and other military assets.
• Japan and the US began air, sea and land exercises around Japan in a show of force and amid increased Chinese military activity in the region.
• Israel and Lebanon held a second round of talks over their disputed sea border.
• Turkish President Erdogan said it was time for a realistic proposal about a two-state solution on the divided island of Cyprus.
• Israel announced its delegation will travel to Sudan after the two countries agreed to take steps to normalize relations.

Key Points – Week Ahead

• In the week ahead, important macro data releases in the US include non-farm payrolls, ISM PMI surveys, factory orders, weekly initial jobless claims and balance of trade data. The Federal Reserve will decide on monetary policy decision. The US presidential election takes central stage next week, with Joe Biden leading the polls and early voting hitting record levels amid the coronavirus pandemic.
• In Europe, Eurozone will release retail sales, Markit manufacturing and services PMIs. Markets will closely watch Germany’s industrial output, factory orders and manufacturing PMI. The UK will publish the latest construction PMI, and Halifax house price index. The BoE will decide on monetary policy decision.
• In Asia-Pacific, China will release Caixin manufacturing and service sector PMIs and exports/imports and trade balance. Japan will publish monetary policy meeting minutes, while Australia will release balance of trade data. Australia’s RBA will decide on monetary policy decision.
• In emerging markets, India and South Africa will release the latest Markit manufacturing PMIs and Brazil will publish industrial production and inflation rate. Indonesia will release the latest inflation rate and Q3 GDP figures

Disclosures
Sources of information and data: Bloomberg; Financial Times; Reuters.com; CNNMoney.com; BBC Business News; The Wall Street Journal. The material in this document has been prepared by Patronus Wealth Privé (DIFC) Limited for general information and illustrative purposes only and does not constitute any form of recommendation or investment advice. The material in this document is intended for recipient’s use only and any disclosure, copying, distribution or any action in reliance on its contents is prohibited. The historical performance is not meant to forecast, imply or guarantee the future performance. The information presented in this document have been obtained from sources generally believed to be reliable. Patronus Wealth Privé (DIFC) Limited makes no representation as to its accuracy or completeness and accepts no liability for any loss arising from the use of material in this document.

Patronus Wealth Privé (DIFC) Limited is regulated by the DFSA.

Key Points – Week in Review

Global equities declined for the week. Investors grew cautious about a resurgence in coronavirus cases in the US and Europe with more than 83k new cases recorded in the US on both Friday and Saturday, and Europe registering a record 200k of daily new infections in a single day. The yield on the 10-year Treasury climbed to a four-month high of 0.85% from 0.75% in the previous week. Volatility, measured by the Cboe Volatility Index (VIX), closed Friday at 27.55%, while Brent crude futures declined slightly to USD 41.77. The value of the US Dollar against a basket of major currencies, ended the week lower around 92.76, hitting the lowest level in more than six weeks. China’s Yuan traded stronger against the US dollar (USD/CNY 6.6867) after the onshore rate was set at 6.6703, and traders established long positions following comments from China’s State Administration of Foreign Exchange that the Yuan has proved more stable than expected. Gold prices hovered around the flatline of USD 1,900 for most of the week, closing Friday at USD 1,902.05 per troy ounce, and in credit markets, the 3M USD Libor rate hit a record low of 0.21%. It is now down more than 100 basis points from its highs in March.

Key Market Developments – North America

• The major US benchmarks ended the week lower led by losses in the tech-heavy Nasdaq (down -1.06%). The large-cap S&P500 Index fared better declining -0.53% in the same period. Sector wise, within the large-cap index, Communication Services outperformed, up +2.13%, while IT shares fell -2.21%. Gains within Communication sector were helped by internet giants Alphabet and Facebook, while IT sector was dragged down by Intel shares after the world’s largest semiconductor chip manufacturer fell over -10% in early trading Friday as investors assessed results in its data center business. The quarterly reporting season got into full swing and 90 companies of the S&P 500 have reported their results during the week. Analysts polled by FactSet Research expect overall earnings for the large-cap index to decline -16.5% QoQ.
• Retail sales in the US increased by +1.9% in September MoM, beating market expectations.
• The number of workers filing for unemployment benefits declined to 787K in the week and below market expectations of 860k. Most of the drop can be attributed to California, where the claims declined to 159k following a 2-week pause to remove a large backlog.
• A flash IHS Markit composite PMI estimate showed increase to 55.5 in October from 54.3 in the previous month with the reading pointing to the fourth successive month of expansion in private sector activity. The services sector grew at the fastest pace in nearly two years (56 in October vs 54.6 in September), while manufacturing output rose the most in 21 months (53.3 in October vs 53.2 in September).
• The Kansas City Fed’s manufacturing production Index rose by 5 points to +23 in October, suggesting an increase in manufacturing activity, mainly boosted by output at fabricated metal and machinery plants.
• Housing starts in the US rose 1.9% to a seasonally adjusted annual rate of 1.41mn units in September and below market expectations of 1.45mn. Building permits rose 5.2% and above market expectations of 1.52mn. The NAHB/Wells Fargo Housing Market Index shows the homebuilder sentiment is at a record high in October for the second consecutive month.
• The National Association of Realtors’ report showed sales of previously owned houses jumped 9.4% in September, the most since May of 2006. It was the fourth consecutive month of gains amid record-low interest rates and demand for houses away from big cities.
• The Federal Reserve Governor Brainard said in prepared remarks to the Society of Professional Economists that the economic recovery in the US remains highly uncertain and highly uneven, with certain sectors and groups experiencing substantial hardship. He added that the Fed is committed to providing sustained accommodation to achieve a broad-based recovery. Brainard warned that further fiscal support will be needed alongside accommodative monetary policy to turn a K-shaped recovery into a broad-based and inclusive economic recovery.
• The latest Fed’s beige book showed the economic activity in most part of the country was up “slightly to modest”.
• The Federal Deposit Insurance Corporation reported that 7.1mn households in the US did not have a bank account in 2019 – the lowest level since 2009.
• House Speaker Pelosi said there was still a chance for a stimulus deal with Congressional Republicans despite resistance from Republicans, adding that she was optimistic an agreement could be reached. It is unclear, however, whether the deal could be passed before the November election. Initially, Pelosi said stimulus deal must be agreed within 48 hours deadline which expired earlier in the week.
• Biden and Trump had their last debate 12 days before the November election. Pundits and strategists labeled it as a more civil debate than the first one. Biden made clear that if elected president, his administration would reverse Trump’s foreign policy decisions by immediately re-entering the Paris climate accord and halting the US’s exit from the WHO. Given uncontrollable spread of the coronavirus across the country, Biden warned that the US was about to enter a “Dark Winter”.
• The number of confirmed coronavirus cases in the US nears 8.5mn with Florida reporting on Thursday, its highest daily jump in new cases in over two weeks. At the same time, other states such as Illinois and Ohio faced record rises in infections.
• At least 5 of Vice President Pence’s aides including his chief of staff were reportedly tested positive for the coronavirus in recent days.
• White House chief of staff Mark Meadows suggested during a CNN interview on Sunday that the US could not get control of the pandemic following a recent surge in new infections.

Key Market Developments – Europe

• Equity markets across Europe ended the week largely lower as alarming rise in coronavirus infections, lingering Brexit uncertainty and fading hopes for US fiscal stimulus weighed on investor sentiment. The Europe 600 and the UK’s FTSE All-Share Indexes declined -1.36% and -0.46%, respectively.
• A flash IHS Markit Eurozone composite PMI estimate for October slipped to 49.4 from 50.4 in September with the latest reading pointing to a renewed contraction in business activity across the Eurozone. Accelerating growth of manufacturing output (54.4 in October vs 53.7 in September), was overwhelmed by a steepening deterioration in the service sector (46.2 in October vs 48.0 in the previous month). The latest reading pointed to a second successive month of contraction in the service sector as inflows of new business fell at an accelerated rate.
• A preliminary estimate shows the Eurozone consumer confidence indicator fell to -15.5 in October from -13.9 in the previous month. It was the lowest reading since May as a second wave of coronavirus infections and the threat of stricter restriction measures weighed on households’ mood.
• The Eurozone current account surplus narrowed sharply to EUR 21.8 bn in August from EUR 32.1bn the previous year. Services surplus declined to EUR 6.4bn from EUR 13.3bn while the primary income account posted a EUR 0.2bn deficit.
• A preliminary IHS Markit/CIPS UK composite PMI estimate for October dropped to 52.9 from 56.5 in the previous month. The latest reading pointed to the weakest rise in UK private sector output since July, as the speed of recovery slowed in both manufacturing (56.4 in October vs 59 in September) and services sectors (52.3 in October vs 56.1 in September). The manufacturing output pointed to a solid growth although at slower pace, while the service sector indicated a sharp loss of momentum across the service economy.
• German GfK consumer climate for November reached a score of -3.1, missing market expectations. The consumer confidence in the UK declined to -31 in October from -25 in the previous month as further lockdowns to contain the second wave of coronavirus cases weighed heavily.
• Annual CPI rate in the UK increased to 0.5% in September from 0.2% in August, matching market expectations. Retail sales increased 1.5% MoM in September, beating forecasts of a 0.4%.
• In an interview with French newspaper Le Monde, the ECB President Lagarde said that the European economic recovery risked “losing momentum” as governments imposed new restrictions to curb the coronavirus pandemic. She urged the EU members to consider making Eurozone debt a permanent tool.
• The ECB policymaker Holzmann said he saw no need for further monetary stimulus at present, while leaving the door open for more easing if the pandemic worsens.
• The BoE’s chief economist Bailey said is not in favor of deploying negative interest rates. The clarifying comment came after a contradicting statement was made by policymaker Vlieghe on Tuesday, in which he said negative rates might be needed to bolster recovery, and that the economic outlook was pointing that more stimulus was needed.
• The Eurozone governments plan to borrow more and increase deficits in 2020, with total budget deficits expected to hit EUR 1tn. In addition, Italian government approved a preliminary 2021 budget that includes expansionary measures totaling EUR 39bn.
• Public sector net borrowing in the UK (excluding public sector banks) hit an all-time high of GBP 36.1bn in September. This is GBP 28.4bn more than a year ago and the third-highest borrowing in any month since records began in 1993 as the UK government stepped up efforts to support the economy hit by the pandemic. Also, this equated to 103.5% of GDP, the highest level of borrowing as a share of the economy since the 1960-61 financial year.
• The UK is expected to resume trade talks with the EU marking a new push by the two sides to protect billions of dollars worth of trade from the beginning of 2021. According to the UK’s minister of the Cabinet Office Glove, the door is still open for a post-Brexit trade deal, but the EU needed to change its approach and show it is serious before talks can resume. Following the conversation with the UK chief Brexit negotiator Frost, the EU negotiator Barnier twitted that Brussel was ready to discuss detailed legal treaty texts and to “intensify” trade talks. The PM Johnson, however, still refuses to restart Brexit negotiations despite ticking clock.
• Spain and Italy announced stricter lockdown measures over the weekend, while France reported the country’s highest ever number of new coronavirus cases in the past days. France extended a curfew to cover almost 70% of its population and said the state of emergency could extend until February 2021. Germany’s Merkel announced difficult times ahead as a second wave of Covid-19 in Europe is under way. In the UK, Wales opted for a full lockdown expected to last 17 days, while England’s the strictest tier-3 lockdown, was extended to cover South Yorkshire and greater Manchester and could be implemented in other areas soon.

Key Market Developments – Asia-Pacific/Emerging Markets

• Stock markets across Asia-Pacific ended the week mixed. Mainland Chinese equities, measured by the CSI 300 Index, retreated -1.65% as investors turned cautious ahead of China’s Communist Party Congress and lack of progress in the US stimulus talks. The Hang SengIndex added +2.18% for the week posting its fourth consecutive weekly rally. Japan’s Nikkei 225 Index was lower –0.75% in the same period.
• The report by National Bureau of Statistics showed China’s economy grew by +4.9% in Q3 YoY, below market expectations of +5.2%. Industrial production gained +6.9% YoY in September, while retail trade rose by +3.3% – the strongest gain so far in 2020.
• Average new home prices in China’s 70 major cities increased by +4.6% YoY in September, posting the slowest gain in home prices since February 2016.
• Japan’s core CPI declined by -0.3% YoY in September, while Singapore CPI stayed flat in the same period beating market expectations, of -0.4% decline.
• Exports from Japan fell -4.9% YoY in September, beating market expectations, as exports to the US increased for the first time in 14 months. Exports to the Asia region dropper -2.0%, while shipments to China, Japan’s largest trading partner, rose +14.0%.
• China’s PBoC injected a CNY 50bn seven-day reverse repos operation and held the rate unchanged at 2.2% in a move to maintain the reasonable and sufficient liquidity of the banking system.
• The BoJ policy-setting committee is expected to lower its projections for Japan’s GDP and inflation growth for the current fiscal year in a meeting on 28-29 October. The main reason for lowering the growth forecast is the larger-than-expected decline in economic activity caused by the coronavirus pandemic, with data released after the BoJ’s forecast in July showing Japan’s economy contraction at an annualized rate of -28.1%.
• The BoJ’s member Sakurai said the central bank should spend time monitoring the impact of steps it took to cushion the economic impact from the coronavirus crisis, signaling that no immediate expansion of stimulus was needed.
• Japan and Britain signed their first post Brexit-deal with UK companies being exempted of tariffs on 99% of the country’s exports.
• To combat China’s regional assertiveness, Vietnam and Japan agreed to strengthen security and economic ties including Vietnam’s imports of Japan’s military technology.
• On Wednesday, the IMF downgraded a 2020 forecast for Asia-Pacific region to a contraction of -2.2%. The fund noted the lower outcome for the region by 0.6% than it had forecasted it in June, amid possible resurgence of coronavirus infections and ongoing tensions between Beijing and Washington.
• As reported by the US Seventh Fleet, on 19 October, the US, Japan and Australia conducted naval exercises in the South China Sea.
• On Thursday, Lebanon’s President Michael Aoun designated Saad al-Hariri as Lebanon’s new prime minister to form a new government. Hariri faces major challenges including a mounting list of woes such as a banking crisis, currency crash, rising poverty and crippling state debt.

Key Points – Week Ahead

• In the week ahead, important macro data releases in the US include Q3 GDP growth, personal income and expenditure and durable goods orders. The earnings season continues with Alphabet, Apple, Amazon and Facebook due to report their quarterly results.
• In Europe, Eurozone will release consumer confidence and economic sentiment, unemployment and inflation rates and Q3 GDP growth. The ECB will decide on monetary policy decision. The UK will publish national wide housing prices, consumer credit and mortgage approvals. Brexit negotiations will be in the spotlight next week.
• In Asia-Pacific, China will release NBS manufacturing PMI. China’s Communist Party Congress will be held in the week. Japan will publish retail sales and consumer confidence. The BoJ will announce its monetary policy decision.
• In emerging markets, Turkey will release the latest business confidence and inflation report, while South Africa will publish inflation rate and balance of trade data.

Disclosures

Sources of information and data: Bloomberg; Financial Times; Reuters.com; CNNMoney.com; BBC Business News; The Wall Street Journal. The material in this document has been prepared by Patronus Wealth Privé (DIFC) Limited for general information and illustrative purposes only and does not constitute any form of recommendation or investment advice. The material in this document is intended for recipient’s use only and any disclosure, copying, distribution or any action in reliance on its contents is prohibited. The historical performance is not meant to forecast, imply or guarantee the future performance. The information presented in this document have been obtained from sources generally believed to be reliable. Patronus Wealth Privé (DIFC) Limited makes no representation as to its accuracy or completeness and accepts no liability for any loss arising from the use of material in this document.

Patronus Wealth Privé (DIFC) Limited is regulated by the DFSA.

Key Points – Week in Review

Global equities were mixed on the week as investors grew more cautious on prospects of a stimulus package being passed in the USbefore November election. A rapid growth in coronavirus cases in the US and across Europe weighed on sentiment too, after France’s Macron imposed new strict curfews in Paris and eight other large French cities, and the UK govevernment announced stricter efforts to mitigate the spread of the virus. The yield on the 10-year Treasury eased to 0.76% from 0.78% the previous week, while volatility, measured by the Cboe Volatility Index (VIX), closed Friday at 27.41%. Brent crude futures for December delivery fell in the week on concerns that the overall demand will decline on rising Covid-19 cases, and after the International Energy Agency said that if the pandemic persists, oil demand will not reach pre-pandemic levels until 2025. The value of the US Dollar against a basket of major currencies, closed the week at 93.68. The Euro depreciated against the US dollar towards EUR/USD 1.17 handle as a second wave ofcoronavirus infections and new lockdown restrictions continued to threaten the Eurozone recovery. Gold prices traded mixed around the flatiline of USD 1,900 for the most of the week amid steady US dollar and lack of progress in the US fiscal stimulus talks.

Key Market Developments – North America

• US equites ended the week in positive territory. The tech-heavy Nasdaq led the gains (up +0.79%), while the small-cap Russell 2000
  Index trailed (down -0.23%). Nasdaq closed lower on Friday after Senator Hawley, an outspoken critic of large tech companies, said
  he would go to the Senate floor to try and pass a big tech bill next week. Sector wise, within the large-cap S&P 500 Index, Industrials
  outperformed, up +1.10%, while Energy shares fell -2.10%
• Retail sales jumped +1.9% in September beating consensus estimates of +0.7%, As data showed, vehicles, home improvement and
  sporting goods were standout categories. The University of Michigan’s consumer sentiment increased to 81.2 in October from 80.4
  the month earlier but still remained below pre-coronavirus levels.
• Industrial production fell -0.6% in September, its first decline in five months, and missing market expectations of +0.5% growth. The
  production remained 7.1% below its pre-pandemic level as manufacturing output decreased -0.3% while the output for utilities
  dropped -5.6%
• Import prices went up +0.3% MoM in September, its fifth consecutive monthly gain, and in line with market expectations. Export
  prices rose +0.6% MoM in September and above market expectations of a +0.4% gain. It was the fourth straight monthly rise in export
  prices, driven by higher cost of both agricultural and non-agricultural exports
• § Initial jobless claims reached 898K in the week ended 10th October, the highest level in almost two months and well above market
  expectations of 825K. Continuing claims however, offered a better picture, falling from 11.2mn to 10.1mn in the same period.
• Canada’s unemployment rate improved in September falling to 9.0% from 10.2% recorded the previous month.
• The Federal Reserve Vice Chair Clarida said it could take a year for GDP growth to return to its prepandemic level. The Fed’s Quarles
  urged close monitoring of consumer loans amid stimulus uncertainty
• Negotiations over a fifth coronavirus relief package continued in the week between Treasury Secretary Mnuchin and House Speaker
  Pelosi. Trump has raised his offer for a new fiscal stimulus package to a USD 1.8tn in a bid to strike a final compromise with
  congressional Democrats, but a gap of around USD 400bn remains, with Pelosi seeking a total of USD 2.2tn. Senate Republicans are
  reluctant to back a plan negotiated by Mnucin and Pelosi with Senate Majority Leader McConnell backing a more limited package of
  around USD 500bn. Mnuchin remarked on Wednesday that “getting something done before the election and executing on that
  would be difficult.”
• On Thursday, Biden and Trump held their virtual debates on ABC and NBC networks, respectively. Biden criticized Trump’s “panicked”
  response to the Covid-19 pandemic, while Trump defended his handling of the crisis. Trump’s electoral campaign announced a
  number of campaign rallies since his bout with Covid-19, while Biden plans to travel to Pennsylvania and Florida as the fight for the
  White House focuses on two of the biggest swing states
• The US confirmed its first case of Covid-19 reinfection casting doubts about immunity from the coronavirus. Eli Lilly paused a
  government-sponsored trial of its antibody therapy and enrolment of participants in a clinical trial due to a potential safety concern.
  This comes less than 24 hours after Johnson & Johnson said research on its experimental vaccine was put on hold after a participant
  unexplainly fell ill.
• US banks kicked off the Q3 reporting season with JPMorgan, Goldman Sachs, Citigroup, Bank of America, Wells Fargo and Morgan
  Stanley, all reporting their quarterly results. As data from FactSet Research show, so far, around 10% of the constituents of the S&P 500
  Index have reported their Q3 earnings, with YoY earnings growth running at -18.4%, while YoY sales are seen -3.27% lower compared
  to the same quarter last year
• Apple launced a redesigned line-up and four new versions of the iPhone 12 with faster 5G connectivity. The company promised to
  usher in a “new era” for its flagship product.
• Ford delayed the launch of its plug-in hybrid Escape SUV to 2021 after thousands of similar vehicles in Europe were recalled for
  problems involving fires while recharging.

Key Market Developments – Europe

• Equity markets across Europe ended the week largely lower as alarming rise in coronavirus infections, lingering Brexit uncertainty and
  fading hopes for US fiscal stimulus weighed on investor sentiment. The Europe 600 and the UK’s FTSE All-Share Indexes declined –
  0.77% and -1.56%, respectively
• As reported by Reuters, the seven-day average of newly reported coronavirus cases in Europe has topped 100K with case count
  overtaking that of the US. In response, authorities across the continent resorted to tighten restrictions with France introducing nightly
  curfews from 9pm until 6am in Paris and eight other large French cities. In the UK, the government introduced a three-tier system
  that will see different parts of the country placed in different categories dependent on rates of infection, while in Spain, the central
  government has invoked powers to overrule local authorities on imposing limits on activity to contain the virus’ spread. Both Czech
  Republic and the Netherlands imposed partial lockdowns, while Germany announced limits on the number of people at private
  gatherings and a curfew for bars and restaurants in areas deemed hotspots. Northern Ireland said it would enter four-week lockdown
  on Friday, closing schools, pubs and restaurants as part of new restrictions
• The Eurozone CPI declined -0.3% in Semptember YoY – the steepest decline since April 2016. Prices fell for both energy and nonenergy industrial goods. At the same time, services inflation slowed to 0.5% from 0.7%. Consumer prices in Germany declined by –
  0.2% (its largest decrease since January 2015) and France’s CPI declined by -0.5% in the same period.
• Industrial output in the Eurozone rose by +0.7% in August MoM, missing market expectations of a +0.8% increase. The ZEW indicator
  of economic sentiment dropped by 21.6 points in October to 52.3, the lowest level since May.
• The Eurozone’s trade surplus widened to EUR 14.7bn in August MoM, but below market expectations of a EUR 15.1bn
• The UK economy struggled in August with GDP increasing by +2.1% from the month earlier – not even half the median forecast in
  data collected by Reuters – and the slowest increase since the economy began to recover in May
• The unemployment rate in the UK rose to 4.5% in August from 4.1% in July
• The ECB Chief Economist Lane warned that the Eurozone economy faces a “tougher phase” of the economic recovery as coronavirus
  cases surged across the economic block putting a question over the extent of localized lockdowns. President Lagarde noted the
  central bank has an arsenal of economic stimulus “on standby” amidst a surge of coronavirus cases in Europe. Lane said the ECB is
  considering a Fed-style inflation target, which would allow price levels to overshoot the central bank’s 2% target to offset lengthy
  periods during which inflation has undershot that level.
• The ECB moved a step closer to exploring the creation of a virtual currency, after Lagarde said she was “very seriously considering” a
  digital euro.
• The BoE’s Governor Bailey does not think the economy is going through V-shaped recovery, because of a probable second wave of
  Covid-19
• The FT reported that the BoE has begun a fact-finding mission to see whether the UK banks could cope if the central bank wanted to
  introduce negative interest rates to support the economy. On Monday, the BoE wrote to banks asking them about their readiness to
  deal with a zero or negative bank rate saying the step was to “assess the appropriateness of a negative official bank rate alongside all
  of its other tools”
• The EU continued to reject the idea of a free trade deal with the UK as both sides remained divided on key issues such as fishing
  rights, corporate governance and fair competition. The EU Commission president Ursula von der Leyen announced that negotiations
  would continue next week while the EU’s Chief Brexit negotiator Barnier noted the EU is ready for Brexit talks “until last possible day”
  urging his British counterparts not to walk out of trade talks as deals on security and fishing are possible over the next two weeks
• Johnson told the head of the EU Commission that he was disappointed there had not been more progress in Brexit trade talks. He
  urged UK businesses to prepare for no deal Brexit after negotiations stalled and as the self-imposed 15th October deadline for the UK
  to leave the EU if no deal was reached expired. Johnson’s spokesman said that trade talks with the EU were over unless the bloc
  changed its negotiating position. French Foreign Minister Le Drian said a no-deal Brexit looked “very likely” based on the state of
  negotiations between the EU and the UK.
• The EU won World Trade Organization permission to impose tariffs on USD 4bn worth of US goods in retaliation against subsidies for
  Boeing. The EU is expected to hold introduction of tarrifs until after the US presidential election next month.
• The EU will impose duties of up to 48% on imports of aluminum from China over an investigation into unfair prices from Chinese
  producers
• France will go ahead with plans to collect its contentious digital services tax mid-December, keeping Europe on course for a trade
  battle with the US over the taxation of tech giants.
• Moody’s Investors Service downgraded the UK’s sovereign credit rating to Aa3 from Aa2 and assigned a stable outlook, citing that
  the UK’s economic strength has diminished the last downgrade, the country’s fiscal strength has eroded as general government debt
  has risen further as a result of the pandemic, and the weakening in the UK’s institutions and governance that the rating agency has
  observed in recent years.
• Investors buying Italy’s latest debt sale will get no payment, as the country capitalizes on its record-low borrowing costs. Italy’s
  borrowing costs moved negative for the first time ever
• Roche will launch laboratory SARS-CoV-2 antigen test to support high-volume testing of suspected Covid-19 patients.
• AstraZeneca’s antibody medicine against Covid-19 is advancing into the last stage of clinical tests and will be administered to more
  than 6,000 people starting in the next few weeks.

Key Market Developments – Asia Pacific/Emerging Markets

• Stock markets across Asia-Pacific ended the week mixed. Japan’s Nikkei 225 Index was lower -0.89%, while mainland Chinese equities,
  measured by the CSI 300 Index, and Hong Kong shares, gained +2.36% and +1.81%, respectively. Total value of stock market in China
  has climbed to a record high of more than USD 10tn, boosted by strength of country’s economic recovery following the Covid-19
  pandemic
• China CPI rose by +1.7% YoY in September, the least in 19 months, with food inflation hitting its lowest in 16 months. Producer prices
  declined by -2.1% YoY in September, posting the eighth straight month of fall in factory prices
• Banks in China extended CNY 1.9tn in new loans in September, beating market forecasts of CNY 1.7tn. It is the highest reading in six
  months and much better than CNY 1.69tn a year earlier.
• Car sales in China increased +12.8% YoY to 2.57mn in September, the sixth straight month of increase, as the vehicle market comes
  off lows hit during the coronavirus lockdown. Sales of trucks, vans and other commercial vehicles, which account for around a quarter
  of overall market, surged +40% while sales of passenger vehicles were up +8%. China’s exports rose +9.9% YoY in September, while
  imports surged +13.2% in the same period
• China’s PBoC injected a CNY 500bn one-year medium-term lending operation and kept the rate unchanged at 2.95% for the sixth
  straight month, in a move aiming to maintain sufficient liquidity of the banking system.
• Japan industrial production increased by +1.0% in August from the previous month, compared with a preliminary estimate of a +1.7%,
  signaling a slowdown in economic recovery. The largest contributors to the growth were motor vehicles, iron, steel, and electronic
  parts and devices
• The BOJ’s latest tankan survey for October showed the manufacturers’ sentiment index rose to -26 points from September’s -29 while
  the service-sector index was lifted to -16 from -18. The reading showed that economic activity was gradually recovering, while
  remaining deeply negative
• China’s government sold US dollar debt directly to US buyers for the first time, with a USD 6bn offering drawing record demand
• The Chinese government said said Beijing and members of ASEAN should work together to remove “external disruption” in the South
  China Sea. This comes on the back of the US’s action to block Hong Kong users from some government websites and limiting their
  access to critical economic data – another incident that could spark tensions in US-China relations
• China’s Xi said China will not stop reforms and opening up of the country, but it must stick to supply-side structural reforms and rely
  more on its domestic economy.
• North Korea unveiled previously unseen intercontinental ballistic missiles at an unprecedented predawn military parade showcasing
  the country’s long-range weapons for the first time in two years
• Lebanon and Israel launched talks to solve a lingering dispute over their maritime border running through potentially offshore gasrich Mediterranean waters
• National Commercial Bank, Saudi Arabia’s largest lender by assets, agreed to buy rival Samba Financial Group for USD 15bn.
• Abu Dhabi National Oil Company (ADNOC) will look at expanding into clean energy, with investments in hydrogen seen as an area
  of interest.
• The IMF raised its 2020 global growth forecast to -4.4%, up from -5.2% outlook forecasted in June. The IMF now expects advanced
  economies to contract -5.8% instead of -8%, while GDP is expected to decline -3.3% in emerging markets – about the same as the –
  3.5% drop forecasted in June.

Key Points – Week Ahead

In the week ahead, important macro data releases in the US include flash PMI surveys, building permits and housing starts, existing home sales and initial jobless claims. The Q3 earnings season continues with companies such as IBM, Netflix and Tesla reporting their results. Market reaction to the final US presidential debate between Trump and Biden on Thursday will be closely watched.

In Europe, Eurozone will release the latest consumer confidence and flash PMI surveys. The UK will publish inflation data, retail sales and flash PMI surveys.

In Asia-Pacific, China will release Q3 GDP growth rate, industrial production, retail sales and unemployment rate. Japan will publish trade balance, flash PMI surveys and the latest inflation data. China’s PBoC will be deciding on monetary policy. In emerging markets, India will publish foreign exchange reserves and deposit growth data.

Disclosures
Sources of information and data: Bloomberg; Financial Times; Reuters.com; CNNMoney.com; BBC Business News; The Wall Street Journal. The material in this document has been prepared by Patronus Wealth Privé (DIFC) Limited for general information and illustrative purposes only and does not constitute any form of recommendation or investment advice. The material in this document is intended for recipient’s use only and any disclosure, copying, distribution or any action in reliance on its contents is prohibited. The historical performance is not meant to forecast, imply or guarantee the future performance. The information presented in this document have been obtained from sources generally believed to be reliable. Patronus Wealth Privé (DIFC) Limited makes no representation as to its accuracy or completeness and accepts no liability for any loss arising from the use of material in this document. Patronus Wealth Privé (DIFC) Limited is regulated by the DFSA.