Week in Review: Global Equities Rebound

Most global equity markets rose for the week as investors seemed to grow more optimistic that the Trump administration and U.S. legislators would reach some form of a stimulus deal, as well as progress on treatments and vaccines for the coronavirus.

President Trump’s rapid recovery following his COVID-19 diagnosis the previous week also seemed to boost sentiment. The president attributed his recovery to the new antibody (Regeneron’s REGN-COV2) and antiviral (Gilead’s Remdesivir) treatments he received, while promising that they would soon be free and widely available to Americans.

OPEC on Thursday said it had downwardly revised its forecast for global oil demand growth over the long term in the wake of the coronavirus pandemic and as climate policies continue to shape the future of energy. OPEC said it believed oil would remain the largest contributor to the energy mix through to 2045, accounting for more than 27%, followed by gas (roughly 25%), and coal (nearly 20%). The contribution from solar, wind and geothermal energy was expected to grow by 6.6% per year on average through to 2045, representing 8.7% of the fuel share, up from 2.1% in 2019.

Looking ahead, OPEC said the “big question hanging over energy and oil markets” was to what extent there would be a longer-term impact on consumer behaviour, and thus energy demand. Brent crude ended the week at $42.80 a barrel, up 9.21% for the week with oil prices having fallen more than 35% year-to-date.

In U.S. election news the Commission on Presidential Debates has cancelled the planned October 15 debate between Democratic candidate Biden and President Trump after Trump refused to agree to conduct it virtually, for now the debate scheduled for October 22 is still on. Biden is currently leading Trump in the national polls with the 10-poll average indicating that just under 50 per cent of Americans intend to back Biden while Mr Trump’s support trails this by around five or six points.

European shares rose on expectations that a US stimulus deal may still be reached before the elections and on the hopes that meetings on a post-Brexit relationship between the UK and Europe ahead of an EU summit in Brussels next week would move parties closer together in reaching a deal before the looming yearend deadline. The pan-European STOXX 50 Index advanced 2.57% for the week while the UK’s FTSE 100 advanced 1.94%.

U.S. equities continued their strong performance with the Dow Jones (+3.27%), S&P500 (+3.86%) and Nasdaq (4.56%) all gaining on the week. Focus will be shifting to 3rd quarter U.S. earnings in the week ahead with better than expected earnings likely to provide further support to equity markets.

Asian markets also benefited from the positive sentiment with the Shanghai Composite rising 1.68% after its recent Golden Week holiday and Japan’s Nikkei 225 (+2.56%) responding positively to Bank of Japan’s central bank Governor’s Kuroda affirmation that the economy is starting to recover.

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Market Moves of the Week

Locally the focus has shifted to the upcoming medium-term budget speech by Finance Minister Tito Mboweni, which will draw further attention to country’s dire fiscal situation. The medium-term budget policy statement sets out government’s priorities over the next three years. Market watchers will be focussing on the Minister’s push to reign in public sector wage growth, structural reforms required to stimulate an economic recovery and importantly how the budget deficit will be reduced in the years ahead.

Over the past 20 years South Africa has not only added more debt, relative to GDP, than its emerging market peers but is also forecast to grow its debt more than any of these countries in the next two years. Debt to GDP stood at around 30% in 2009 climbing to 63.5% over a ten-year period and could reach up to 80% by the end of this fiscal year.

The JSE all share gained 1.78% to 55,182.99 points for the week. Resources firmed 3.79% and industrials gained 2.13% while the financial and listed property sectors were down 4.06% and 3.01% respectively over the week. The rand gained for a third successive day on Friday, along with other emerging-market currencies ending the week at R16.47/$.

WeeklyMovements
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Chart of the Week

Recent polls suggest that a "blue wave," in which Democrats gain unified control of the presidency and Congress, is looking more likely. As the chart of the week shows, former Vice President Biden is now ahead by 6pp in polls in the most likely tipping-point state, Pennsylvania, and around 4pp in Florida and Arizona, two nearly must-win states for President Trump. As for the Senate, Democrats are currently leading in the polls in enough states to win at least 50 seats, which would give them unified control of Congress in the event of a Biden victory.

BlueWave

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