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G10 Macro Rates Market Analysis – Weekly Review – 12th October 2020

Monday, October 12, 2020

With the Pacific G10 Macro Rates Team 

Sentiment changed last week with risk assets benefitting on the back of increasing chances of a Blue Sweep. The narrative shifted from higher taxes and more regulation to near term fiscal boost. Financial markets ignored the saga with President Trump contracting Covid-19 at the ‘super spreader’ event in the White House and spending couple of days in hospital. S&P 500 finished last week +3.8%, US 10y yield was 8bps higher at 0.774%, WTI was back above $40 and almost +10% on a week.


North America
US: ISM Services further improved in September to 57.8 (56.2 exp.) from 56.9. Labour market data continue to show that significant amount of jobs is being filled but the number of unemployed remains excessively high. As initial claims stalled at around 800k per week since early August, continued claims declined from 14mil to almost 10.5mil according to the latest data.

Canada: Employment data for September surprised to the upside with the net change of 378.2k (150.0k exp., 245.8k prev.) and unemployment rate down at 9.0% (9.8% exp., 10.2% prev.), while participation rate increased to 65.0% (64.7% exp., 64.6% prev.).

Eurozone: Data that was released last week mostly covered the month of August. Given the dynamic nature of the current environment two months lag is an awfully long time. This makes the data useless for assessing current economic environment.


August Retail Sales were up 4.4% MoM (2.5% exp., -1.3% prev.). In France Industrial Production increased 1.3% MoM in August (1.7% exp., 3.8% prev.) and Manufacturing Production increased 1% (2.4% exp., 4.5% prev.). In Germany, Factory Orders increased 4.5% MoM in August (2.8% exp., 2.8% prev.) but Industrial Production declines -0.2% MoM (1.5% exp., 1.2% prev.). In Italy, Retail Sales increased 8.2% MoM in August (3.8% exp., -2.2% prev.), Industrial Production increased 7.7% MoM (1.4% exp., 7.4% prev.) and September Services PMI improved to 48.8 (46.6 exp., 47.1 prev.).

Sweden: Services PMI decreased to 54.7 in September (56.6 prev.), while Composite PMI dropped to 54.9 from 55.7.

Norway: GDP Mainland GDP increased 0.6% MoM in August (0.9% exp., 1.1% prev.) and September Underlying CPI increased 0.2% MoM (-0.4% prev.).

September PMIs showed small improvements with Manufacturing increasing from 47.2 to 47.3 and Services from 45 to 45.6.

Markit/CIPS Construction PMI improved to 56.8 in September (54 exp., 54.6 prev.). August GDP growth was significantly weaker than expected with 2.1% increase MoM (4.6% exp., 6.6% prev.) with all sectors underperforming versus the expectations.

Australia: RBA left its overnight rate and 3-year target yield unchanged. Central Bank hinted that extra monetary easing could be announced in the coming months to support the economy.

New Zealand: ANZ Business Confidence improved to -14.5 from -28.5.

For further information on the Pacific G10 Macro Rates team, their experience and strategy please see below 

Read the Strategy Information Sheet

IMPORTANT INFORMATION: Issued and approved by Pacific Capital Partners Limited, a limited company registered in England and Wales, authorised and regulated by the Financial Conduct Authority . The information contained herein is not approved for use by the public and is only intended for recipients who would be generally classified as investment professionals. Information or opinions contained in this article do not constitute an offer to sell or a solicitation, or offer to buy, any securities or financial instruments or investment advice or any advice or recommendation.

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