Market Recap Week of October 13th

The sell-off in global equity markets continued last week as market participants have woken up to the fact that the global economic recovery has lost momentum, at the same time as the US Federal Reserve is ending their bond buying program (QE3). However, the real source of the increased volatility is Europe. Germany, the big dog of the Eurozone economy, reported a big drop in factory orders and industrial production, stoking fears that a recession might be on the cards.

Amidst the increased volatility last week European equity markets fared the worst. The FTSE Eurofirst 300 index fell over 4.02% while the German DAX index dropped to the lowest level in over a year, down 4.42%. In the US, the much watched Dow Jones Industrial Average has now erased all of its YTD gains while the S&P 500 had its worst week since May 2012, down 3.14%. The tech-heavy NASDAQ Composite fell 4.45%. Core government bonds were in demand as yields moved lower again last week with the German 10-Year yield closing at 0.89%. Gold bounced as investors looked for a place to hide, the precious metal rose 2.66% to $1,227 per troy ounce.

Week Ahead

Key macro data this week includes reports on industrial production and inflation from around the globe. There is a host of economic data released from the UK including inflation, retail sales, housing and the labour market. There is also a raft of data due out from China over the week, increasingly important as investors fret over the slowdown in the global economy. Disappointing Chinese data would put further pressure on markets. The Irish Government will release their latest budget on Tuesday, with a few tweaks here and there expected to keep the people happy. Of course there will be outrage from the opposition and the various lobby groups either way. I’ll prefer to listen to Dunphy and Giles wax lyrical on the beautiful game as we head to Germany Tuesday night for a showdown with the world champs!