The Weekly Compass: 06/10/25
French Political Turmoil and Irish Budget in Focus
Our CIO, John Mullane, shares the latest Market News and Views and gives insights for the week ahead.
The Week That Was
Investors largely shrugged off concerns about a US government shutdown in a week that saw the equity rally broaden out. The S&P 500 closed up 1.1% and surpassed 6,700 for the first time, buoyed by a strong outturn from the healthcare sector. This strength came on the back of a deal between Pfizer (+14.7%) and the US government on drug prices, which enables it to qualify for lower tariffs. The deal is being seen as a framework that could allow other sector players on both sides of the Atlantic to qualify for similar relief. As a result, sector names such as AstraZeneca (+15.0%) and Novo Nordisk (+8.5%) helped push European equities 2.9% higher on the week.
From an economic perspective, data confirmed that Irish industrial activity expanded in September, whilst Eurozone core inflation held steady at 2.3%, leaving the prospects of a rate cut before year-end finely balanced. In the US, activity levels in the services sector decelerated in September whilst consumer confidence also weakened. Labour market data was mixed overall, indicating that while job openings have been increasing modestly, employees are increasingly reluctant to move.
The Week Ahead
It’s been a solid start to the trading week, with equities in Asia-Pacific moving close to new all-time highs on the back of a strong rally in Japan. The move higher coincided with a weakening of the Yen against its main currency pairs as the ruling LDP elected the pro-stimulus Sanae Takaichi as its leader and, by extension, the likely next Prime Minister.
Following a 7.4% decline last week, oil prices (WTI) moved marginally higher this morning as OPEC+ agreed to increase supply by less than expected for November.
Economic and political developments will likely be the dominant drivers of market sentiment in the week ahead. Budget negotiations between Democrats and Republicans will continue on Capitol Hill. Whilst the uncertainty tied to past shutdowns has resulted in heightened market volatility, the average return of the S&P 500 over the last six shutdowns has been marginally positive.
French politics will also be in focus following the resignation of the French Prime Minister after only a couple of weeks in the role. From an economic standpoint, data is light this week, with minutes from the Fed (Wednesday) and ECB (Thursday) likely to be the main market-moving releases. Investors will be particularly keen to see the level of debate in last month’s Fed FOMC meeting, given that another two interest rate reductions are largely expected by markets before year-end. On Friday, data from the University of Michigan is likely to confirm that US consumer sentiment weakened on increased worries about the outlook for the jobs market.
From a corporate perspective, releases are light as it remains the fallow period ahead of the commencement of Q3 earnings season. However, Shell, PepsiCo and TSMC are all due to provide corporate updates. The market will pay close attention to TSMC to ascertain what impact increased semiconductor wafer prices are having on margins and what AI-related demand looks like.
AI will also be in focus at the OpenAI Developer Conference today—an event which in the past has seen new innovations launched that have had ripple effects across the tech sector.
Closer to home, there is increased speculation that Tuesday’s Irish budget will bring positive news for companies trading below €1bn in market cap on Euronext Dublin, as the 1% stamp duty is expected to be abolished. It is also expected that the VAT on the building of new apartments will be reduced from 15% to 9%, which would likely be positive for listed names in the homebuilding and real estate sectors.
Key Market-Moving Events This Week
- Macro – US consumer confidence; Fed and ECB minutes
- Corporate updates – Shell, PepsiCo and TSMC
- Political developments – Negotiations to end US government shutdown; focus on potential new PM in France
Further Reading
This is an extract from the Weekly Markets Report by Cantor Fitzgerald Ireland. For more details on individual securities or to discuss how we can support your investment needs, please get in touch.
Written by John Mullane, CIO, Cantor Fitzgerald Ireland