Equity markets on a roller coaster ride

Global stocks oscillated between gains and losses all week long. Investors remained cautious due to fresh U.S.-China concerns over trade, rising Treasury yields, and the psychodrama of the debt ceiling. The three major U.S. stock indexes eventually managed to close higher before the Columbus Day as lawmakers reached an agreement Thursday to raise the country's debt ceiling by $480 billion. This allows the U.S. government to meet its liabilities until December 2021. Additionally, initial jobless claims fell to 326,000 last week, breaking a sequence of three straight weekly gains. The S&P 500 rose 0.79%, the Dow Jones Industrial Average gained 1.22%, or 420 points, while the Nasdaq edged up 0.09%. Small cap stocks lagged behind their large-cap counterparts (Russell 2000 down 0.38%).

Most international stock market indexes finished the week in positive territory. The MSCI EMU was up 0.72%. The MSCI World gained 0.69%. On the other hand, APAC markets were mixed. The Shanghai Composite and NIFTY 50 closed higher (+0.67% and +2.07% respectively) while the NIKKEI nose dived (-2.51%).

Strong momentum for the energy sector

For the fourth week in a row, energy stocks jumped 5.02% as oil prices continued to climb (WTI crude up 4.57% week-over-week, notching seven straight weeks of gains) after major oil producers opted against opening the taps more widely. Among the cyclical sectors, financials enjoyed a bounce (+2.26%) with the U.S. 10-year Treasury yield trending above 1.6%. As regards the defensive sectors, utilities (+1.45%) and consumer staples (+1.40%) fared well while health care (-0.30%) and real estate (-0.77%) closed in the red. It was also a tough week for communication services (-0.13%), weighed by Facebook (-3.78%). The social-media giant's stock was pressured by a six-hour outage and France Haugen’s testimony before Congress. The whistleblower stated that the Facebook products "harm children, stoke division, and weaken our democracy."

Sea of red in the bond space

The yield on the 10-year Treasury note hit its highest level since May (+1.61%, i.e. +14bps over the week). Same trend in Europe with the 10-year Germany bond and the 10-year France OAT whose yields ended at -0.15% and +0.20% respectively.

Corporate investment grade bonds plunged in the face of rising Treasury yields (-0.28% in Europe, -0.84% in the U.S.). High-yield bonds (-0.37% in Europe, -0.31% in the U.S.) slipped for the third week in a row and emerging debt (-0.65% in local currencies) recorded its fifth straight week of losses.

Elsewhere, gold edged down 0.22% (spot price at $1,757.13/Oz) in the wake of a flat dollar index (at 94.104).

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