Sea of red across global equity markets   

U.S. stocks slumped (-2.21% for the S&P 500, -3.20% for the Nasdaq Composite over the week) on signs of consumer weakness in a rising rate and inflationary environment. The Conference Board’s consumer confidence index fell unexpectedly to a reading of 109.3 from 115.2, missing economists estimates for 114.5. Furthermore, U.S. jobless claims rose for the third straight week, weighing on sentiment. The S&P 500 thus broke a seven-month winning streak in September, the worst month (-4.76%) since the pandemic sell-off in March 2020. It is even worse for the Nasdaq Composite (-5.31%).

European and Asian markets did not perform better this week. The MSCI EMU was down 2.72%, the Nikkei plunged 4.89% and the Shanghai Composite lost 1.24%. Investors continued to worry about Evergrande Group's debt crisis while eyeing the potential impact of a widening power shortage on the Chinese economy.

Energy far above the flatline

Though the U.S. Congress and Senate avoided a shutdown this week by passing a bill to fund the government into December, ten of the eleven major S&P sectors finished in negative territory. Energy was the only sector that weathered the storm (+5.79%), as oil prices soared (WTI crude up 2.57%) on expectations for tighter crude supplies. Healthcare stocks were the worst performers (-3.54%) even if Merck & Co (shares up 10.58% week-over-week) reported that its experimental Covid-19 pills cut the risk of death and hospitalization by 50%. In the same way, tech stocks were severely hit (-3.34%) amid pressure from surging Treasury yields. Conversely, financials managed to minimize losses (-0.30%) thanks to bank stocks, underpinned by Treasury yields.

Another negative week for bonds

U.S. and European government bonds were almost flat. Yet the 10-year U.S. T-note yield rose up to +1.56%, before retreating and closing at +1.47%. Same trend in Europe with the 10-year Germany bond yield and the 10-year France OAT that closed at -0.222% and +0.132% respectively.

Corporate investment-grade bonds slid again in the U.S. (-0.59%) while their European counterparts treaded water (+0.01%). High-yield bonds (-0.38% in Europe, -0.26% in the U.S.) slipped for the second week in a row and emerging debt (-0.71% in local currencies) recorded their fourth straight week of losses.

Elsewhere, gold was up 0.60% (spot price at $1,760.98/Oz) in spite of a higher dollar index (+0.79%).

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