Though the U.S. economy grew stronger than expected in the third quarter, U.S. stocks extended their sell-off at the end of October, the Dow Jones and Nasdaq indices erasing their gains for the year. International stocks tumbled down in line with U.S. indices (S&P500 -3.94 percent, MSCI World -3.90 percent, MSCI EMU -3.29 percent, Nikkei -5.98 percent). A number of downbeat earnings indeed raised investor fears over corporate profit growth in the wake of uncertainties over the trade environment, the slowdown in China’s economy, the slump in U.S. housing activity, the tight labor market and the upturn in inflation (“core” inflation in the U.S. now running at 2.2 percent for the year, i.e. above the Federal Reserve’s target).
No safe haven sector: all the industry groupings were down, energy being the worst performer (-7.07 percent) once again, as the oil prices exhibited a third negative week in a row. Technology (-5.73 percent) also spooked investor sentiment due to very disappointing results from many companies including giants such as Amazon and Alphabet. Unsurprisingly, the most defensive sectors did better than the broad-based indices in this risk-averse environment (consumer staples and utilities more specifically with only -1.47 percent and -2.13 percent respectively).
Flight-to-quality also hit high-yield bonds and emerging debt while the 10-Year U.S. Treasury yield fell from 319bps to 308bps.
Lastly, the U.S. dollar, also considered as a safe-haven asset, was on reasonably solid ground against many currencies (e.g. EUR-USD down -0.77 percent over the week).
Find the full report here : https://www.trackinsight.com/weekly-flow-report/2018-10-26/global