Week from 10 to 16 February 2020
The bull trend showed no sign of abatting at the beginning of the week, Wall Street racing to new all-time highs, driven by growing hopes that the coronavirus could reach its peak this month. China’s senior medical adviser said on Tuesday the number of new cases was falling in some areas and forecast the outbreak may be over by April. Unfortunately, Chinese factories are still struggling to get back to work after the extended Lunar New Year holiday. Furthermore Capital Economics estimated in a note on Friday that the efforts to contain the deadly virus could cost the world economy over $280bn in Q1 2020.
However, global stock markets seemed to ignore the impact of the epidemic on the future corporate earnings as well as the poor data from U.S. factories (industrial production down 0.3% in January). By contrast, retail sales rose 0.3% in the same month. So far so good. Besides, U.S. Fed Chair Jerome Powell reaffirmed on Tuesday that the U.S. economy is resilient.
The S&P500 therefore climbed 1.58%, the Nasdaq Composite added 2.21% and the Dow Jones Industrial Average gained 1.02%. European and emerging stock markets also pushed higher (MSCI EMU and MSCI EM up 1.36% and 1.34% respectively), following Wall Street. Last but not least, things were looking up for Chinese shares (Shanghai Composite: +1.43% after four weeks in the red and a peak-to-valley drawdown of 7%).
All the S&P sectors finished in positive territory but it is worth noting that the most defensive segments were the best performers (real estate: +4.81% ; utilities: +2.43%). Consumer discretionary also fared well (+2.43%) thanks to the strength of the American consumer. Unsurprinsingly, tech stocks continued to reign on Wall Street (+2.27%), especially with the chipmaker Nvidia rallying sharply (+15.2%) in the wake of a stellar earnings report. On the other hand, energy lagged behind (only +0.31%) though crude oil futures rebounded amid reports of renewed buying by Chinese refineries (WTI crude up +3.44%).
On the safe haven side, Treasuries and investment grade bonds were virtually unchanged but gold prices rose again (+0.90%). The coronavirus also helped the greenback (EUR-USD breaking through the 1.0850 level).
In the credit space, high yield bonds remained healthy (+0.45% in the U.S.) and emerging debt bounced back (+0.63% in local currencies) after two weeks of losses.
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-02-14/global