Once again, Wall Street fell for the third week in a row as fear is growing among investors that the U.S.-China trade war is leading to a world recession. Negative economic and geopolitical news (Hong-Kong crisis, Italy, UK and Argentina’s political uncertainty on the one hand, Germany and UK Q2 GDP shrinking by 0.1% and 0.2% respectively, slowdown in retail sales growth and weakest rate of industrial production growth in China since 2002 on the other hand) indeed compelled many investors to take refuge in safe harbors such as investment grade bonds (U.S. 10-year T-Note yield dropping from 1.74% to 1.55%) and gold (+1.06% WTD).
Despite a sense of renewed optimism induced on Tuesday by the U.S.’s partial retreat on new tariffs, the yield-curve inversion worsened (3-month/10-Year spread increasing from 26 to 32bps) and even triggered a wave of panic in stock markets on Wednesday (DJIA and S&P500 down 3.05% and 2.93% respectively that day).
The Dow Jones Industrial Average eventually dropped more than 400 points over the week (-1.53% vs. -1.03% for the S&P500 and -0.79% for the Nasdaq Composite). Unsurprisingly, the bearish sentiment in the U.S. also hit European, Asian and emerging markets (MSCI EMU: -0.67% WTD, Nikkei: -1.29%, Hang Seng: -0.79%, MSCI EM: -1.11%).
Among the S&P sectors, the overall picture remained broadly unchanged compared to previous weeks, the most defensive segments being the best performers (i.e. utilities: +0.53% WTD, and real estate: +0.28%) while energy (-3.88%), financials (-2.16%) and consumer discretionary (-1.90%) lagged behind, the same causes having the same effects.
Find the full report here: https://www.trackinsight.com/weekly-flow-report/2019-08-16/global