Stock markets retreated on Monday as disappointing U.S. economic data and fresh trade worries dampened risk appetite. President Donald Trump indeed tweeted that he was ready to restore tariffs on steel and aluminum imported from Brazil and Argentina and then added that a trade deal with China could be delayed until after the 2020 presidential election. To make matters worse, China announced it would soon publish a list of “non-reliable entities” that could lead to sanctions against U.S. companies. In the wake of these bad news and the looming Dec. 15 deadline for imposition of further U.S. tariffs on Chinese goods, investors logically turned to safe-haven assets, boosting sovereign bond prices and sending gold to a one-month high.
However, market sentiment changed radically on Friday with the latest data on U.S. jobs. Nonfarm payrolls surged by 266,000 in November, much better than the 187,000 expected by economists polled by Dow Jones, and the jobless rate dropped to 3.5%. These figures allowed the S&P500 to recover from losses suffered earlier this week. The index therefore finished the week slightly higher (+0.16%). Small cap stocks did even better (Russell2000 up 0.57%). China and Japan followed suit (Shanghai Composite and Nikkei225 rising by 1.39% and 0.26% respectively) by contrast with Europe (CAC40 down -0.56%, DAX30: -0.53%, FTSE100: -1.45%).
Long-maturity bond yields logically climbed at the end of the week, the yield on U.S. 10-year Treasuries jumping to 1.84% (from 1.78% a week ago), but the 3-month T-bill fell from 1.59% to 1.53%. Conversely, renewed appetite for risk pushed up the value of high yield bonds (+0.12% in Europe and +0.28% in the U.S.) and emerging debt in local currencies (+0.83%). Gold declined (-0.44%) while oil prices skyrocketed (WTI futures up 7.30%) after OPEC and other producers agreed to cut output by an additional 500,000 barrels per day in Q1 2020.
Unsurprisingly, energy stocks gained the most over the week (+1.52%) in the wake of rising crude oil prices, along with consumer staples (+0.92%) and healthcare (once again in positive territory: +0.91% WTD, undoubtely the best sector over the last 8 weeks with a cumulative performance of +11.4%). In contrast, most of the winners last week lost ground (industrials: -1.09% WTD, consumer discretionary: -0.79%, information technology: -0.40%, real estate: -0.27%).
Find the full report here: https://www.trackinsight.com/weekly-flow-report/2019-12-06/global