Week from 25 to 31 May 2020
We could have reused the heading of our last article as equity markets closed higher week-over-week although tensions between the United States and China continued to worsen due to the violation of Hong Kong’s freedom on the one hand and the coronavirus pandemic on the other hand.
Despite this backdrop, the Dow Jones Industrial Average jumped 3.75%, cutting some gains at the end of the week as President Trump announced his press conference on China. The S&P 500 rose 3.01% at 3,044.31, breaking above the 61.8% Fibonacci retracement, while the Nasdaq Composite added 1.77%.
European markets did even better (MSCI EMU up 4.70%) in the wake of the latest European Commission proposal for a €750bn fund to reboot economies hit by the coronavirus outbreak, in addition to the different national recovery plans and the €540bn package of three safety nets for workers, businesses and member states. Besides, the recovery in Europe appears to be quicker than in the U.S.
This also explains why the EUR-USD pair topped 1.11 (+2.18% WTD).
In Asia, Japan was the best performer (Nikkei 225 up 7.31%) while Hong Kong lagged behind (Hang Seng edging up +0.14%), pushed down by a slew of measures imposed by the U.S. in retaliation for China’s decision to go forward with tougher national security legislation.
All the S&P sectors flashed green for the second time in May with financials leading the charge (+6.58%) as investors snapped up beaten-down bank stocks such as JPMorgan Chase (+8.64%), after CEO Jamie Dimon said the biggest U.S. bank was “very valuable” at the current price. Industrials also fared well (+6.01%). Moreover, the rebound on the most defensive sectors (real estate and utilities up 5.83% and 5.73% respectively) brought them back to the levels observed during the mid-April rally. For once, technology (+1.42%) and communication services (+0.58%) significantly underperfomed the broader market. The same held true for energy (+0.92%) even though oil prices were supported by falling supplies as OPEC cut production (WTI crude up 6.74%).
Credit markets kept up their winning streak (IG EUR +0.76%, IG USD: +1.34%, HY EUR: +2.52%, HY USD: +1.65%). Emerging debt followed suit (+1.75% in local currencies).
By contrast, Government bonds were treading water (U.S. 10-year yield moving from 0.66% to 0.65%), like gold (+0.08% WTD, at $1,736.9 0/Oz).
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-05-29/global