U.S. stocks drifted lower as Donald Trump kept up the pressure on Xi Jinping with a threat to put tariffs on another $325bn of Chinese goods while market participants scaled back hopes of an aggressive interest rate cut (50bp) by the Federal Reserve. Furthermore Wall Street remained skeptical after another batch of corporate earnings showing mixed results even if investors had low expectations. Thus, in the tech sector, Netflix shares tumbled by nearly 15.6% (WTD) as the company lost U.S. streaming customers for the first time in eight years and missed targets for new subscribers overseas. At the opposite end of the scale, Microsoft reported a better-than-expected fiscal fourth-quarter revenue due to increased sales from its cloud business. However, Microsoft stock slid by 1.64% over the week.
The S&P500 and Russell2000 eventually retreated by 1.23% and 1.21% respectively. European and Asian indices followed the trend though to a lesser extent (MSCI EMU down 0.38%, Shangai Composite down 0.22%). On the other hand, emerging markets were staying above water (MSCI EM in USD: +0.63%).
On the interest rate front, Treasury yields fell on both sides of the Atlantic: from 2.12% to 2.05% for the U.S. 10-Year T-bond, from 2.14% to 2.06% for the U.S. 3-month T-Bill, from -0.21% to -0.32% for the German 10-Year Bund. Investment grade corporate bonds and emerging debt remained firm overall.
In commodity markets, oil prices slumped more than 7.6% (WTI) though Iran’s Revolutionary Guards captured a British-flagged oil tanker in the Persian Gulf on Friday. However, the Trump administration appeared ready to start talks with Iran. Moreover, U.S. data showed large builds in refined product stockpiles heightening fears of weak demand during the peak driving season. As a result the energy sector saw its last week’s gains vanish (-2.48% WTD).
By contrast, gold jumped above $1,425/oz (at $1,426.70, i.e. +1.03% WTD).
Find the full report here: https://www.trackinsight.com/weekly-flow-report/2019-07-19/global