Week from 29 June to 5 July 2020
U.S. financial markets were closed on Friday in observance of Independence Day but four trading days were enough for global stocks to wipe out the losses suffered last week. U.S. nonfarm payroll employment rose 4.8 million in June, well above consensus forecasts and the unemployment rate fell to 11.1%. Another hopeful sign came from stronger PMIs showing the manufacturing sector grew more than expected last month.
Equity markets rallied on this encouraging data despite the rising number of confirmed COVID-19 cases in the U.S. Dr. Anne Schuchart, the principal deputy director at the Centers for Disease Control and Prevention, said on Monday that the virus is spreading too quickly and too broadly to be brought under control. Besides the U.S. set record highs in new coronavirus cases, surpassing 55,000 on Thursday.
Ignoring the threat of new lockdown measures, the Dow Jones Industrial Average rose 3.25%, the S&P 500 gained 4.02% and the Nasdaq Composite added 4.62% above 12,200, while the CBOE Volatility Index (VIX) tumbled by over 20%, below the 28 threshold. Similarly, European markets began the month of July on a bullish note (MSCI EMU up 2.57% WTD) even if they turned lower on Friday. Results were mixed in Asia. The Shanghai composite index spiked (+5.82%) as the Caixin China General Manufacturing PMI rose to 51.2 in June from 50.7 in the previous month. This is the highest reading since December 2019. By contrast, the Nikkei 225 was down 0.91% in the wake of a larger-than-expected decline in Japanese industrial production.
All the S&P sectors fared well with the smallest excess return between the best performer (communication services: +5.64%) and the poorest (financials: +1.57%) since mid-February. It is also worth noting that energy managed to break its 20-day losing streak (cumulative loss of 17.6%!) in the wake of higher oil prices (WTI up 4.65%/$40.28 per barrel) as data showed U.S. crude stockpiles fell by 7.2 million barrels last week.
On the interest rate front, the yield on the 10-year U.S. T-notes inched up from 0.64% to 0.68% while the 10-year Bund remained unchanged at -0.47%. Unlike the previous week, corporate bonds were shining again but investment grade bonds continued to outperform high yield bonds (+0.68% vs. +0.41% in the U.S.) as had already been the case in the second half of June. Emerging debt in local currencies also finished the week in positive territory (+0.25%) after an ongoing decline of 1.96% from 8 to 26 June.
Elsewhere, gold futures settled higher (+0.71%, fourth positive week in a row). This is a clear indication that investors are still worried about coronavirus surge around the world, and in the U.S. more specifically, despite improving economic data.
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-07-03/global
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