Week from 9 to 15 November 2020
Equity indices jumped sharply Monday, continuing the post-election rally, after major networks declared Joe Biden the winner of the US presidential election and U.S. pharmaceutical giant Pfizer announced that its experimental vaccine, developed jointly with German partner BioNTech, is more than 90% effective in protecting people from the Covid-19 virus. This rebound was triggered by a massive sector and factor (value versus growth) rotation, investors betting on stronger economic activity in 2021.
Markets then settled down, rising infections and hospital admissions at an all-time high tempering stock market euphoria, and pushing many states and cities to tighten their restrictions on social gatherings. Additionally, it should be noted that the vaccine is not yet approved by the US Food and Drug Administration and its widespread availability remains a thorny issue so far, as it needs to be stored at extremely cold temperatures.
Notwithstanding these uncertainties, the Dow Jones Industrial Average closed 1,156 points, or +4.08%, higher week-over-week. The S&P 500 gained +2.16%, posting a record closing high at 3,585.15, while the Nasdaq Composite slid by -0.55% as tech fell out of favour (e.g. Microsoft and Facebook down -3.22% and -5.61% respectively). Last but not least, small cap stocks significantly outperformed their large cap counterparts (Russell 2000 up +6.08%).
Among the S&P sectors, energy led the pack (+16.46%), erasing the cumulative loss suffered over the last seven weeks, as the WTI crude surged by $3, or +8.05%, at $40.13 per barrel. Financials also fared well (+8.28%) in the wake of rising yields. Industrials (+5.28%), real estate (+5.19%), and consumer staples (+3.58%) were not far behind. By contrast, investors in consumer discretionary and tech stocks were wincing. Those sectors ended the week on a negative note (-1.1% and -0.4% respectively).
For once, European indices climbed higher than their US peers. In France, the CAC 40 skyrocketed 8.67%. In Germany, the DAX 30 rose 4.78%. Overall, APAC markets also performed relatively well (Hang Seng, KOSPI, and NIFTY 50 up 1.73%, 3.20% and 3.72% respectively).
Conversely, safe havens tumbled in the aftermath of Pfizer’s announcement.
Thus, sovereign bonds were massively sold off. US Treasury yields shot up to levels not seen since the beginning of the outbreak. As an illustration, the yield on the US 10-year T-note spiked to +0.98% before closing to +0.89% (+6bps WTD) and the German Bund on the same maturity finished the week at -0.55% (+7bps WTD). Investment grade corporate bonds slid 0.14% in the US. Lastly, gold futures (Dec 2020) which had nosedived Monday finally reversed some of their early losses to finally drop 3.5% over the week, hit by higher yields and robust dollar (USD-EUR: +0.47%).
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Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-11-13/global
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