After five straight sessions of losses last week, risky assets rebounded strongly as the risk of a no-deal Brexit seemed to recede a little bit. Moreover, Washington and Beijing were making further substantive progress on trade talks and U.S. data showed only a modest rise in core inflation last month, backing expectations the Federal Reserve would maintain its dovish stance on future rate hikes.
All the equity indices simultaneously posted strong gains (S&P500: +2.89 percent, its best week since the beginning of the year, MSCI EMU: +2.88 percent, Nikkei225: +2.02 percent, MSCI All China+HK+Taiwan: +2.63 percent), U.S. stocks recording the largest inflows.
All the sectors were in the green too. However, two among them significantly underperformed the market: first, industrials (S&P industrials index up only +0.29 percent WTD) as Boeing shares slumped by 10.3 percent after the company’s new 737 Max 8 & 9 passenger jets were grounded by aviation authorities worldwide (U.S. included though the FAA took its time before making its decision). A shock wave for this industry grouping! Let’s remember that the American planemaker has the largest weighting within the Dow Jones Industrial Average Index. The decision to ground all Boeing 737 Max planes could cost the company billions of dollars.
Second sector lagging behind the market: information technology (S&P information technology index up +0.84 percent) in the wake of Facebook whose shares dropped 2.1% WTD as two top executives announced their resignation (Chris Cox, its chief product officer, on the one hand and Chris Daniels, who was in charge of WhatsApp, on the other hand) due to disagreements with Mark Zuckerberg over the social network’s future direction.
The second week of March was also profitable for U.S. bondholders and clearly favoured high-yield and IG corporate debt (Bloomberg Barclays US Corporate High Yield Total Return Index: +0.73 percent). Nevertheless the market’s turn toward riskier assets did not lift yields on Treasuries (e.g. U.S. 10 Year yield slightly falling from 263 to 259bps).
In commodity markets, oil prices edged up (WTI: +4.37 percent) on tightening global supply after a Saudi official said the kingdom plans to extend its oil output cuts into April.
Lastly, the Euro rose modestly against the Dollar over the week (+0.81 percent).
Find the full report here : https://www.trackinsight.com/weekly-flow-report/2019-03-15/global