Markets remained relatively cautious all week long before a crucial G20 summit. On Saturday overnight, Donald Trump and Xi Jinping eventually agreed to a cease fire after a year of heightened tensions. Though the two leaders are going to resume economic and trade negotiations and the U.S. waives new tariffs on Chinese products, at least for now, it does not mean that a substantive deal is on track…
After a three-week rally and before the final outcome of U.S.-China talks, global stocks were treading water during the last days of June (Nasdaq: -0.32%, S&P500: -0.29%, MSCI EMU: +0.14% ; MSCI Emerging Markets: +0.16% ; Nikkei: +0.08%, Shangai Composite: -0.77%).
However, this period of dead calm masked a much more contrasted situation by sector. Thus the most defensive sectors which had outperformed the market since the beginning of May were suddenly sold by investors: real estate down 2.73% WTD, the best performer over the last 9 weeks along with health care (down 1.17% WTD, weighed down by a 6.5% decline in shares of Celgene Corp and a 8.1% fall in those of Bristol-Myers Squibb) and utilities (down 2.12% WTD). Information technology also dropped by 0.2% over the week.
In contrast, financials jumped 1.47% after the Federal Reserve announced on Thursday the largest banks, including JPMorgan Chase & Co, Bank of America Corp, Citigroup Inc, and Deutsche Bank have strong capital levels and virtually all are now meeting supervisory expectations.
Materials continued to recover (+1.48%) and the energy sector managed to be positive (+0.23% WTD) as Russia and Saudi Arabia agreed to extend the deal on OPEC oil production cuts by another six to nine months. Furthermore U.S.-Iran tensions remained in sharp focus. The White House now targets sanctions on Iran’s Supreme Leader Ayatollah Ali Khamenei and other top officials. U.S. crude oil futures extended last week’s rally gaining 104 cents, or 1.81%, to $58.47 per barrel.
In the same vein, gold futures jumped 1.25% to $1,413.70/oz briefly hitting a six-year high (above $1,425) in intraday trading.
On the interest rate front, all the lights are still green. The 10-year T-note yield finished the week at 2% (i.e. a 30-month low) while the German Bund yield with the same maturity slid from -0.29% to -0.33% and the French OAT slipped into negative territory on Friday’s close (-1bp). Investment grade corporate bonds gained 0.22% in Europe and 0.71% in the U.S. High yield bonds were flat. Lastly, emerging debt in local currencies fared well (+0.67%).
Find the full report here : https://www.trackinsight.com/weekly-flow-report/2019-06-28/global