Week from 14 to 20 September 2020
A further fall in megacap tech stock prices (Facebook: -5.3%, Apple: -4.6%, Google-Alphabet: -4%) pushed the S&P 500 and the Nasdaq to their third straight week of losses (-0.64% and -0.56% respectively). The S&P 500 seems on track to reach the first retracement level around 3,260. Investors who had flocked into tech giants in the last months are becoming edgy, reducing their exposure accordingly. Hence the negative impact on the large-cap stock indices. By contrast, small cap stocks appear to regain strength (Russell 2000 up 2.64% week-over-week). It’s the first time they have outperformed their large cap counterparts since early August.
Unlike the previous week, when European equity markets were resilient showing little correlation with the U.S., this time they followed the bearish trend across the Atlantic (MSCI EMU down -0.53%) even though APAC markets closed higher (Shanghai Composite: +2.38%, KOSPI: +0.66%, NIFTY 50: +0.35%, S&P/ASX 200: +0.09%), except for Japan (NIKKEI: -0.20%). Overall, emerging markets fared well too (MSCI EM up 1.53%).
Among the S&P sectors, Communication Services (-2.31% week-over-week) – including Facebook and Alphabet -, and Information Technology (-1.04%) – including Microsoft and Apple – were hit again as tech rout deepened, but Consumer Discretionary (-2.33%) and Consumer Staples (-1.71%) also ran out of steam after August retail sales data showed momentum slowing. However, the University of Michigan’s consumer sentiment for the U.S. jumped to 78.9 in September from 74.1 in August, beating market expectations of 75.
Conversely, the energy sector rose 2.9% as oil prices rebounded sharply (WTI crude oil up 10.13% over the week, from $37.33 to $41.11 per barrel). A surprising drop in U.S. inventories caught the market wrong-footed. Industrials (+1.52%), materials (+0.93%, fourth positive week in a row, undoubtedly the best sector in September), and health care (+0.84%) also managed to hold gains.
There was very little change on the interest rate front. The U.S. 10-year Treasury yield steadied in a tight range, closing at 0.70% (+3bps), after Powell said the Fed would keep near-zero rates at least until 2023. In Europe, the 10-year Bund yield seemed to be cast in stone (unchanged at -0.48%).
iTraxx and CDX indices were relatively stable. Emerging debt was the best segment in credit markets (+0.85% in local currencies).
Lastly, gold rose 0.71% to $1,953.2/oz, while EUR/USD traded 0.29% higher at 1.1865.
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-09-18/global
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