The latest macro data showed that U.S. consumer spending edged up in August (seasonally adjusted 0.1%), suggesting that the economy’s main growth engine was slowing down after accelerating sharply in Q2. Furthermore, businesses have cut back on investment. U.S. core capital goods orders unexpectedly fell in August.
The release of a whistleblower complaint against President Trump also added to worries about the global economy, exacerbated by the China-U.S. trade war. Besides, the Trump administration is now considering delisting Chinese companies from U.S. stock exchanges and is thinking about ways to limit U.S. investments into China.
Equities logically flashed red across the board after this flow of bad news. The S&P500 dropped 1.01% while the NASDAQ Composite tumbled 2.52%. Asia and Europe (to a lesser extent despite the bleak picture given by business surveys from the euro zone’s biggest economies) were also hit by the increasing risk aversion among market participants (Shangai Composite down 2.47%, MSCI EMU down 0.59%). In a more volatile environment (VIX up 12.4% at 17.22), only a few defensive sectors managed to stay afloat (utilities: +1.30%, consumer staples: +1.21%, real estate: +0.16%). By contrast, all the others finished the week in negative territory, the worst performers being healthcare (-3.01%), energy (-2.61%, WTI crude losing -3.75% to $55.91 per barrel) and communications services (-2.34%).
Global uncertainty pushed yields lower around the globe (U.S. 10-year yield falling from 1.74% to 1.69%, German 10-Year yield from -0.52% to -0.57%). It is striking to note that German, French and Japanese sovereign debts are negative up to 15 years.
Investment grade corporate bonds also benefitted from the flight to safety (+0.20% in Europe, +0.17% in the U.S.) while the higher-risk asset classes tended to lose ground (U.S. high-yield bonds down 0.43%, emerging debt in local currencies down 0.31%).
Find the full report here: https://www.trackinsight.com/weekly-flow-report/2019-09-27/global