Bond yields climbed (U.S. 10-Year Treasury yield rising to 1.9% from 1.55% a week ago) and investment grade bonds plunged on both sides of the Atlantic (-0.76% in Europe, -1.53% in the U.S.). By contrast, stock markets held firm (S&P500: +0.96%, MSCI EMU: +1.51%, Shangai Composite: +1.05%) on hopes of easing U.S.-China tensions and diminished risk of a no-deal Brexit.
Stocks were also helped by the ECB which kicked off another wave of monetary easing, cutting interest rates by 10bps to -0.50%, promising that rates would stay low for a long period of time and restarting bond purchases of €20bn a month from November. However, Draghi had faced unprecedented revolt, France, Germany, Netherlands being opposed to immediate QE resumption. Such disagreement over a major monetary policy measure has never been seen during Draghi’s eight-year tenure.
Furthermore, it is worth noting that value stocks sharply came back in favor (S&P500 Value Index up 2.47%) while momentum stocks fell heavily. Several sectors took advantage of this factor rotation at the expense of high-flying tech names (S&P IT index down -0.39%), and more specifically financials (+3.89%) and energy (+3.36%) though oil prices dropped (WTI down 2.95%) after President Donald Trump said he had fired John Bolton as National Security Advisor. That being said, crude oil is set to spike by several dollars per barrel when markets reopen on Monday after two major Saudi oil installations were hit by drone strike on Saturday, knocking out 5% of global supply (i.e. more than 5 million barrels a day).
Among the losing sectors, real estate was the poorest performer over the week (-3.24%) followed by consumer staples (-0.92%).
Find the full report here: https://www.trackinsight.com/weekly-flow-report/2019-09-13/global