Week from 6 to 12 April 2020
Market participants shrugged off the huge jump in jobless claims in the U.S. (6.61 million people filed initial claims for jobless benefits in the week ended April 4, more than the 5.25 million expected by economists) as the Federal Reserve unleashed another round of emergency measures, super-sizing its lending facilities to offer $2.3 trillion of credit to small and mid-sized businesses and local governments more specifically. For the first time, it will buy high-yield corporate debt through exchange-traded funds. This decision has boosted market sentiment and fuelled the global bond rally.
High-yield bonds have logically surged (+6.08% WTD in the U.S., +3.79% in the eurozone) and investment grade corporate bonds have followed suit (+2.67% in the U.S., +1.99% in the eurozone).
Conversely, the risk-on mood pushed sovereign bond yields a bit higher (10-year U.S. Treasury yield to 0.73% from 0.62%, 10-year Bund yield to -0.35% from -0.44%) but did not halt the gold uptrend. The haven metal picked up more than $100 to settle at $1,736.20/Oz (+6.27% WTD).
But the best performance eventually came from stocks. Thus the S&P500 rose 12.1% over the week, notching its best weekly gain since 1974. The NASDAQ gained 10.59% while the Russell2000 experienced a much stronger rebound (+18.50%), thereby reducing the gap between small-cap stocks and their large-cap peers.
Unsurprisingly, even if the VIX index remains above 40, all the S&P sectors finished the week in positive territory, the best performers being real estate (+21.22%), materials (+20.66%), financials (+19.12%), utilities (+17.64%). Consumer staples (+4.93%), healthcare (+9.41%) and communication services (9.94%) lagged behind. Energy did not lose ground (+13.25%) though oil prices dropped sharply (WTI crude down 19.69%!). The OPEC+’s decision to cut output by a record 9.7 million barrels per day for May-June seems to be meaningless as storage is now full and demand has collapsed in the wake of the Covid-19 pandemic.
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-04-10/global