Week from 21 to 27 September 2020
Though U.S. equity markets closed higher on Friday as tech showed renewed strength, the S&P 500 ended the week down 0.6% (fourth consecutive week in the red) while small cap stocks nose dived (Russell 2000 down 4.03%). By contrast, the tech-heavy NASDAQ Composite fared well (+1.11%), snapping a three-week losing streak. Apple gained 5.09% week-over-week after Morgan Stanley said the recent sell-off creates a ‘compelling entry point’ ahead of the iPhone 12 launch. Amazon (+4.75% WTD) and Microsoft (+3.71% WTD) were not far behind, the latter being in the spotlight after announcing a $7.5 billion deal in cash to buy ZeniMax Media (parent company of the game publisher Bethesda Softwork).
As regards the major sectors in the S&P 500, information technology was logically the best performer (+2.13% WTD) while value stocks were losing ground on recurring fears that a lack of further fiscal stimulus could be damaging to the U.S. economic recovery. However, investor sentiment could have been boosted at the end of the week as U.S. Treasury Secretary Steven Mnuchin reportedly planned to resume talks with House Speaker Nancy Pelosi to try and deal with this issue before the presidential election. Energy (-8.6% with WTI crude down 2.09%), materials (-4.62%), financials (-4.24% with big banks under pressure after a report from the International Consortium for Investigative Journalists (ICIJ) alleging complicity in processing illicit funds), and industrials (-2.6%) were among the worst sectors leading to the downside.
Elsewhere, European stock markets tumbled as a surge in coronavirus cases across the continent might threaten global growth (MSCI EMU down 4.16%).
Overall, APAC markets did not perform better (Shanghai Composite: -3.56%, NIKKEI: -0.67%, KOSPI: -5.54%, NIFTY 50: -3.95%). One exception with Australia’s flagship index (S&P/ASX 200: +1.71%).
Emerging markets also wobbled, losing -4.46% over the week (MSCI EM).
On the interest rate front, the U.S. 10-year Treasury yield declined within its 5-week tight range (+0.66%, i.e. -4bps over the week). In Europe, the 10-year Bund yield followed suit (-0.53%, i.e. -5bps).
In credit markets, the landscape has changed dramatically. Investment grade and high yield indices were under pressure after a quiet period of several months: IG corporate bonds slipping -0.26% in Europe (-1.17% in the U.S.); high yield bonds down -1.42% in Europe (-1.75% in the U.S.). This sharp downward adjustment was even more severe in emerging bond markets (emerging debt in local currencies down -3.16%).
Lastly, gold slipped back below $1,900 for the first time in over two months (-4.88% WTD at $1,857.80/Oz) while EUR/USD traded 2.08% lower at 1.1618.
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-09-25/global
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