Week from 8 to 14 June 2020
Last week’s stock market euphoria quickly turned to disappointment after Jerome Powell said on Wednesday the Federal Reserve might keep U.S. interest rates at near zero till the end of 2022.
U.S. equity indices plunged on Thursday, suffering their biggest one-day decline since March in the wake of rising Covid-19 hospitalisations in several states and growing concerns over a second wave of pain as cases topped 2 million nationwide. Wall Street’s fear gauge (VIX) was flashing red again, surging above 36 (+47%).
The Dow Jones Industrial Average fell 5.55% WTD despite a shallow bounce on Friday. The S&P 500 lost 4.78% erasing last week’s gains, while the Nasdaq Composite slumped 2.30%. Small cap stocks were hit more severely than their large cap counterparts (Russell 2000 down 7.93%).
It was also a very tough week in Europe. The DAX 30 traded 6.99% lower, the CAC 40 fell 6.90%, the FTSE 100 was down 5.85%, while the broad-based Stoxx Europe 600 index dropped 5.66%.
Similarly, APAC equity markets closed lower across the region, but most to a lesser degree than the U.S. and Europe (NIKKEI 225: -2.44%, KOSPI: -2.27%, ASX 200: -2.52%, NIFTY 50: -1.67%, and Shanghai Composite: -0.38%).
All the S&P sectors finished in negative territory. Energy (-11.07% amid falling oil prices – WTI futures down 8.32% – and new fears of a supply glut) and interest-rate sensitive financials (-9.32%) weighed the most on the benchmark index. Technology (-2.03%) and communication services (-2.80%), which had lagged behind last week, weathered the storm with downside risk seeming much more limited.
In unfavourable market conditions, investors logically fleed to safety. Gold (+3.17%) and investment grade bonds directly benefited from the flight to quality after the Fed promised to maintain monthly bond purchases at the current pace of about $80 billion in Treasuries and $40 billion in agency and mortgage-backed securities. 10-year Treasury yield fell 20 basis points to 0.71%. Same move in Europe where the 10-year Bund yield slid from -0.28% to -0.44%. U.S. IG corporate bonds inched up (+0.18%) while high-yield bonds suffered significant losses (-1.99%). Unsurprisingly, emerging debt was also hit by risk-off mood (-1.17% in local currencies).
Find the full report: https://www.trackinsight.com/en/weekly-flow-report/2020-06-12/global