Week from 13 to 19 January 2020
As part of the ‘Phase One’ trade deal signed by President Trump and Vice Premier Liu He on January 15, China commits to refrain from competitive devaluation. In the wake of the 96-page text of this agreement, Treasury secretary Steven Mnuchin announced that China should no longer be designated as a currency manipulator at this time. Market sentiment was boosted by this news even if the underlying rivalry between both countries is unlikely to disappear.
Wall Street’s major indexes finished the week at record highs, investors cheering the conclusion of the trade deal. The S&P 500 rose 1.97%, the Nasdaq Composite surged 2.29% and the Dow Jones Industrial Average climbed 1.82%. Small caps did even better (Russell2000 up 2.53%).
By contrast, performance in European and Asian markets was mixed after macro data from China stressed that growth was slowing. The MSCI EMU managed to gain 0.78% while the Shanghai Composite dropped 0.54%.
Among S&P sectors, utilities led the pack (+3.76%), many stocks shining throughout the week (e.g. American Water Works: +6.43% ; Southern Company: +5.66% ; Eversource Energy: +5.12% ; Sempra Energy: +4.97%). Tech stocks continued to push higher (sector up 2.95%) with Google’s parent company Alphabet hitting $1 trillion in market value (+3.54% WTD). Materials (+2.70%), real estate (+2.46%), communication services (+2.40%), and industrials (+1.99%) also fared well.
In fact, energy was the only loser over the week (-1.12%) as oil prices slipped to five-week lows (WTI at $58.54 a barrel, down -0.85% WTD). Oversupply worries were resurfacing amid softer seasonal demand.
Treasury yields remained virtually unchanged (U.S. 10-year: +1bp ; 10-year Bund: -2bps). U.S. consumer price index increased 0.2% in December (vs 0.3% in November) and monthly underlying inflation pressures retreated. IG corporate bonds and high yield bonds gained about 0.2% on both sides of the Atlantic. On the other hand, emerging debt edged down 0.18% (in local currencies), thereby ending a 6-week winning streak.
Lastly, gold was relatively stable (+1bp) after its three-week rally.
Read the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-01-17/global