Stocks rallied again for the fourth consecutive week despite the US government shutdown, the political imbroglio about Russia’s role in the last U.S. presidential election, Theresa May’s Brexit vote overwhelmingly rejected by MPs and weaker trade data from China but, at precisely the right time, the latter came out in force on Tuesday hinting at more stimulus in the near future, thereby easing concerns about slowing global growth. Simultaneously, President Trump confirmed that there has been progress toward a trade deal with China.
It was enough for all the broad-based indices to finish the week into positive territory (S&P500: +2.87 percent, MSCI EMU: +2.25 percent, MSCI EM: +1.69 percent in USD, Hang Seng: +1.59 percent).
In this more favourable market environment, financial stocks were undoubtedly the best performers (+6.13 percent) thanks to upbeat earnings from Bank of America, Goldman Sachs, Citigroup, and last but not least, with a $22 billion deal in the fintech industry (buyout offer by Fiserv Inc for First Data Corp). One should also remember that the banking sector was one of the poorest performers over the last two weeks. Furthermore, it is clear that more stable markets and slightly higher interest rates (10-year T-bond yield at 278bps, and 2-year yield at 262bps) could also help banks recoup some of their losses from the recent rout.
Information technology stocks were the second winner of the week (+5.1 percent) in the wake of Netflix shares which jumped 6.5 percent on Tuesday after the video streaming pioneer said it was raising prices for its U.S. subscribers. All the other high-profile stocks gained momentum following this announcement and most of them eventually did even much better than Netflix over the week (the latter facing profit-taking on Friday).
Once again, energy (+2.93 percent) benefited from the new surge in oil prices (+4.26 percent WTD, +18.5 percent over the last three weeks).
By contrast, utilities continued to fare poorly (down 0.18 percent WTD, the only sector which was still in the red over the last four weeks, thereby initiating net inflows and cheap investment before the week-end).
Find the full report here: https://www.trackinsight.com/weekly-flow-report/2019-01-18/global