Week from 31 August to 6 September 2020
Although there was no particular catalyst, stock markets suddenly nose-dived on Thursday with megatech stalwarts among the hardest hit stocks in the worst selloff of the summer (Microsoft down -6.4% week-over-week, Facebook -3.72%, Alphabet -3.25%, Amazon -3.15%, Apple -3.08%).
The S&P 500 therefore slid 2.31% WTD to 3,426.96, closing well off Friday’s session low, even though it was on track to reach the 3,600 mark (key resistance) on Wednesday. To put it bluntly, this trend reversal came as no surprise as stock markets were clearly overbough until Sept. 3 (S&P 500 RSI > 70 for several days). Among the main indexes, the NASDAQ composite was, unsurprisingly, the most impacted (-3.27% WTD, but losing more than 6% over the last two days) by the tech bleed. Sector rotation did not only hurt big tech (S&P IT sector down -4.15%). Energy (-4.46%) did also scatter volatility spike (VIX index breaching the 30 threshold). It was indeed a particularly challenging week for oil, with the WTI crude closing below $40 per barrel for the first time since the end of June ($39.77, i.e. -7.45% WTD on oversupply concerns in the U.S.). By contrast, materials and utilities stood out from the other sectors, gaining +0.79% and +0.43% respectively over the week.
The U.S. stock market correction carried over into European markets, though to a lesser extent (MSCI EMU: -1.73%, DAX 30: -1.46%, CAC 40: -0.76%), while APAC markets closed mixed (Shanghai Composite: -1.42%, NIFTY 50: -2.69%, KOSPI: +0.61%, NIKKEI: +1.41%).
On the interest rate front, government bonds did not really offer a downside risk protection to partially offset losses on stocks. Thus, the U.S. 10-year Treasury yield dropped only 2 basis points at 0.72% (vs. -6 bps for its German counterpart at -0.47%). Overall, prices of corporate bonds were quite steady (investment grade bonds: +0.33% in Europe, +0.10% in the U.S.; high-yield bonds: +0.33% in Europe, -0.13% in the U.S).
Lastly, gold showed technical weakness, losing 2% on the week at $1,926.20/Oz, from an unexpected surge in the dollar (EUR-USD down -0.86%), helped by a positive U.S. jobs report for August. The U.S. economy added 1,371 million nonfarm jobs that month (slightly above the consensus forecasts).
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-09-04/global