Week from 7 to 13 December 2020
Global stocks took a breather as Brexit and US stimulus talks stalled. Meanwhile, figures released Thursday by the Labor Department showed 853,000 Americans filed for unemployment benefits in a week compared to analysts’ consensus of 725,000.
The Dow Jones logically snapped a three-week winning streak (-0.57% WTD). The S&P 500 was down 0.96% and the Nasdaq Composite slid 0.69%. By contrast, small cap stocks gained momentum (Russell 2000 up 1.02%), confirming once again the factor rotation which has been underway since mid-November.
European indices lost ground (MSCI EMU down 1.38%) though the European Central Bank decided to increase its PEPP (Pandemic Emergency Purchase Programme, non-standard monetary policy measure initiated in March 2020) by €500bn to a total of €1,850bn. At the same time, the UK and EU were not able to break the Brexit logjam.
In Asia, the Shanghai Composite slumped 2.83%, ignoring strong export data, while Hong Kong’s Hang Seng dropped 1.23%. Japan’s Nikkei declined 0.37% while Australia’s S&P/ASX 200 edged up 0.13%.
Most S&P sectors finished the week in negative territory except for communication services (+0.10%) and energy (+1.14%, as brent crude managed to cross $50 a barrel on Thursday for the first time since March). Real estate was the biggest decliner (-2.88%), followed by financials (-1.76%). Tech was also under pressure (-1.43%), with Facebook falling 2.2% after the Federal Trade Commission and a coalition of States sued the company for antitrust violations and called for its break-up.
On the interest rate front, European Government bond yields slid further in the wake of lockdowns and Brexit deadlock (Germany 10-year bond yield at -0.63%). ECB buying also pushed Italian bond yields to record lows (10-year govies closing at +0.52%). Similarly, the US 10-year T-note yield was trending downward, from +0.97% to +0.90%, as hopes for an end-of-year stimulus agreement were evaporating.
Unsurprisingly, credit markets flashed green again with a sixth positive week in a row for emerging debt (+0.62% in local currencies) as well as for high-yield securities, though to a lesser extent (+0.03% in Europe, +0.09% in the US). Investment grade bonds also fared well (+0.33% in Europe, +0.22% in the US).
Lastly, spot gold closed at $1,839.85/Oz (+0.2% WTD, +21.26% YTD).
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Find the full report here: hthttps://www.trackinsight.com/en/weekly-flow-report/2020-12-11/global
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