Week from 26 October to 1 November 2020
Equity indices wrapped up a tough week, the worst since March to put it bluntly, with the rapid growth in COVID-19 infections and renewed restrictions throughout Europe. To make matters worse, big tech’s outlooks disappointed: Apple (-5.37% week-over-week), Amazon (-5.25%), Facebook (-7.61%), and Microsoft (-6.36%) were deep in the red, despite firmer quarterly results. Only Google-Alphabet weathered the storm (-1.22%) after the company posted a strong rebound in ad-spending and beat analysts’ expectations accordingly (EPS: $16.40 versus $11.42 expected).
Against this background, the S&P 500 skidded almost 200 points, or -5.64% amid volatility spike (VIX at 38, equity skew above the warning level of 2). Similarly, the Dow Jones Industrial Average sustained its biggest weekly loss since March (-6.47%), like the NASDAQ (-5.51%). Small cap stocks nose-dived too (Russell 2000 down -6.22%).
All the S&P sectors sank into correction, the worst performers being industrials (-6.52%), information technology (-6.47%), and consumer discretionary (-6.23%). Energy was also hit hard (-5.71%) as oil slumped (WTI crude down 10.2%) in the wake of higher stockpiles in the U.S.
The less severe losses came from utilities (-3.70%) and communication services (-3.94%).
Unsurprisingly, European markets closed significantly lower (MSCI EMU down -6.74%) as many countries including Germany and France returned to lockdowns to try to stop a new wave of COVID-19 infections. Same trend for APAC markets: Shanghai Composite (-1.63%), NIKKEI (-2.29%), KOSPI (-3.97%), NIFTY 50 (-2.41%), S&P/ASX 200 (-3.88%).
Likewise, it was a challenging week for bond markets. Credit indices closed wider on both sides of the Atlantic. If IG corporate bonds treaded water in Europe (-0.02%), their U.S. counterparts lost -0.63%. High yield bonds (-1.05% in Europe, -1.27% in the U.S.) and emerging debt (-1.37% in local currencies) followed suit.
On the interest rate front, the yield of the German 10-Year government bond fell 5bps to -0.628%, its lowest level since March 2020. It should also be noted that the €17 billion inaugural social bond under the EU SURE program (aiming to help protect jobs and keep people in work) was a successful issue as this investment vehicle was more than 13 times oversubscribed. By contrast with the 10-Year Bund, the yield on the U.S. 10-year T-Note rose from +0.85% to +0.88%.
Lastly, gold fell 1.16% from $1,902/Oz to $1,879.90 while the EUR-USD pair traded lower (-1.57%). The U.S. dollar indeed benefited from the end-of-week flight to quality with traders buying this safe haven as the coronavirus is spreading rapidly in many Western countries.
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-10-30/global
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