Despite the improved sentiment on trade developments (China announcing that it will temporarily reduce tariffs on imports of American-made cars) and signs of strength from the American consumers, U.S. equity indices finished in negative territory for the second-straight week (S&P500: -1.26 percent WTD, -5.80 percent MTD, -10.8 percent QTD ; Russell2000: -2.57 percent WTD, -8.68 percent MTD, -16.84 percent QTD), at their lowest level since April, on weaker economic growth prospects abroad: disappointing industrial output in China on the one hand and business growth in the eurozone hitting a four-year low on the other hand. It is now clear that the benefits of the 2017 tax cuts may be fully wiped out in the coming days.
The Wall Street selloff on Friday was magnified by the healthcare sector (-1.85 percent WTD), dragged down by Johnson & Johnson which fell more than 10 percent after Reuters reported the company knew for decades that its talcum baby powder contained asbestos, something the company denied.
However this sector was not the poorest performer over the week, far from it. Ahead of the Fed meeting on 18-19 December, bank stocks were sold pressuring financials (sector down -3.54 percent WTD). The energy sector also lagged behind the broader indices (-3.22 percent), crude oil prices falling (WTI -2.68 percent WTD) on weaker-than-expected global demand expectations.
Only information technology (+1.78 percent WTD) in spite of Apples underperformance (down -1.79 percent WTD), utilities (+0.64 percent), and communication services (+0.47 percent WTD) managed to weather the storm.
By contrast with U.S. indices, their European and Asian peers were slightly positive over the week but keep in mind that non-U.S. investors had not yet digested the Wall Street correction on Friday. Unfortunately, every rebound is immediately challenged or invalidated in these roller coaster markets under bearish pressure. European and Asian stocks are expected to fall again early next week.
Lastly, on the interest rate front, U.S. Treasury bond yields were relatively stable (no massive move toward safe-haven assets observed this week though the net inflows are significant), the 10-Year U.S. Government Bond yield closing at around 289bps.
Find the full report : https://www.trackinsight.com/weekly-flow-report/2018-12-14/global