Week from 15 to 21 June 2020
After a tough week, Wall Street turned positive in the middle of the month as the Federal Reserve said it will start buying individual corporate bonds on the secondary market as from Tuesday. Stocks were also helped by a feeling of optimism prevailing in the crude oil market (WTI up 9.62% WTD at $39.75 a barrel) on hopes that the OPEC+ deal will soon bring prices back to normal as demand around the northern hemisphere was again increasing.
Nevertheless, investor sentiment became bearish Thursday with U.S. data showing a high level of new weekly jobless claims (1.508 million for the week ended June 13). It worsened again Friday after Apple announced it would reclose some stores in Arizona and Florida following a rise in Covid-19 cases. Unfortunately, many states and countries, including China and Japan, are now experiencing a resurgence of coronavirus infections which could hinder the pace of economic reopening and lead to a sluggish growth recovery scenario accordingly.
The equity sell-off accelerated into the close, reversing some of the gains made earlier in the week. That said, the magnitude of the declines was not comparable to those observed last week. All in all, stock indexes therefore managed to stay in positive territory.
The Dow Jones Industrial Average was up 1.04%, or 266 points, after falling more than 200 points on Friday. The S&P 500 gained 1.86%, while the Nasdaq Composite added 3.73%.
European indexes did better (DAX 30: +3.19%, CAC 40: +2.90%, FTSE 100: +3.07%) but they were closed by the time of Apples announcement. APAC markets also fared well though to a lesser extent (NIKKEI 225: +0.78%, KOSPI: +0.42%, ASX 200: +1.62%, NIFTY 50: +2.72%, and Shanghai Composite: +1.64% despite fears of a second wave of coronavirus cases in China as Beijing officials ordered the schools to close again and urged residents not to leave the city).
Among the S&P sectors, healthcare stocks led the pack (+3.12%) followed by technology (+2.79%). Only three sectors were losing ground: utilities (-2.39%), energy (-0.96%: crude oil up but natural gas down) and real estate (-0.77%).
On the interest rate front, the yield curve of U.S. govies remained virtually unchanged (10-year yield at 0.70%). The same was true of Germanys yield curve (10-year yield at -0.42%).
On the other hand, investment grade corporate bonds and high-yield bonds closed higher (+0.47% and +0.80% respectively in the U.S.) in the wake of the Fed bond-buying plan. Same trend in Europe (IG: +0.15% ; HY: +0.70%). By contrast, emerging debt in local currencies inched down 0.4%.
Lastly, it is worth noting that gold prices rebounded strongly on Friday, trading to fresh yearly highs at 1,745.90/Oz (+0.96% WTD).
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-06-19/global