Equity markets rallied around the globe (MSCI World up +1.89% WTD, S&P500: +1.79%, MSCI EMU: +2.15%, Nikkei: +2.39%, Shangai Composite: +3.93%) after Chinese and American trade negotiators confirmed they would reopen their talks in early October though Trump showed little sign of ceding. At the same time, Carrie Lam, the head of Hong Kongs legislative council, announced that she will formally withdraw the controversial draft bill which had sparked three months of protests.
Market players therefore preferred to focus on the prospect of a de-escalation to the trade conflict and potential easing from central banks, paying no real attention to the macro data released on Tuesday which however showed a gloomy picture of the U.S. manufacturing sector (ISM index at 49.1 in August, down from 51.2 in July). To make matters worse, China’s exports unexpectedly fell in August (-1% from a year earlier) thereby missing market consensus of a 2% growth, while imports remained weak (-5.6%), pointing to further weakness in the world’s second-largest economy even if the services sector expanded simultaneously.
As was already the case a week ago, all the S&P sectors were up. The best performers were energy (+2.64%) in the wake of crude oil prices (WTI up +2.58% WTD), consumer discretionary (+2.61%), and information technology (+2.41%). Utilities (+0.35%) and health care (+0.67%) lagged behind.
Treasury yields inched up on profit-taking. The 10-year U.S. Treasury yield rose 5 basis points to 1.55%, off a three-year low of 1.44% touched last week. The German Bund on the same maturity increased from -0.70% to -0.64%.
By contrast, emerging debt (+1.41% in local currencies) broke its three-week losing streak.
Lastly, like the other safe-haven assets, gold fell 0.92% to $1,509/Oz.
Find the full report here: https://www.trackinsight.com/weekly-flow-report/2019-09-06/global