Week from 12 to 18 October 2020
Overall mixed sentiment prevailed all week long. A setback in the progress towards a Covid-19 vaccine (Johnson & Johnson has just paused its Covid-19 vaccine candidate clinical trials) and the growth of coronavirus infections in Europe have significantly increased uncertainty about the future economic outlook. Furthermore, it will be more difficult to reach an agreement on a big stimulus package before the U.S. presidential election even though 898,000 Americans filed for unemployment insurance (up 53,000 from the prior week’s 845,000), i.e. the highest level since the end of August.
All this news cast a shadow over upbeat earnings reports from the car and truck manufacturer Daimler AG (+2.5% WTD) or the world leader in luxury, LVMH (+5% WTD), as well as a much stronger-than-expected report for U.S. retail sales in September (+1.9%). Consumer spending, the backbone of the U.S. economy, holds up so far despite social and economic consequences of the Covid-19 pandemic but it was not enough to boost Wall Street, disappointed by the U.S. total industrial production (0.6% decline in September, the first in 5 months!).
With such conflicting data, benchmark indices treaded water.
The Dow Jones Industrial Average was almost flat (+0.07%). The S&P 500 edged up +0.19% while the Nasdaq Composite added +0.79%, thereby posting a four-week winning streak. Small cap stocks lagged their large cap counterparts (Russell 2000 down 0.23%).
Among the main S&P sectors, industrials (+1.10%), communication services (+0.90%) and utilities (+0.84%) led the pack. Real estate (-2.31%) and energy (-2.10% in spite of a 0.69% rise in oil prices even as crude demand concerns continue to linger) lagged behind.
Overall, European equity markets closed lower across the region (MSCI EMU down -0.6%) and APAC markets closed mixed (Shanghai Composite: +1.96%, S&P/ASX 200: +1.22% but NIKKEI, KOSPI and NIFTY 50 down -0.89%, -2.11%, -1.27% respectively).
U.S. 10 Year Treasury Notes closed -3bps (+0.76% yield) while the yield of the German Bund on the same maturity declined to -0.62% from -0.52%. IG corporate bonds gained +0.38% in Europe (+0.17% in the U.S.); on the flip side, high yield bonds edged down -0.13% in Europe (virtually flat in the U.S.) and emerging debt lost -0.6% in local currencies.
Lastly, gold pared some of its last week’s gains (-0.97% week-over-week) though it seemed to show signs of resilience even as the dollar rose (EUR-USD down 0.81%), favoured by a widening interest rate differential. The slight fall in Treasury yields helped to offset the negative impact of the dollar rebound on the yellow metal.
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-10-16/global
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