Week from 5 to 11 October 2020
U.S. stock markets ended the week significantly higher on hopes lawmakers could agree to targeted stimulus packages before the presidential election. However, President Trump had blown hot and cold throughout the week, telling Fox Business News that talks with Democrats were moving along, just a short while after he called them off.
The Dow Jones Industrial Average rose 3.27% despite the lack of fiscal package. The S&P 500 soared by 3.84%, while the Nasdaq Composite added 4.56%. Small cap stocks continued their winning streak (Russell 2000 up 6.38%), thereby reducing their negative excess return to large cap stocks (YTD return differential between S&P 500 and Russell 2000: -9.48% as of October 9, 2020).
For the first time since early August, all 11 S&P sectors traded in the green led by materials (+5.12% week-over-week) and energy (+5.00%, pushed higher by rising oil prices – WTI crude up 9.58% – amid supply disruptions in the wake of Hurricane Delta and Tropical Storm Gamma). Unlike the previous week, real estate lagged behind (+1.37%).
European markets also closed higher though to a lesser extent (MSCI EMU up 2.79%), as the coronavirus pandemic was gathering pace across the continent, jeopardizing recent economic recovery, as stressed by ECB President Christine Lagarde.
APAC markets followed suit (Shanghai Composite: +1.68%, KOSPI: +2.75%, NIFTY 50: +4.36%, S&P/ASX 200: +5.36%, NIKKEI: +2.56%). Overall, emerging markets fared well too (MSCI EM up 3.77%).
On the interest rate front, U.S. government bonds lost ground (10-year yield at 0.78%, highest level since June). Conversely, credit indices were tighter. IG corporate bonds gained +0.40% in Europe (+0.44% in the U.S.); high yield bonds were up +0.78% in Europe (+1.52% in the U.S.) while emerging debt took the lead in this bullish trend (+1.61% in local currencies).
Lastly, gold prices rose for a second straight week (+1%), returning significantly above the key $1,900 threshold on Friday (Dec20 Futures at $1,936.3/Oz). At the same time, EUR/USD traded 0.85% higher at 1.1815.
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-10-09/global
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