The week began on the worst trading day of the year (S&P500 down 3%, volatility spike with the VIX index hitting 24.5) as China retaliated against the U.S. by suspending imports of American agricultural goods and letting the yuan depreciate. Nevertheless, Wall Street recovered from steep early losses in the middle of the week (S&P500 up 1.88% on Thursday) as the People’s Bank of China fixed the yuan at a firmer level than many traders had feared and Chinese data showed exports had risen 3.3% in July even though analysts expected a 2% fall. Furthermore, U.S. data pointed to a robust labor market allaying some worries about a recession.
Despite this sharp rebound, global stocks finished this week of extremes in negative territory, Friday being another day in the red after President Trump suggested the U.S. negotiators would not meet with their Chinese counterparts next month. All the equity markets without any exception were down (S&P500: -0.46% WTD, Nasdaq: -0.56%, MSCI EMU: -1.49%, Nikkei: -1.91%, Shangai Composite: -3.25%).
The picture was more mixed among sectors. As was the case last week, the most defensive segments led the pack as investors continued to flee to safety (real estate: +1.76% WTD, utilities: +1.05%). On the other hand, it was again a tough period for energy (-2.2% WTD as oil prices were dragged down on demand worries: WTI futures down 2.08%), financials (-1.67%, hurt by a new wave of yields touching all-time lows – 10-Year Bund at -0.58%, 10-Year T-Note at 1.74%) and tech stocks (-0.81% WTD) in the wake of a Bloomberg report stating that Washington was delaying a decision about licenses for U.S. firms to restart trade with Huawei.
Lastly, investment grade corporate bonds weathered the storm (+0.25% in the eurozone, +0.65% in the U.S.) while high yield bonds inched down (-0.16% in the eurozone, -0.29% in the U.S.).
Find the full report here: https://www.trackinsight.com/weekly-flow-report/2019-08-09/global
