Unsurprisingly, the Federal Reserve lowered interest rates by 25bps on Wednesday. The market moved up during Powell’s conference but stock indices experienced their largest gains and hit new highs on Friday, following a much stronger than expected employment report (non-farm payrolls rising by 128,000 in October). Furthermore, the Caixin/Markit China Manufacturing PMI rose unexpectedly to 51.7 in October 2019 (vs 51.4 in September), boosted by a rebound in exports. This is the fastest pace of expansion in the manufacturing sector since February 2017.
The S&P500 was up 1.47% WTD, finishing at 3,066.91. The Nasdaq Composite ended up 1.74% WTD at 8,386.40. Healthcare (+3.04% WTD as health spending remains very high in the United States), information technology (+2.05%), industrials (+2.04%), financials (+1.51%) and communication services (+1.51%) were the top performers among the S&P sectors. Only utilities (-0.10%), energy (-0.34% with WTI crude down 0.81% to $56.20 a barrel) and real estate (-0.72%) fell back.
Asia and Europe followed this upward trend though to a lesser extent (Shangai Composite: +0.11% ; Nikkei: +0.22% ; MSCI EMU: +0.35%). The FTSE100 lagged behind (-0.30%) after the EU approved a flexible 3-month Brexit delay. The House of Commons then voted on Tuesday to hold a general election on December 12 in the hope of breaking the country’s political deadlock.
Treasury yields slipped after the Fed’s decision (U.S. 10-year yield falling to 1.73% from 1.80% a week ago), but Jerome Powell signalled that the Fed has not planned any further cut in the near future. That being said, it is worth noting that the spread between the 10-year and 2-year yields has gradually widened into positive territory since the beginning of October. It now stands at 21bps.
Corporate investment grade bonds also fared well (+0.15% in Europe, +0.60% in the United States), like emerging debt in local currencies (fifth positive week in a row), while high yield bonds inched down (-0.02% in Europe, -0.10% in the United States).
Find the full report here: https://www.trackinsight.com/weekly-flow-report/2019-11-01/global
