Week from 28 September to 4 October 2020
Stock markets had started the week off on the right foot as Chicago PMI jumped to 62.4, topping estimates of 52.1, and renewed hopes for fiscal stimulus lifted sentiment on the recovery in the U.S. Unfortunately, Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi did not reach any agreement even if the latter said Friday that lawmakers will provide further aid for airline companies either through a broad stimulus package or bipartisan standalone legislation. Furthermore, Donald Trump tweeted the same day that he and his wife had tested positive for COVID-19. He was later transferred to Walter Reed National Military Medical Center. Could this unexpected event impact the presidential race even though Americans have already begun voting in several states? This is the question everyone is asking now, even if the latest memo from the Presidents physician, Dr. Sean Conley, stated his patient continues to do well, having made substantial progress since diagnosis. He even left the hospital as early as this Monday declaring he will be back on the campaign trail soon.
After wavering Friday morning in the wake of Donald Trump’s announcement, most equity markets ended the week higher despite an uptick in volatility.
The Dow Jones Industrial Average rose 1.87%, the S&P 500 was up 2.50%, while the Nasdaq Composite gained 3.78%. Small cap stocks recouped the severe losses suffered last week (Russell 2000 up 3.82%).
Among the major sectors in the S&P 500, ten out of eleven were up, with consumer discretionary (+3.6%), information technology (+3.45%), real estate (+3.24%), and communication services (+2.99%) leading the pack. Energy was the exception, tumbling another 3.81% after a 20% decline in Q3. U.S. crude futures traded almost 8% lower at $37 a barrel.
Like their U.S. peers, European indices fared well (DAX 30: +1.76%, CAC 40: +2.01%, FTSE: +1.2%) though rising coronavirus cases rekindled fears of further economic weakness in the region.
It is difficult to report on the WTD performance of APAC markets as some of them were closed for holidays. China therefore began its 8-day Golden Week holiday on 1 October, with hundreds of millions of people traveling across the country. Most market players are now on leave until next Friday.
There was no big change on the interest rate front. The U.S. 10-year Treasury yield rose a bit within its 6-week tight range (+0.70%, i.e. +4bps over the week). Credit markets stabilized after the severe losses experienced last week: IG corporate bonds up +0.10% in Europe (+0.47% in the U.S.); high yield bonds up +0.57% in Europe (+1.00% in the U.S.). Emerging debt also benefited from this upward adjustment (+0.91% in local currencies).
Elsewhere, gold popped again (+1.94%), achieving its best weekly performance since early August, as the U.S. dollar dipped from highs (EUR-USD up 1.01%).
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-10-02/global
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