Week in Markets (Week Ending June 30, 2019)

July 1, 2019

Key News and Events

  • Positive progress was made at the meeting between Presidents Trump and Xi at the G20 summit in Japan last week, as both countries agreed to resume trade talks. President Trump agreed to suspend the imposition of new tariffs on Chinese goods and China agreed to increase its purchase of agricultural products from the U.S. President Trump also suspended some of the recent sanctions placed on Chinese telecoms company Huawei, allowing them to buy equipment and services from U.S. companies again.
  • European Union (EU) leaders remained divided at the emergency EU summit last week, as they failed to reach an agreement on filling the five top EU posts for the next five years.
  • U.S.-Iran tension escalated further as U.S. President Donald Trump ordered “hard-hitting” sanctions on Iranian Supreme Leader Ayatollah Ali Khamenei and his office. India, a major importer of Iran’s crude oil, announced that oil imports from Iran will stop in compliance with U.S. sanctions.
  • Meanwhile, President Trump became the first U.S. President to visit North Korea, as he met North Korean leader Kim Jong-un at the demilitarized zone dividing North and South Korea over the weekend. Both leaders shook hands and agreed to resume stalled nuclear talks.

Week in Markets

Equities

  • Global equity markets rose marginally over the week as markets await news from the U.S.-China talks at the G20 summit over the weekend.
  • The S&P 500 index fell by 0.3% over the week, underperforming the MSCI World index, which rose by 0.1%. On a year-to-date basis, S&P 500 index outperformed the MSCI World index (18.5% vs 17.4%).
  • U.S. Large Cap stocks underperformed Small Cap stocks over the week, as the S&P 500 index fell by 0.3% while the Russell 2000 index rose by 1.2%. On a year-to-date basis, the S&P 500 index outperformed the Russell 2000 index (18.5% vs 17.0%).
  • Growth stocks underperformed Value stocks over the week as measured by the MSCI USA Growth and Value index. Growth Stocks fell by 0.5% while Value Stocks fell by 0.1% over the week. On a year-to-date basis, Growth Stocks outperformed Value Stocks (22.7% vs 14.9%).

Bonds

  • The 10-year U.S. treasury yield fell by 6bps to 2.00% and 30-year U.S. treasury yield fell by 7bps to 2.53% over the week.
  • The 20-year TIPS yield fell by 4bps to 0.55% and 20-year breakeven inflation fell by 2bps to 1.76% over the week.
  • The spreads on the Bank of America Merrill Lynch U.S. Corporate Index fell by 3bps to 122bps and the spreads on the Bloomberg Barclays Long Credit Index fell by 3bps to 161bps over the week.
  • The U.S. High Yield bond spread over U.S. treasury yields rose by 12bps to 407bps and the spread of USD denominated EM debt over U.S. treasury yields rose by 5bps to 352bps over the week.

Commodities

  • The S&P GSCI index rose by 1.0% in USD terms over the week.
  • The S&P GSCI Energy index rose by 1.7% as the price of WTI crude oil rose by 1.8% to US$58/BBL in a week in which U.S.-Iran tensions escalated following the announcement of U.S. sanctions on Iranian Supreme Leader Ayatollah Ali Khamenei.
  • Industrial Metal prices rose by 1.5% as copper prices rose by 0.5% to US$5,972/MT.
  • Agricultural prices fell by 1.5% and gold prices rose by 0.8% to US$1,409/Oz.

Currencies

  • The U.S. dollar depreciated against most major currencies over the week, with the exception of the Japanese yen.
  • Sterling appreciated by 0.2% against the U.S. dollar over the week, ending the week at $1.27/£.
  • The euro appreciated by 0.6% against the U.S. dollar over the week, ending the week at $1.14/€.
  • The Japanese yen was unchanged against the U.S. dollar over the week, ending the week at ¥107.74/$.
  • The Canadian dollar appreciated by 1.1% against the U.S. dollar over the week, ending the week at C$1.31/$.

Highlighted Last Week Releases

Region

Description

Comment

U.S.

New Home Sales MoM

New home sales fell by 7.8% in the month of May, despite analysts forecast for a modest rise of 1.6%. The seasonally adjusted home sales number of 626k was the lowest since December 2018, despite falling mortgage rates this year.

UK

GfK Consumer Confidence

Consumer confidence in the UK fell by 3 points to -13 in June, undershooting analysts forecast for a 1-point fall, as global growth concerns and ongoing Brexit uncertainty weighed on sentiment.

China

Caixin China PMI Mfg

The Caixin Manufacturing PMI, which focuses on smaller private sector firms, dropped by 0.8 points to 49.4 in June, indicating a contraction in manufacturing activities over the month. This is attributed to a decline in domestic demand and a reduction in overseas demand as U.S.-China trade tensions continue to bite.

Sources: Global Asset Allocation, Bank of America Merrill Lynch, Barclays Capital, Factset. Click here for index descriptions.

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