Week in Markets (Week Ending October 20, 2019)

October 21, 2019

Key News and Events

  • UK Prime Minister Boris Johnson agreed a revised withdrawal agreement with European Union (EU) leaders last week. The agreement introduces a customs border in the Irish sea, which means that the rest of the UK would no longer risked being “trapped” in the EU's customs area.
  • However, his plans faced a setback after the House of Commons voted to withhold approval of the agreement "unless and until" implementing legislation is passed, forcing the Prime Minister to request a 3-month Brexit extension with the EU, as required by the so-called "Benn Act".
  • The U.S. and China made further progress on their "phase one” trade deal. President Trump stated his intention to finalize the agreement over the coming weeks and sign the agreement when he meets with President Xi at the Asia-Pacific Economic Cooperation forum in mid-November.
  • China recorded the slowest economic growth rate in nearly 30 years, as their economy expanded by 6.0% year-on-year in the third quarter amidst weakening global demand and an ongoing trade war with the U.S.. Meanwhile, the International Monetary Fund (IMF) revised their 2019 growth estimate for the world economy to 3.0%, the lowest growth rate since the financial crisis and down 0.3% from its previous estimates six months ago.

Week in Markets

Equities

  • Global equity markets rose over the week.
  • The S&P 500 index rose by 0.6% over the week, underperforming the MSCI World index, which rose by 0.7%. On a year-to-date basis, S&P 500 index outperformed the MSCI World index (21.0% vs 19.1%).
  • U.S. Large Cap stocks underperformed Small Cap stocks over the week, as the S&P 500 index rose by 0.6% while the Russell 2000 index rose by 1.6%. On a year-to-date basis, the S&P 500 index outperformed the Russell 2000 index (21.0% vs 15.1%).
  • Growth stocks underperformed Value stocks over the week as measured by the MSCI USA Growth and Value index. Growth Stocks rose by 0.3% while Value Stocks rose by 0.7% over the week. On a year-to-date basis, Growth Stocks outperformed Value Stocks (25.5% vs 16.8%).

Bonds

  • The 10-year U.S. treasury yield was unchanged at 1.75% and 30-year U.S. treasury yield rose by 3bps to 2.25% over the week.
  • The 20-year TIPS yield fell by 1bps to 0.39% and 20-year breakeven inflation rose by 3bps to 1.67% over the week.
  • The spreads on the Bank of America Merrill Lynch U.S. Corporate Index fell by 4bps to 118bps and the spreads on the Bloomberg Barclays Long Credit Index fell by 3bps to 163bps over the week.
  • The U.S. High Yield bond spread over U.S. treasury yields fell by 8bps to 402bps and the spread of USD denominated EM debt over U.S. treasury yields fell by 1bps to 339bps over the week.

Commodities

  • The S&P GSCI index fell by 0.6% in USD terms over the week.
  • The S&P GSCI Energy index fell by 1.3% as the price of WTI crude oil fell by 1.7% to US$54/BBL.
  • Industrial Metal prices was unchanged as copper prices fell by 0.2% to US$5,751/MT.
  • Agricultural prices rose by 0.7% and gold prices rose by 0.7% to US$1,490/Oz.

Currencies

  • The U.S. dollar depreciated against all major currencies over the week.
  • Sterling appreciated by 1.7% against the U.S. dollar over the week, ending the week at $1.29/£.
  • The euro appreciated by 0.9% against the U.S. dollar over the week, ending the week at $1.11/€.
  • The Japanese yen appreciated by 0.1% against the U.S. dollar over the week, ending the week at ¥108.52/$.
  • The Canadian dollar appreciated by 0.5% against the U.S. dollar over the week, ending the week at C$1.31/$.

Highlighted Last Week Releases

Region

Description

Comment

U.S.

Retail Sales Ex Auto MoM

Retail sales excluding automobiles fell by 0.1% in the month of September, the first fall in seven months. Analysts have expected a 0.2% increase, This, together with a 0.9% fall in automobile sales, led to overall retail sales falling by 0.3%.

 

UK

CPI YoY

In the UK, consumer prices grew by 1.7% in the year to September, unchanged from the previous month and remaining at a near 3-year low. Food and non-alcoholic beverages inflation was steady at 1.8%, but a fall in fuel prices (-2.1%) helped keep inflation low.

 

China

GDP YoY

China's economy grew at 6.0% year-on-year in the third quarter, the slowest growth rate in nearly 30 years amidst weakening global demand and an ongoing trade war with the U.S.. The growth rate was below analysts' expectations of 6.1% and last quarter's growth rate of 6.2%, and was just within China's official 2019 GDP target range of 6.0% to 6.5%.

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

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