Week in Markets (Week Ending September 15, 2019)

September 16, 2019

Key News and Events

  • The European Central Bank (ECB) cut its deposit rate by 10bps to -0.5%.  The Central bank also stated that it would restart its bond purchasing programme, by buying €20billion of bonds from November 2019. Although the level of additional easing was smaller than the market had expected a few weeks ago, in the immediate run-up to the meeting there had been discussion about whether German and French ECB board members were looking to block any additional QE. The introduction of a tiered bank deposit system, where only a fraction of deposits are subjected to paying the negative deposit rate of -0.5%, should help reduce some of the negative unintended consequences of the negative interest rate policy.
  • Positive progress was made in the ongoing US-China trade negotiations, as both countries showed a more conciliatory tone with gestures of goodwill. China suspended previously-announced additional tariffs on some US goods including agricultural products which were scheduled to take effect on September 17th. Meanwhile, US President Donald Trump said that he would postpone the scheduled 5% increase on USD $250 billion of imports from China from October 1 to October 15 and indicated his willingness to consider an ‘interim deal’ with China.
  • Geopolitical risks in the global energy market resurfaced following an attack on Saudi Arabia’s oil infrastructure over the weekend. Yemen’s Houthi rebels have claimed responsibility for the coordinated attacks on key Saudi Arabian oil facilities which includes Abqaiq – the country’s biggest oil processing structure and Khurais oilfield, resulting in loss of approximately 5 percent of global oil supply. This has already seen the largest intraday spike in oil prices with Brent crude oil prices jumping 19% as markets opened but has since retracted some of the upward move.

Week in Markets


  • Global equity markets rose over the week, supported by additional easing promised by the ECB and more conciliatory US-China trade negotiations.
  • The S&P 500 index rose by 1.0% over the week, underperforming the MSCI World index, which rose by 1.3%. On a year-to-date basis, S&P 500 index outperformed the MSCI World index (21.7% vs 19.4%).
  • U.S. Large Cap stocks underperformed Small Cap stocks over the week, as the S&P 500 index rose by 1.0% while the Russell 2000 index rose by 4.9%. On a year-to-date basis, the S&P 500 index outperformed the Russell 2000 index (21.7% vs 18.2%).
  • Growth stocks underperformed Value stocks over the week as measured by the MSCI USA Growth and Value index. Growth Stocks fell by 0.1% while Value Stocks rose by 2.0% over the week. On a year-to-date basis, Growth Stocks outperformed Value Stocks (25.9% vs 17.8%).


  • The 10-year U.S. treasury yield rose by 34bps to 1.90% and 30-year U.S. treasury yield rose by 35bps to 2.37% over the week.
  • The 20-year TIPS yield rose by 24bps to 0.45% and 20-year breakeven inflation rose by 10bps to 1.72% over the week.
  • The spreads on the Bank of America Merrill Lynch U.S. Corporate Index fell by 5bps to 121bps and the spreads on the Bloomberg Barclays Long Credit Index fell by 3bps to 165bps over the week.
  • The U.S. High Yield bond spread over U.S. treasury yields fell by 22bps to 383bps and the spread of USD denominated EM debt over U.S. treasury yields fell by 13bps to 335bps over the week.


  • The S&P GSCI index fell by 0.1% in USD terms over the week.
  • The S&P GSCI Energy index fell by 1.8% as the price of WTI crude oil fell by 3.0% to US$55/BBL.
  • Industrial Metal prices rose by 1.6% as copper prices rose by 1.4% to US$5,870/MT.
  • Agricultural prices rose by 3.7% and gold prices fell by 1.4% to US$1,503/Oz.


  • The U.S. dollar had a mixed performance against major currencies over the week.
  • Sterling appreciated by 1.2% against the U.S. dollar over the week, ending the week at $1.25/£.
  • The euro appreciated by 0.3% against the U.S. dollar over the week, ending the week at $1.11/€.
  • The Japanese yen depreciated by 1.2% against the U.S. dollar over the week, ending the week at ¥108.07/$.
  • The Canadian dollar depreciated by 0.5% against the U.S. dollar over the week, ending the week at C$1.32/$.

Highlighted Last Week Releases





Core Inflation

Despite the near-certainty that markets believe the US Federal Reserve will continue to cut the Federal Funds rate later this week, core Consumer Price Index (CPI) inflation which strips out the more volatile food and energy components, accelerated to 2.4% from 2.2%. However, it should be noted that while it is an indication of building inflationary pressures the Fed targets core inflation measured using the core Personal Consumer Expenditure index, which is currently at 1.6% (below the Fed’s 2.0% target).



Average Weekly Earnings

UK wages grew at the fastest pace since the onset of the Financial Crisis with the three-month average growth rate for wages reaching 4.0% year-on-year. This coincided with a further sign of labour market tightness as the unemployment rate unexpectedly ticked 0.1% lower to 3.8%. That being said, higher wages have been unable to spur consumer confidence which continues to be undermined by ongoing political uncertainty.  

Euro Area

Industrial Production

Economic deterioration, especially in the industrial sector, continued into July as industrial production missed expectations of a modest 0.1% contraction and declined by -0.4%. Year-on-year, industrial production in the Euro Area is down 2.0%, which although is less than the prior upwardly revised reading of -2.4% was short of expectations of a 1.4% decline.

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

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