Week in Markets (Week Ending September 22, 2019)

September 23, 2019

Key News and Events

  • As widely expected, the US Federal Reserve (Fed) cut the target range for the federal funds rate by 25bps to 1.75%-2.00%. That being said, the Federal Open Market committee (FOMC) appeared to be divided in their decision making with two committee members wanting to keep rates unchanged whilst another voted for a more aggressive 50bps cut. Although there was also division in regards to the future course of the Federal funds rate, the median projection suggests no further cuts are planned for the rest of the year before increasing rates thereafter.
  • Signs of market stress were evident over the course of last week in the US with the overnight borrowing rate in the repo market spiking to 10%. This prompted the Fed to add liquidity for the first time in a decade while also lowering the rate that it pays banks on their excess reserves.
  • Spain is heading for a fourth general election in as many years in November 2019 as caretaker Prime Minister Pedro Sanchez was unable to form a government after six months of negotiations.
  • US-China trade negotiations progressed with officials from both the countries conducting meetings aimed at laying ground work for higher-level talks in October. US President Donald Trump stated that he did not need to secure a deal with China before the 2020 election and stressed that he wanted a comprehensive pact but not a partial deal.

Week in Markets


  • Global equity markets fell over the week.
  • The S&P 500 index fell by 0.5% over the week, underperforming the MSCI World index, which fell by 0.4%. On a year-to-date basis, S&P 500 index outperformed the MSCI World index (21.1% vs 19.0%).
  • U.S. Large Cap stocks outperformed Small Cap stocks over the week, as the S&P 500 index fell by 0.5% while the Russell 2000 index fell by 1.1%. On a year-to-date basis, the S&P 500 index outperformed the Russell 2000 index (21.1% vs 16.8%).
  • 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 0.4% over the week. On a year-to-date basis, Growth Stocks outperformed Value Stocks (25.3% vs 17.3%).


  • The 10-year U.S. treasury yield fell by 14bps to 1.75% and 30-year U.S. treasury yield fell by 18bps to 2.20% over the week  in which the US Federal Reserve (Fed) cut the target range for the federal funds rate by 25bps to 1.75%-2.0%. .
  • The 20-year TIPS yield fell by 13bps to 0.32% and 20-year breakeven inflation fell by 5bps to 1.67% over the week.
  • The spreads on the Bank of America Merrill Lynch U.S. Corporate Index fell by 2bps to 119bps and the spreads on the Bloomberg Barclays Long Credit Index was unchanged at 165bps over the week.
  • The U.S. High Yield bond spread over U.S. treasury yields fell by 2bps to 381bps and the spread of USD denominated EM debt over U.S. treasury yields rose by 7bps to 342bps over the week.


  • The S&P GSCI index rose by 3.3% in USD terms over the week.
  • The S&P GSCI Energy index rose by 5.8% as the price of WTI crude oil rose by 5.9% to US$58/BBL as the attack on Saudi Arabia's two largest crude oil facilities sparked supply disruption fears. This was later exacerbated by rising geopolitical tensions with US President Trump threatening potential military action.
  • Industrial Metal prices fell by 1.7% as copper prices fell by 1.6% to US$5,778/MT.
  • Agricultural prices fell by 0.2% and gold prices fell by 0.1% to US$1,502/Oz.


  • The U.S. dollar had a mixed performance against major currencies over the week.
  • Sterling appreciated by 0.4% against the U.S. dollar over the week, ending the week at $1.25/£.
  • The euro depreciated by 0.7% against the U.S. dollar over the week, ending the week at $1.1/€.
  • The Japanese yen appreciated by 0.2% against the U.S. dollar over the week, ending the week at ¥107.89/$.
  • The Canadian dollar depreciated by 0.2% against the U.S. dollar over the week, ending the week at C$1.33/$.

Highlighted Last Week Releases





FOMC Rate Decision

The 25bps rate cut by the Fed was widely anticipated. However, no further cuts are lined up in the future, as reflected by no change in the median projection. The growth forecast for 2019 was bumped up slightly to 2.2% with the Fed noting that the health of the consumer was stronger than expected although this was countered by weaker business spending.



CPI Inflation (year-on-year)

UK consumer price inflation slowed to the weakest level since 2016 with lower computer game and clothes prices contributing to the deceleration. Headline inflation fell from 2.1% to 1.7%, below market expectations and the Bank of England’s target rate of   2.0%. Core inflation also slipped to 1.5% from 1.9%. The lower inflation rate came ahead of the Monetary Policy Committee (MPC) where MPC members agreed to keep interest rates unchanged.  

Euro Area

ZEW Survey Expectations

While the perspective of the current economic situation in the Euro Area dipped slightly in September to -15.6, the economic outlook looks less dire than previously thought with the ZEW Survey Expectations index increasing to -22.4 from -43.6. Concerns over the impact of the US-China trade war and risks of a No-Deal Brexit eased since the last reading.

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

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