Week in Markets (Week Ending September 29, 2019)

September 30, 2019

Key News and Events

  • In the U.S., House of Representatives Speaker Nancy Pelosi announced a formal impeachment inquiry into President Donald Trump. The inquiry will look into allegations that the President has improperly pressured Ukraine into investigating his potential 2020 presidential opponent Joe Biden and his son by threatening to withhold military aid to the country.
  • The UK Parliament was reconvened after the Supreme Court unanimously ruled that Prime Minister Boris Johnson’s decision to suspend parliament for five weeks was unlawful.
  • U.S. officials confirmed that high-level trade talks with China will resume in early October. However, optimism was tapered by reports that the Trump administration is considering a ban on Chinese companies listing on U.S. exchanges.
  • The U.S. and Japan have agreed an initial trade deal which will eliminate or lower tariffs on certain products.  Japan made concessions on agricultural imports whilst the U.S. reduced tariffs on a selection of industrial goods exports. The two countries also reached a deal on digital trade allowing tariff-free digital commerce between them.

Week in Markets

Equities

  • Global equity markets fell over a week in which a formal impeachment inquiry into President Donald Trump was announced. Some analysts fear that the inquiry will lead to a legislative gridlock that could be a drag on the economy.
  • The S&P 500 index fell by 1.0% over the week, underperforming the MSCI World index, which fell by 0.9%. On a year-to-date basis, S&P 500 index outperformed the MSCI World index (19.9% vs 17.9%).
  • U.S. Large Cap stocks outperformed Small Cap stocks over the week, as the S&P 500 index fell by 1.0% while the Russell 2000 index fell by 2.5%. On a year-to-date basis, the S&P 500 index outperformed the Russell 2000 index (19.9% vs 14.0%).
  • Growth stocks underperformed Value stocks over the week as measured by the MSCI USA Growth and Value index. Growth Stocks fell by 1.6% while Value Stocks fell by 0.5% over the week. On a year-to-date basis, Growth Stocks outperformed Value Stocks (23.3% vs 16.7%).

Bonds

  • The 10-year U.S. treasury yield fell by 8bps to 1.68% and 30-year U.S. treasury yield fell by 7bps to 2.13% over the week.
  • The 20-year TIPS yield rose by 3bps to 0.35% and 20-year breakeven inflation fell by 7bps to 1.60% over the week.
  • The spreads on the Bank of America Merrill Lynch U.S. Corporate Index rose by 2bps to 121bps and the spreads on the Bloomberg Barclays Long Credit Index rose by 2bps to 167bps over the week.
  • The U.S. High Yield bond spread over U.S. treasury yields rose by 18bps to 399bps and the spread of USD denominated EM debt over U.S. treasury yields rose by 15bps to 357bps over the week.

Commodities

  • The S&P GSCI index fell by 1.8% in USD terms over the week.
  • The S&P GSCI Energy index fell by 3.4% as the price of WTI crude oil fell by 3.8% to US$56/BBL.
  • Industrial Metal prices fell by 1.6% as copper prices fell by 1.1% to US$5,714/MT.
  • Agricultural prices rose by 0.8% and gold prices fell by 0.8% to US$1,490/Oz.

Currencies

  • The U.S. dollar appreciated against most major currencies (except the Canadian dollar) over the week.
  • Sterling depreciated by 1.5% against the U.S. dollar over the week, ending the week at $1.23/£.
  • The euro depreciated by 0.6% against the U.S. dollar over the week, ending the week at $1.09/€.
  • The Japanese yen depreciated by 0.2% against the U.S. dollar over the week, ending the week at ¥108.16/$.
  • The Canadian dollar appreciated by 0.3% against the U.S. dollar over the week, ending the week at C$1.32/$.

Highlighted Last Week Releases

Region

Description

Comment

U.S.

Markit U.S. Manufacturing PMI

The U.S. Manufacturing PMI bounced back from a decade low recorded last month, rising by 0.7 points to 51.0, beating forecasts of a 0.1-point rise. The index reached a 5-month high as stronger new order growth and output productivity boosted the sector.

 

Eurozone

Markit Eurozone Manufacturing PMI

The Eurozone Manufacturing PMI fell to its lowest level in nearly seven years, defying analyst expectations of a small increase and falling by 1.4 points to 45.6 in September. The Eurozone manufacturing sector has now contracted for eight consecutive months, with the German manufacturing sector experiencing the steepest monthly contraction since 2009.

 

UK

GfK Consumer Confidence

Consumer confidence in the UK increased by 2 points to -12 in September, beating expectations of an unchanged reading. Consumer confidence remained low amidst ongoing Brexit uncertainty, but consumers have revised up their sentiments on the general economic situation and their personal financial situation.

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

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