Stock Markets Globally declined modestly during the week week, while global long-term bond yields retreated near record lows. On the economic front, U.S. initial jobless claims increased for the first time since March, raising worries that the economic recovery is beginning to stall. Positively, European Union leaders agreed on a landmark stimulus package to help member states mitigate the economic downturn. We believe the pace of improvement in economic data will likely slow as coronavirus cases continue to rise, but the continuing fiscal and monetary stimulus will play a crucial role in supporting the expansion until a vaccine is discovered.
United States
U.S indices ended mixed for the week after surrendering early gains; at its Thursday peak, the S&P 500 Index moved within nearly 3% of its all-time high in February. The market rotation that began the previous week remained in evidence, with mid-caps and value stocks regaining some of the substantial ground lost in recent months to large-caps and growth shares. Technology stocks and the tech-heavy Nasdaq Composite Index fared worst, dragged down by declines in Apple and several chip-makers. Energy stocks outperformed within the S&P 500 as oil prices rallied early in the week.
| Index | Friday’s Close | Week’s Change | % Change YTD |
| DJIA | 26,500.81 | -171.14 | -7.14% |
| S&P 500 | 3,218.57 | -6.16 | -0.38% |
| Nasdaq Composite | 10,382.10 | -121.09 | 15.71% |
| S&P MidCap 400 | 1,852.98 | 15.54 | -10.18% |
| Russell 2000 | 1,471.92 | -1.92 | -11.78% |
Europe
European shares fell, as a deterioration in U.S.-China relations eroded earlier gains from the European Union (EU) agreeing on a recovery fund and positive news on efforts to develop a coronavirus vaccine. In local-currency terms, the pan-European STOXX Europe 600 Index ended the week 1.17% lower, while Germany’s DAX Index eased 0.23%, France’s CAC 40 slid 1.47%, and Italy’s FTSE MIB declined 1.25%. The UK’s FTSE 100 Index fell 2.38%.
EU leaders agreed to a historic deal on a EUR 750 billion stimulus plan. As a result, the European Commission, the EU’s executive branch, can now raise billions of euros in capital markets on behalf of all 27 states.
Asia
Japanese stocks were relatively unchanged in the holiday-shortened trading week. Japan’s stock markets were closed on Thursday for Marine Day and on Friday for Health-Sports Day. The Nikkei 225 Stock Average advanced 55 points (0.2%) and closed at 22,751.61 on Wednesday, July 22. The widely watched market yardstick has returned -3.8% for the year-to-date period. The large-cap TOPIX Index and the TOPIX Small Index, broader measures of Japanese stock market performance, posted a modest loss and gain, respectively. The yen was modestly stronger versus the U.S. dollar during the week and trended below JPY 107 per U.S. dollar.
Chinese stocks declined for the week. The large-cap CSI 300 Index declined 0.9% and the benchmark Shanghai Composite Index shed 0.5%, weighed by a Friday sell-off on news that the Trump administration withdrew consent for China to operate its consulate in Houston, Texas. This unexpected decision rattled investors who viewed it as an aggressive move that would ratchet up bilateral tensions at a time when China’s economic recovery remains fragile.
In China’s bond markets, the yield on the sovereign 10-year bond ended the week almost unchanged at 2.98%. The People’s Bank of China kept the loan prime rate (LPR), a reference rate for new bank loans, unchanged for a third straight month, as expected. The one-year LPR remains at 3.85%, while the five-year rate stands at 4.65%. In the currency markets, the renminbi declined following the escalation in U.S.-Beijing tensions, losing 0.4% against the greenback and closing at 7.018 for the week.
