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Global Markets Weekly Market Review – Week 40, 2020

Global markets brushed off the uncertainties around the economic recovery and finished the week higher on hopes that Congress will reach a deal on another coronavirus-relief bill. Attention turned back to the virus and its effects after news that U.S President Trump and First Lady Melania Trump have both tested positive for COVID-19 and that they will be going into quarantine.

United States

The large-cap indices broke a string of four weekly losses and moved higher, although gains were more robust among small-caps. Most sectors within the S&P 500 Index recorded modest positive returns, with the exception of energy stocks, which added to their sharp recent declines.

On the economic front, the U.S. economy added 661,000 jobs, marking a slowdown in the pace of job gains, but the unemployment rate came in better than expected at 7.9%. We believe that the economic recovery is entering a slower phase, but a gradual improvement in the labor market, along with low interest rates and fiscal stimulus, should provide support.

Index Friday’s Close Week’s Change % Change YTD
DJIA 27,682.81 508.85 -3.00%
S&P 500 3,348.44 49.98 3.64%
Nasdaq Composite 11,075.02 161.46 23.43%
S&P MidCap 400 1,902.81 87.14 -7.77%
Russell 2000 1,539.30 65.26 -7.74%
Europe

Shares in Europe rebounded as investors snapped up beaten-down stocks, especially in the financials sector. News that President Trump and his wife had tested positive for COVID-19 eroded some of the market’s gains. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 2.02% higher, with major indexes also posting gains. Germany’s Xetra DAX Index rose 1.76%, France’s CAC 40 gained 2.01%, and Italy’s FTSE MIB climbed 1.96%. The UK’s FTSE 100 Index added 1.78%.

Eurozone consumer prices fell for a second consecutive month in September, with the year-over-year inflation rate hitting a four-year low of -0.3%, according to an initial estimate. Tumbling oil prices and weaker prices for non-industrial goods were key deflationary factors.

Asia

The Tokyo Stock Exchange halted stock trading on all of Japan’s exchanges for the full day on Thursday, October 1. A technical glitch, resulting from a system failure to switch to backup mode, caused a transmission outage. Japanese stocks declined in the four-day trading week. The Nikkei 225 Stock Average declined 175 points (0.75%) and closed at 23,029.90. The market benchmark has declined (2.7%) for the year-to-date period. The large-cap TOPIX Index and the TOPIX Small Index, broader measures of Japanese stock market performance, also recorded losses. The yen stayed in a tight range for the week and traded above JPY 105 per U.S. dollar on Friday.

Chinese stocks rose slightly in a holiday-shortened week, lifted by several economic readings showing that the recovery was on track, but they ended September with their biggest monthly loss since May 2019. Technology shares outperformed, and Shanghai’s tech-focused STAR 50 Index rose 4.0% ahead of the initial public offering of Chinese fintech company Ant Group, which could raise up to USD 30 billion in a Hong Kong-Shanghai dual listing set to happen in the coming weeks.

On the economic front, China’s purchasing managers’ index (PMI) readings for September underscored the country’s strong recovery after being the first to tame the coronavirus. The private Caixin survey showed that manufacturing PMI remained at a high level, boosted by new export orders.

Other Key Markets
  • Brazil – Stocks in Brazil, as measured by the Bovespa Index, returned about -3.0%. Brazilian assets were somewhat volatile as government officials struggled to find a way to help lower-income individuals with more financial assistance—possibly by extending the costly corona-voucher program that provides basic monthly income but expires at the end of 2020—while observing the limitations of the country’s mandatory spending cap.
  • Turkey – Stocks in Turkey, as measured by the BIST 100 Index, returned about 1.9%. Equity investors did not seem concerned about an outbreak of hostilities in the Caucasus region between Turkey’s eastern neighbor Armenia and Azerbaijan, or the Turkish government’s offer of support to the Azeris.
  • Mexico – Mexican stocks, as measured by the IPC Index, returned about 1.5%. On Thursday, the Mexican central bank held its policy meeting and decided to reduce its overnight interest rate by 25 basis points, from 4.50% to 4.25%. The decision was widely expected. In their post-meeting statement, policymakers acknowledged the risks for inflation, economic activity, and financial markets but noted that the central bank’s “space” for responding with easier monetary policy is “limited.”
Sources: Barrons (Dow Jones & Company), Bloomberg Quint, The Economist Europe, Edward Jones Financial Reports & Trowe Price Market Insights