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Global Markets Weekly Market Review – Week 43, 2020

Following three consecutive weekly advances, global stocks declined modestly during the week. The news flow was dominated by headlines around the negotiations for another round of fiscal relief from Washington before the U.S election, which is fast approaching is held.

United States

The major benchmarks ended mixed, as investors reacted to stimulus negotiations while monitoring third-quarter corporate earnings reports. The technology-heavy Nasdaq Composite Index performed worst, dragged lower by weakness in bellwether Apple, while the S&P MidCap 400 and small-cap Russell 2000 indexes managed modest gains. The technology sector also fared worst within the S&P 500 Index, while communication services shares were strong, helped by gains in internet giants Facebook and Alphabet (parent company of Google), despite Tuesday’s news that the latter had become the target of a Justice Department antitrust lawsuit.

The week’s economic data seemed generally supportive, especially regarding the housing sector. Overall housing starts in September missed expectations, but single-family construction and overall building permits reached new 13-year highs. Existing home sales also surprised on the upside, jumping 9.4% in September to their highest level since May 2006. Weekly jobless claims broke a streak of negative surprises and fell more than expected to 787,000, the lowest level since March. Continuing claims also continued to fall sharply, from a revised 9.4 million to 8.4 million, although observers noted that the expiration of unemployment benefits for some workers might be partly at work.

Index Friday’s Close Week’s Change % Change YTD
DJIA 28,335.57 -270.74 -0.71%
S&P 500 3,465.39 -18.42 7.26%
Nasdaq Composite 11,548.28 -123.28 28.71%
S&P MidCap 400 2,015.59 18.26 -2.30%
Russell 2000 1,639.65 5.85 -1.73%
Europe

Shares in Europe fell on signs that the economic recovery was stalling amid tighter restrictions to curb surging coronavirus infections. The pan-European STOXX Europe 600 Index ended the week 1.36% lower, and major country indexes also declined: Germany’s DAX Index slipped 2.04%, France’s CAC 40 gave up 0.53%, and Italy’s FTSE MIB dropped 0.54% The UK’s FTSE 100 Index lost 1.00%, in part reflecting strength in the pound after the resumption of talks with the European Union (EU) on post-Brexit trade ties. UK stocks tend to fall when the pound rises because the index includes many multinationals with overseas revenues.

European Central Bank President Christine Lagarde said in an interview with French newspaper Le Monde that the European economic recovery risked “losing momentum” as governments imposed new restrictions to curb the coronavirus pandemic.

Asia

Chinese stocks retreated for the week, with the large-cap CSI 300 Index and benchmark Shanghai Composite Index shedding 1.5% and 1.8%, respectively. The yield on China’s 10-year sovereign bond decreased, slowing a steady advance dating back to July. On the monetary policy front, the People’s Bank of China Governor Yi Gang said that China’s key debt ratios could moderate in the coming months as economic growth picks up. Yi also stated that the central bank would pursue a balanced approach to supporting China’s economy, saying that monetary policy “needs to guard the gates of money supply and properly smooth out fluctuations” in the country’s macro leverage ratio. The renminbi currency continued its strengthening against the U.S. dollar aided by strong inflows into China’s domestic bond market, whose relatively high yields have attracted foreign investors.
Japanese stocks generated gains for the week. The Nikkei 225 Stock Average advanced 106 points (0.5%) and closed at 23,516.59. The widely watched market yardstick has declined (0.6%) for the year-to-date period. The large-cap TOPIX Index and the TOPIX Small Index, broader measures of Japanese stock market performance, posted mixed results. The yen strengthened modestly and traded below JPY 105 per U.S. dollar on Friday
Other key markets:
  • Brazil – Stocks in Brazil, as measured by the Bovespa Index, returned about 3.0%. During the week, proposed legislation that would affect the central bank’s autonomy made some progress through the Senate, with a vote expected to take place on November 4. The legislation would give the central bank a primary mandate of price stability, with financial stability and promoting full employment as some secondary goals. While the central bank has had de facto independence for most of the past two decades, the central bank governor and the entire monetary policy board ultimately serve at the pleasure of the president.
  • Turkey – Stocks in Turkey, as measured by the BIST-100 Index, returned about -0.2%. Shares rose in the first half of the week, as investors waited for the outcome of the central bank’s October 22 monetary policy meeting, but they surrendered all of their gains, and more, by the end of the week.
Sources: Barrons (Dow Jones & Company), Bloomberg Quint, The Economist Europe, Edward Jones Financial Reports & Trowe Price Market Insights