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Global Markets Weekly Market Review – Week 48, 2020

A new round of vaccine optimism and diminishing political uncertainty helped global stocks build on recent gains for the holiday-shortened week. Most of the major benchmarks hit record highs, with the narrowly focused Dow Jones Industrial Average gaining the most attention by crossing the 30,000 threshold for the first time.

United States

The S&P 500 and Russell 2000 both posted fresh record highs as well. Trading was cut short last week, with Thanksgiving Thursday off and the equity markets closing early on Friday. Economic data releases were light, putting the emphasis on the high-wire act investors are walking between positive vaccine news and rapidly climbing COVID-19 cases and hospitalizations. We think the longer-term outlook remains positive for stocks, but investors should expect spurts of volatility as we turn the page on 2020. Vaccine and political developments helped push the yield on the benchmark 10-year Treasury note modestly higher. (Bond prices and yields move in opposite directions.)

The political environment also appeared supportive. Shares rallied Monday afternoon following reports President-elect Joe Biden was preparing to nominate former Federal Reserve Chair Janet Yellen as Treasury Secretary.

Index Friday’s Close Week’s Change % Change YTD
DJIA 29,910.37 646.89 4.81%
S&P 500 3,638.35 80.81 12.62%
Nasdaq Composite 12,205.85 350.88 36.03%
S&P MidCap 400 2,205.72 57.21 6.92%
Russell 2000 1,855.27 69.53 11.20%

Europe

European shares rose for a fourth consecutive week, fueled by positive vaccine developments, fading U.S. election uncertainties, and expectations that the U.S. Congress may compromise on a smaller economic stimulus. However, the advance lost steam after the UK and Germany extended coronavirus restrictions and vaccine euphoria waned. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 0.93% higher, while Germany’s DAX Index advanced 1.51%, France’s CAC 40 rose 1.86%, and Italy’s FTSE MIB added 2.92%. The UK’s FTSE 100 Index was little changed.

Eurozone banks will be allowed to pay dividends again next year if they convince supervisors that their balance sheets are strong enough to survive the fallout from the coronavirus pandemic, Yves Mersch, vice chairman of the ECB’s supervisory board, told the Financial Times that it would be difficult to continue the ban, which started in March, citing legal uncertainty over its enforceability and expectations that other countries may allow banks to restart payouts.

Asia

Chinese stocks rose for the week as solid economic data outweighed concerns about rising defaults among domestic bond issuers. The blue chip CSI 300 Index added 0.8% while the Shanghai Composite Index gained 0.9% for the week, according to Reuters. In fixed income markets, the yield on the sovereign 10-year bond ended the week roughly unchanged. In currency trading, the yuan ended broadly flat against the U.S. dollar. A recent uptick in defaults in China’s high yield bond market has raised expectations that Beijing will focus on corporate sector deleveraging in the near term, as opposed to further stimulating the economy.

Japanese stocks surged in the holiday-shortened trading week. Japan’s stock markets were closed on Monday, November 23, for Labor Thanksgiving Day. For the week, the Nikkei 225 Stock Average advanced 4.4% (1,117 points) and closed at 26,644.71, capping a 16% advance thus far this month and marking its highest level since April 1991. For the year to date, the benchmark is ahead 12.6%. The large-cap TOPIX Index and the TOPIX Small Index, broader measures of Japanese stock market performance, also recorded strong weekly gains. The yen strengthened versus the U.S. dollar and traded near JPY 104 on Friday.

Other Key Markets

  • Mexico –  In its latest quarterly report, the Mexican central bank, known as Banxico, predicted a return to economic growth in 2021 after an expected 9% contraction in 2020. Banxico’s baseline forecast was for 3.3% growth in the new year, a number that the bank said was premised on a gradual recovery in the global economy. However, the bank emphasized that there is an “environment of high uncertainty associated with both the global and domestic evolution of the pandemic” as long as the pandemic restricts activity.