Global Markets Weekly Review – Week 49, 2020
Stocks edged higher last week as the market’s historic rally extended to the first week of December. Despite a notable slowdown in hiring that was revealed in the November jobs report, major global indices closed at record highs and Treasury yields rose, reflecting expectations for additional fiscal stimulus.
U.S Stock markets reached further into record territory, with all of the major indexes touching new intraday highs by Friday. Energy shares bounced back after OPEC and other major oil producers reached an agreement to ease output cuts more gradually next year than previously planned, while utilities stocks lagged. On Monday, the Dow Jones Industrial Average closed out November with its best monthly performance since 1987, while the small-cap Russell 2000 Index registered its best monthly gain since its inception in 1978.
Rising hopes for a new round of fiscal stimulus also appeared to boost sentiment. On Tuesday, a bipartisan group of U.S. senators proposed a USD 908 billion relief package, although Senate Majority Leader Mitch McConnell announced that he was considering a smaller plan in the range of USD 500 billion. In congressional testimony, Federal Reserve Chair Jerome Powell emphasized the importance of emergency lending programs and advocated for more fiscal stimulus, while Treasury Secretary Steven Mnuchin urged legislators to tap USD 455 billion of CARES Act funds to provide targeted relief.
|Index||Friday’s Close||Week’s Change||% Change YTD|
|S&P MidCap 400||2,242.50||36.78||8.70%|
Shares in Europe paused after last month’s strong rally. In local currency terms, the pan-European STOXX Europe 600 Index ended the week with a modest 0.21% gain. Major European indexes were mixed: France’s CAC 40 ticked up 0.20%, Germany’s DAX Index fell 0.28%, and Italy’s FTSE MIB slipped 0.78%. The UK’s FTSE 100 Index, however, gained 2.87%, reaching nine-month highs on news that the UK had approved the coronavirus vaccine developed by Pfizer and BioNTech.
The European Commission (EC) is ready to exclude Poland and Hungary from the EUR 750 billion pandemic recovery fund and proceed without the two countries if they continue to block Europe’s proposed seven-year budget, EU budget commissioner Johannes Hahn said in an interview with the Financial Times newspaper. The EC’s lawyers have identified possible ways of circumventing Poland’s and Hungary’s objections to the EU linking spending to new rule-of-law requirements, he said. The disagreement is likely to dominate the leaders’ summit that will start on December 10.
Chinese stocks posted their third straight weekly gain, aided by solid economic data. The large-cap CSI 300 Index rose 1.7%, and the benchmark Shanghai Composite Index gained 1.1%, according to Reuters. The yield on China’s 10-year sovereign bond edged lower 3 basis points to end at 3.33%. In currency markets, the renminbi appreciated by 0.5% against the U.S. dollar to CNY 6.5342.
Japanese stocks posted mixed results for the week. The Nikkei 225 Stock Average advanced 0.4% (107 points) and closed at 26,751.24. For the year-to-date period, the benchmark is ahead 13.1%. The large-cap TOPIX Index and the TOPIX Small Index, broader measures of Japanese stock market performance, recorded modest weekly declines. The yen was little changed versus the U.S. dollar and traded near JPY 104 on Friday.
Other Key Markets:
- Brazil – Brazilian stocks, as measured by the Bovespa Index, returned about 2.8%. On Thursday, Brazil reported that its third-quarter gross domestic product increased almost 8% quarter-over-quarter on a seasonally adjusted annualized basis. Earlier in the week, Brazil’s electricity regulator decided to reintroduce the tariff flag system on electricity tariffs, which had been suspended earlier this year due to the pandemic. Due to low water reservoir levels and the need to source more expensive thermal power, this action adds a surcharge on electricity tariffs—to the highest possible level—which, in turn, will feed into inflation in the near term
- Turkey – Turkish stocks, as measured by the BIST-100 Index, returned about 0.2%. Shares fell sharply on Monday but rebounded over the rest of the week. The Turkish Statistical Institute reported that consumer price inflation increased 2.3% in the month of November and that inflation over the 12 months ending in November was 14.03%. The inflation reading was not only greater than expected, but it also exceeds the central bank’s year-end 2020 inflation projection of 12.1%.