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The Trading Room: Weekly Market Review – Week 27, 2020

Global stocks ended the week on a high note, as hope for a coronavirus vaccine buoyed markets. Yet initial enthusiasm faded slightly by the end of the week as U.S financial markets closed for holiday on Friday.

U.S Markets

Stocks recorded solid gains for the holiday-shortened week, helping push the technology-heavy Nasdaq Composite Index to a record intra-day high, while the S&P 500 Index touched its best level since June 10. Within the S&P 500, communication services shares were particularly strong, helped by gains in Netflix and video game stocks, as was the small real estate sector. Financial and energy shares lagged. The week closed out the best quarters for the Dow Jones Industrial Average and S&P 500 since 1987 and 1998, respectively. Markets were closed Friday in advance of the Fourth of July holiday.

Europe

European stocks rose through Friday on encouraging news related to the development of a potential coronavirus vaccine and improving economic data. The pan-European Stoxx 600 index rose 2%, while the German DAX climbed 2.8% and the French CAC was 2.5% higher. Asian markets were higher too, following Wall Street’s gains on Wednesday.

Purchasing managers’ indexes (PMI) for manufacturing in the eurozone continued to show significant improvement with the easing of lock-down restrictions. The June flash manufacturing PMI rose to 46.9 from 39.4, exceeding expectations. Manufacturing in the UK returned to expansion in June, with the flash PMI rising to 50.1 from 40.7. Eurozone inflation quickened to 0.3% in June from 0.1% in May, although core inflation slipped to 0.8% from 0.9%

Asia.

Stocks in Japan lost ground for the week through Friday. Tokyo’s Nikkei 225 index picked up 0.7%) and closed at 22,306.48. The large-cap TOPIX Index and the TOPIX Small Index, broader measures of Japanese stock market performance, also finished lower, with small-caps underperforming large-caps. After a strong rally in May and early June, equity gains have largely stalled over recent weeks, with the Nikkei benchmark down 4.7% from its recent high on June 8.

In South Korea, the Kospi gained 0.8% to 2,152.41. Australia’s S&P/ASX 200 rose 0.4% to 6,057.90. India’s Sensex added 0.4% and shares also rose in Taiwan and Southeast Asia.

Stocks in China rallied for the week after several data points suggested that the economy was firmly recovering after a historic contraction in the year’s first quarter. On Thursday, the blue chip CSI 300 Index closed at its highest level since January 26, 2018, while the benchmark Shanghai Composite Index rose to its highest close since January. China’s sovereign 10-year bond yield was broadly flat for the week until Thursday.

Kenya

Turnover on the Equities market on the Nairobi Securities Exchange was lower this week with 63 million shares valued at Kes.1.5 billion exchanging hands during the week as compared to the 146 million shares valued at Kes.2.7 billion transacted the previous week.

The benchmark NSE All Share Index (NASI) added 1.82 points during the week to close at 139.57, representing a 1-week gain of 1.32%, a 4-week gain of 0.28%, but an overall year-to-date loss of 16.13%. The NSE 20 share index gained 7.35 points during the week to close at 1945.95, representing a one week gain of 0.38% and  a year to date decline of 26.69% while the NSE25 share index shed 12.06 points from last week’s close, a 0.25% decline to close the week at 3,219.26 points.

During the week, Kenya Airways, one of the top traders on volatility movement was suspended from trading for three months. As at time of suspension, KQ had locked in 40.8% in weekly gains for investor returns, jumping to Kes.3.83, up from Kes.2.72 registered the previous week with shares worth Kes.12 million transacted.

NSE20 share Index one year performance

The Derivatives Market closed the week with a total of 20 contracts valued at Kes.612,000, turning lower from the 27 contracts valued at Kes.803,000 transacted the previous week. The NSE also released a special report showing the derivatives market performance for the first half of 2020.

Secondary trading on the bond Market at the Nairobi Securities Exchange registered reduced activity with bonds worth Kes.9.0 billion transacted this week as compared to the Kes.20 billion registered on the previous trading session.