Weekly Market Commentary


A weekly roundup of the latest developments in financial markets and global economies.

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16 Sep 2019

Key Highlights

Major global indices have rebounded after a volatile August that rattled share prices and government bond yields around the world. Improving data, supportive central-banks and global trade optimism all led global markets to advance near record highs.
While the investors will grasp new profits as the Fed delivers on rate cut promises, the Fed's future plans will determine whether markets will continue their run at record highs, keeping the traders on their toes during the week.

Equities

Developed Markets
Key Indices 13-Sep-19 1w 3m YTD 1y
S&P500 3,007 1.0% 4.0% 20.0% 3.6%
DJIA30 27,220 1.6% 4.3% 16.7% 4.1%
EuroSTOXX 3,550 1.6% 4.7% 18.3% 6.5%
DAX 12,469 2.3% 2.5% 18.1% 3.4%
FTSE 7,367 1.2% (0.0%) 9.5% 1.2%
Emerging Markets
Key Indices 13-Sep-19 1w 3m YTD 1y
Brazil 103,501 0.5% 4.8% 17.8% 38.6%
Russia 1,578 4.8% 2.8% 17.0% (7.9%)
India 11,076 1.2% (7.0%) 2.0% (2.6%)
China 3,031 1.1% 4.1% 21.5% 12.8%
South Africa 57,124 2.8% (2.7%) 8.3% 1.7%
United States
US equities finished mixed and near the flatline heading into the weekend, as early upbeat sentiment surrounding trade optimism and positive economic data was tempered by caution ahead of a number of key central bank meetings next week.
While the financial sector stocks benefited from a jump in longer-term bond yields on the back of better lending margins, the materials and industrials slipped in red as the recent signs of consumer spending and manufacturing print have continued to disappoint investors.
The UK & European Union
European markets moved into green on Friday, after a volatile trading session on Thursday when the ECB announced a fresh wave of monetary stimulus including an upcoming interest-rate cut into negative territory and a renewed program of bond purchases.
Banks, the front-line winners from the stimulus package, advanced to new highs while continuing the weekly rally. On the other hand, industrial and manufacturing sector stocks see-sawed from the weak economic prints from Germany and the UK.
Emerging Markets
Asian stocks advanced in a holiday-shortened week, on the back of a defusing trade war and expectations of new stimulus measures by Chinese central bank to boost the economy. The Shanghai and Japanese indices reacted to the news advancing to 10 weeks high.
Elsewhere, the Turkish and Argentine stocks were boosted by hopes for a substantial interest rate reduction from the central banks resulting in a favourable investor sentiment in the market, supporting the rallies in domestic markets.

Credit

Credit Levels*
Key Indices 13-Sep-19 1w 3m YTD 1y
iTraxx Mains 45 47 62 87 60
iTraxx Fin Snr 55 57 79 109 68
iTraxx X-Over 238 239 273 353 278
CDX IG 50 51 60 88 56
CDX HY 317 327 349 449 319
Yield Curves
Key Indices 13-Sep-19 1w 3m YTD 1y
2-yr US Treasury 1.80 1.54 1.84 2.49 2.76
10-yr US Treasury 1.90 1.56 2.09 2.68 2.97
30-yr US Treasury 2.37 2.03 2.60 3.01 3.11
10-yr German Bund -0.45 -0.64 -0.24 0.24 0.42
10-yr UK Gilt 0.76 0.51 0.84 1.28 1.50

* On the Run Levels (bps)

United States Credit
The US treasuries yields were on pace to see the biggest weekly surge in years. While the 10-yr yields inched up to new highs since 2016, the lacklustre US debt auction of 30-yr maturities weighed on the prices, lifting the yields to 2.31% on Friday.
The HY bond market offered an early warning signal to investors, announcing a rise in distressed ratio to three-year high in August. Although the change in sentiment is modest compared to December last year, the continued surge in demand for IG bonds might increase potential risk.
European Credit
Core euro zone bond yields rose to six-week highs on Friday as hopes for progress on US-China trade talks reduced demand for safe-haven assets a day after the European Central Bank pledged indefinite stimulus to boost a weaker economy.
Yields rallied across the table. While Germany's 30-year yields pushed back in positive territory trading at 0.10%, the Italian yields once set for the negative zone inched back to 0.95% in the last trading session.

Currencies & Commodities

Currencies**
Key Indices 13-Sep-19 1w 3m YTD 1y
EUR 1.11 1.10 1.13 1.15 1.17
GBP 1.25 1.23 1.27 1.28 1.31
AUD 0.69 0.68 0.69 0.70 0.72
YEN 108 106.92 108.38 109.69 111.92
Commodities
Key Indices 13-Sep-19 1w 3m YTD 1y
Crude (Brent) 60.6 (2.4%) (2.7%) 14.0% (22.7%)
Crude (WTI) 54.9 (3.0%) 4.9% 20.8% (20.0%)
Gold 1,489 (1.2%) 10.9% 16.1% 23.9%
Silver 17.4 (4.0%) 17.0% 12.6% 23.1%

** w.r.t. USD

Currencies and Commodities
The European currencies ruled the markets this week, on the back of a long-awaited stimulus package from ECB confirming the bottom of EUR/USD. While the pound rose to its highest level since July 2017, the euro surged 0.3% finally stopping at $1.1096.
The crude sparked over the weekend, jumping 12%, as a drone strike in the Middle East halved Saudi's oil output. On the other hand, the WTI surprisingly kept slipping despite a reported sharp drop in US crude stocks.

Economic Calendar

Week In Review
Economic Indicator Release Date Actual Consensus
UK CPI YoY 11-Sep-2019 1.70% 1.80%
US Initial Jobless Claims 12-Sep-2019 204k 215k
ECB Refinancing Rate 12-Sep-2019 0.00% 0.00%
Week Ahead
Economic Indicator Release Date Consensus Prior
Eurozone CPI YoY 18-Sep-2019 1.00% 1.00%
US FOMC Rate Decision 18-Sep-2019 2.00% 2.25%
US Initial Jobless Claims 19-Sep-2019 212k 204k

Disclaimer

This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. This material is not financial research and was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis. Investors are urged to consult with their financial advisors before buying or selling any securities. This information may not be current and Oxane Partners has no obligation to provide any updates.

This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. The information contained in this presentation is not intended to be used as a general guide to investing, or as a source of any specific investment recommendation.Views and opinions expressed are for informational purposes only and do not constitute a recommendation by Oxane Partners to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice. Sources used for preparing the report: Bloomberg; Wall Street Journal, Financial Times, Thomson Reuters