Weekly Market Commentary


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

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11 Nov 2019

Key Highlights

A sharp increase in longer-term bond yields and the continued release of third-quarter corporate earnings reports drove the markets.
Recent signs of progress on trade negotiations has helped recession fears to subside over the past week, hence boosting investor sentiment.

Equities

Developed Markets
Key Indices 08-Nov-19 1w 3m YTD 1y
S&P500 3,093 0.9% 5.3% 23.4% 10.2%
DJIA30 27,681 1.2% 4.9% 18.7% 5.7%
EuroSTOXX 3,700 2.1% 9.6% 23.3% 14.3%
DAX 13,229 2.1% 11.7% 25.3% 14.8%
FTSE 7,359 0.8% 1.0% 9.4% 3.1%
Emerging Markets
Key Indices 08-Nov-19 1w 3m YTD 1y
Brazil 107,629.0 (0.5%) 3.4% 22.5% 25.7%
Russia 1,598.9 0.6% 4.4% 18.6% 1.3%
India 11,908.2 0.1% 7.9% 9.6% 12.4%
China 2,964.2 0.2% 6.1% 18.9% 12.5%
South Africa 56,617.0 (0.1%) 1.9% 7.4% 4.7%
United States
The Dow Jones Industrial Average joined the S&P 500 and Nasdaq Composite Indexes in record territory, as optimism grew about a "phase one" trade deal between the U.S. and China.
On a sector basis, financials outperformed as rising long-term interest rates favoured banks' lending margins. Increasing bond yields weighed heavily on real estate and utilities shares, however, as their typically above-average dividends became less appealing in comparison.
In moderate volume, 820 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq.
The UK & European Union
Equity markets in Europe were mostly higher, buoyed by a rally on Wall Street, optimism about a U.S.-China trade deal, and generally solid corporate earnings reports. The health care and basic materials sectors have beaten the most on earnings per share so far, while utilities and consumer goods have trailed.
The pan-European STOXX Europe 600 Index rose for the fifth week in a row, gaining about 1.4%. The exporter-heavy German DAX rose about 2%, while the UK’s FTSE 100 Index gained about 0.8%.
Emerging Markets
Chinese stocks advanced for the week, as hopes rose for a comprehensive U.S.-China trade agreement following news that both sides agreed to roll back tariffs on each other’s goods as part of a so-called phase one trade deal. For the week, the benchmark Shanghai Composite Index edged up 0.2%, and the large-cap CSI 300 Index, which tracks blue chips listed on the Shanghai and Shenzhen exchanges, rose 0.5%.
Stocks in South Africa, as measured by the FTSE/JSE All Share Index, returned about -0.1%, as a Friday sell-off negated earlier gains. Equities experienced a relief rally early in the week following credit rating agency Moody’s decision late on Friday, November 1, not to downgrade South African sovereign debt into below investment-grade territory.
Stocks in Brazil, as measured by the Bovespa Index, returned -0.6%. Following a solid October—during which equities and the real were lifted, in part, by the passage of pension reform legislation and a late-month central bank interest rate cut—equities were supported by optimism that U.S.-China trade relations were improving.

Credit

Credit Levels*
Key Indices 08-Nov-19 1w 3m YTD 1y
iTraxx Mains 49 50 55 87 68
iTraxx Fin Snr 57 57 67 109 86
iTraxx X-Over 231 233 275 353 282
CDX IG 51 53 58 88 64
CDX HY 327 330 348 449 353
Yield Curves
Key Indices 08-Nov-19 1w 3m YTD 1y
2-yr US Treasury 1.67 1.55 1.62 2.49 2.97
10-yr US Treasury 1.94 1.71 1.72 2.68 3.24
30-yr US Treasury 2.42 2.19 2.22 3.01 3.43
10-yr German Bund -0.26 -0.38 -0.56 0.24 0.46
10-yr UK Gilt 0.79 0.66 0.52 1.28 1.57

* On the Run Levels (bps)

United States Credit
Treasuries were little changed after a recent drop partly attributed to the increased trade optimism, as the yield on the 2-year and 10-year notes were flat at 1.67% and 1.93%, respectively, while the 30-year bond rate ticked 1 basis point higher to 2.42%.
While weighing on Treasury bond prices, trade optimism supported the investment-grade corporate bond market, which saw a contraction in credit spreads, or the extra yield offered over similar-maturity Treasuries.
European Credit
Euro zone bond yields were near 16-week highs on Friday after China and the United States agreed to roll back tariffs if they complete the first phase of a trade deal.
Most 10-year government bond yields were around 1 basis point lower in early trade , with Germany’s benchmark at -0.26%, off a 16-week high of -0.25% hit on Thursday. Italian government bonds outperformed, with the 10-year yield down 3 basis points after a sell-off on Thursday that sent it up 13 bps.

Currencies & Commodities

Currencies**
Key Indices 08-Nov-19 1w 3m YTD 1y
EUR 1.10 1.12 1.12 1.15 1.14
GBP 1.28 1.29 1.21 1.28 1.31
AUD 0.69 0.69 0.68 0.70 0.73
YEN 109 108.19 106.07 109.69 114.07
Commodities
Key Indices 08-Nov-19 1w 3m YTD 1y
Crude (Brent) 63.0 2.1% 9.5% 18.4% (10.2%)
Crude (WTI) 57.2 1.9% 8.9% 26.1% (5.7%)
Gold 1,459 (3.7%) (2.8%) 13.8% 19.2%
Silver 16.8 (7.3%) (0.7%) 8.5% 16.4%

** w.r.t. USD

Currencies and Commodities
The US Dollar edged higher over the last 5 trading days and has pushed the DXY Index - a popularly referenced basket of major USD currency pairs - to its strongest level since mid-October as FOMC rates fell.
WTI crude oil inched $0.09 higher to $57.24 per barrel and wholesale gasoline lost $0.01 to $1.63 per gallon.

Economic Calendar

Week In Review
Economic Indicator Release Date Actual Consensus
US Initial Jobless Claims 07-Nov-2019 211k 215k
Bank of England Rate Decision 07-Nov-2019 0.75% 0.75%
Week Ahead
Economic Indicator Release Date Consensus Prior
US GDP YoY 11-Nov-2019 1.10% 1.30%
US Initial Jobless Claims 12-Nov-2019 215k 211k
US CPI YoY 13-Nov-2019 1.60% 1.70%

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