Weekly Market Commentary


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

Subscribe

20 May 2019

Key Highlights

Escalating trade tensions with China remain firmly behind the wheel, steering stocks on a winding path last week. Trade headlines are likely to continue to drive periods of market volatility, underscoring the importance of maintaining a long-term perspective.
Energy members of key oil producing countries will meet this week amid rising tensions in the Gulf.

Equities

Developed Markets
Key Indices 17-May-2019 1w 3m YTD 1y
S&P500 2,860 (0.8%) 3.0% 14.1% 5.1%
DJIA30 25,764 (0.7%) (0.5%) 10.4% 4.2%
EuroSTOXX 3,426 1.9% 5.7% 14.1% (4.6%)
DAX 12,239 1.5% 8.3% 15.9% (6.7%)
FTSE 7,349 2.0% 1.5% 9.2% (5.6%)
Emerging Markets
Key Indices 17-May-2019 1w 3m YTD 1y
Brazil 89,993 (4.5%) (7.7%) 2.4% 7.6%
Russia 1,536 (2.4%) (2.1%) 13.9% (5.5%)
India 11,407 1.1% 6.4% 5.0% 6.8%
China 2,882 (1.9%) 7.5% 15.6% (8.6%)
South Africa 56,183 (1.1%) 2.8% 6.5% (3.4%)
United States
U.S. equities finished lower in a volatile session, as investors weighed the continued uncertainty surrounding U.S.-China trade tensions, as well as some earnings results and upbeat economic data.
Large-caps outperformed smaller-cap shares, and the small-cap Russell 2000 Index ended the week as the sole major benchmark in correction territory, or down over 10% from its August 2018 highs. Technology stocks within the S&P 500 Index outperformed, and strength in AT&T shares boosted the communication services sector.
All Equity funds report net outflows totaling -$2.311 billion, with Domestic Equity funds reporting net outflows of -$2.120 billion and Non-Domestic Equity funds reporting net outflows of -$0.190 billion. Emerging Markets Equity funds report net inflows of $0.200 billion
The UK & European Union
European equities finished broadly lower following a recovery in the past couple sessions, as U.S.-China trade concerns lingered ahead of the weekend, while Brexit uncertainty festered as talks continue to fail to deliver any new progress.
The pan-European STOXX Europe 600 Index rose for the week, rebounding from a two month-low hit on Monday, despite the increase in U.S.-China trade tensions. The German DAX Index, the UK's FTSE, and Italy's FTSE MIB Index also gained after the previous week's losses.
Emerging Markets
Chinese stocks initially fell sharply due to trade tensions with the U.S., but shares battled back amid expectations that Beijing would roll out more fiscal and monetary stimulus to boost a slowing economy.
Stocks in Turkey, as measured by the BIST-100 Index, returned about -2.0%. Equities were pressured by global market volatility amid heightened trade tensions between the U.S. and China, as an expected trade deal failed to materialize. Shares also declined and the lira struggled amid some disappointing economic data and the government's unwillingness to reconsider its plan to purchase Russian military hardware.
Saudi stocks, as measured by the Tadawul All Share Index, returned about -2.6% in the five trading sessions ended Thursday. While U.S.-China trade tensions created an unfavorable backdrop, the Saudi market in particular was hurt by rising geopolitical tensions between Iran and the U.S., which recently stopped waiving sanctions on a small number of nations purchasing Iranian crude oil.

Credit

Yield Curves
Key Indices 17-May-2019 1w 3m YTD 1y
2-yr US Treasury 2.20 2.27 2.51 2.49 2.56
10-yr US Treasury 2.39 2.47 2.66 2.68 3.11
30-yr US Treasury 2.83 2.89 2.99 3.01 3.25
10-yr German Bund -0.10 -0.05 0.10 0.24 0.64
10-yr UK Gilt 1.03 1.14 1.16 1.28 1.56
Credit Levels*
Key Indices 17-May-2019 1w 3m YTD 1y
iTraxx Mains 65 66 69 87 56
iTraxx Fin Snr 81 79 87 109 62
iTraxx X-Over 279 281 300 353 272
CDX IG 63 61 63 88 61
CDX HY 351 338 350 449 320

* On the Run Levels (bps)

United States Credit
Treasuries finished mixed after giving up an early advance, as the yield on the 2-year note was up 1 basis point (bp) at 2.20%, while the yield on the 10-year note ticked 1 bp lower to 2.39%, and the 30-year bond rate dipped 2 bps to 2.82%
Credit spreads in the investment-grade corporate bond market widened early in the week amid trade headlines, equity volatility, and expectations of elevated supply. Trade war uncertainties and negative flows—particularly a significant outflow from actively managed funds—weighed on the high yield asset class. The municipal market performed in line with Treasuries. The largest deal of the week, $725 million of Allegheny County Hospital Authority revenue bonds, was roughly 10 times oversubscribed.
European Credit
Germany's 10-year bond yield fell back towards 2.5-year lows on Friday, while French and Spanish yields were set for their biggest weekly drops in two months as fears over trade, global growth and Italy boosted higher-rated debt markets.
Italy's Deputy Prime Minister Matteo Salvini ratchetted up tensions with the EU, saying that he would be prepared to see Italy's deficit rise above EU limits if it were to boost employment. His words sent Italy's 10-year bond yield as high as 2.75% on Wednesday, as concern about an Italian showdown with Brussels reemerged.

Currencies & Commodities

Currencies**
Key Indices 17-May-2019 1w 3m YTD 1y
EUR 1.12 1.12 1.13 1.15 1.18
GBP 1.27 1.30 1.29 1.28 1.35
AUD 0.69 0.70 0.71 0.70 0.75
YEN 110.08 109.95 110.47 109.69 110.77
Commodities
Key Indices 17-May-2019 1w 3m YTD 1y
Crude (Brent) 73.3 2.3% 11.0% 37.8% (7.1%)
Crude (WTI) 62.8 1.8% 12.9% 38.2% (12.2%)
Gold 1,278 (0.7%) (3.4%) (0.4%) (1.0%)
Silver 14.4 (2.6%) (8.8%) (7.1%) (12.4%)

** w.r.t. USD

Currencies And Commodities
The British pound lost more than 2% against the U.S. dollar after Brexit talks between Britain’s Conservative and Labour parties broke down Friday, with Labour leader Jeremy Corbyn saying that his party would vote against Prime Minister Theresa May’s Brexit deal in early June.
Oil prices on both sides of the Atlantic just moved off session highs but are trading higher for a fourth-straight session and on pace for their largest weekly gains since mid-February. Prices were supported by a host of supply cuts and concerns of further disruption to Middle East shipments as tensions rise.

Economic Calendar

Week In Review
Economic Indicator Release Date Actual Consensus
US Initial Jobless Claims 16-May-2019 212k 220k
Eurozone CPI YoY 17-May-2019 1.7% 1.7%
Week In Review
Economic Indicator Release Date Consensus Prior
UK CPI YoY 22-May-2019 2.2% 1.9%
US Initial Jobless Claims 23-May-2019 215k 212k
US Manufacturing PMI 23-May-2019 52.7 52.6

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