US

The Dow Jones Industrial Average closed at 25,989.30 on Friday and a weekly gain of 2.6%. The S&P 500 closed at 2,736.27 down 1.6% w-o-w. The Nasdaq Composite closed at 7,247.83, down 2.14% on the week. The small-cap index Russell 2000 is down 1.41% over the previous week at 1527.533. Despite positive movement on Friday as trade hopes rose, US main equity index could not make up for a loss registered over a turbulent week in which retail picture was mixed and technology share languished.

The yield on 10-year Treasuries dipped to 3.07 percent, the lowest in more than six weeks. Dollar Index DXY closed the week at 96.4650, down more than 0.70% compared to last Friday’s close. VIX is up 4.5% to 18.15.

On Friday, Brent crude oil price closed at $67.1, recording a negative performance over the week of -3.76% whilst WTI ended the week at 56.80$, down more than 5% on a weekly basis. The likelihood that Brent will go back to year highs close to 86$ per barrel seems to get smaller and smaller. Gold is up 0.97% to 1222.1$/ounce, the highest in more than one week.

The New York Fed GDP Nowcasting model is now pointing at 2.6% annualized GDP growth in Q4 – one week ago this value was marginally higher at 2.7%. Next Wednesday figure for the initial jobless claims for the current week should be published. Market consensus is currently around 215k.

UK

This week PM May faced the worst week as she took her office as Prime Minister, with three of her government’ ministers resigning and her leadership challenged by her own party’s fellows.

Reason for this round of Brexit chaos is the draft of the Brexit deal presented during the week (which will need the approval of both the UK Parliament and the European Parliament). It is, overall, a “theoretically temporary solution” which both EU and UK Remainers hope to become final as it would keep the UK in the Custom Unions, with the possibility to opt out in the future. As such, it would minimise the impact of Brexit for both parties involved.

Tension in May’s government of course did show up in the GBP: US Dollar appreciated vs the GBP by 1.89% during this week and finished the week at 1.2827$ per sterling; volatility implied by 1 month GBP options spiked at 14.525 vs. last Friday’s 10.2 – as a reference, the same parameter for Brazilian real is now at 14.175, marginally lower than the one on British Pound. The main equity index for UK, i.e. the FTSE 100 is down 1.28% over a week ago, closing on Friday at 7.013,88. The FTSE 250 closed at 18589.09, down 2.71% over a week ago.

The yield on 10-year gilts is down 8 basis points to 1.41% trading compared to previous week close at 1.49%.

Europe

All the major European equity indexes reported a negative performance this week, mainly due to the Chinese slowdown and a not-so-great reporting season, together with tensions from both UK as well as from Italy. DAX is down 1.63% at 11,341 whilst CAC40 is down 1.60% at 5,025.2. Euro Stoxx 50 ended the week at 3,181 which is a 1.49% week over week decrease. FTSE MIB closed at 18,878.31, down 2% on a weekly basis.

Eurodollar closed at 1.142465, with a positive weekly performance of 0.49% compared to last week close of 1.134. The 10-year Bund yields ended at 0.37, down 4 basis points compared to last week close. Italian 10-year yield rose to 3.41, which is 9bp higher compared to last week.

Next Friday preliminary data for November’s PMI indexes both for France and Germany as well as the whole EU will be released. It will be important to see whether the slowdown in the German manufacturing sector has continued or if a rebound is coming. About next week European Government bonds issuance, whilst the gross figure is set to double to €27bn from last week €13.2bn, the net issuance will be only marginally positive thanks to a stunning €25bn in redemptions between principal and coupons.

RoW

Japan’s Nikkei fell 2.56% on a weekly basis, after last week negative performance of -1%. Next Thursday figure for Japan’s October inflation will be published – market consensus stands at 1.4% year-on-year. Hong Kong’s Hang Seng Index HSI is up 2.3% from last week, closing at 26,183.53. China’s Shanghai Composite SHCOMP is up 3.09% at 2,679.11. The positive performance of Chinese stock market is probably due to the relaxation of those rules introduced between 2015 and 2016 to prevent a repeat of the boom-and-bust cycle that took place three years ago. This relaxation has however resulted in a number of bets from speculators that are positioning in order to benefit from future M&A activity as authorities are actively promoting them (together with pledging investors to put money into cash-strapped companies). Investors’ bids are pushing up valuation to an almost-unbelievable levels of some companies. They seem to dismiss the rumours that China and US will agree on nothing more than a framework for a trade deal and that the chance for a quick trade deal between the two countries is close to zero even after the concessions that China seems willing to make to the US. CNY is broadly unchanged during the week, with the range 6.97-6.92 keeping its role of stable corridor for the last month.

Australia’s S&P/ASX 200 is down 3.5% on a weekly basis whilst the main Korean stock market index is almost unchanged at +0.3% over one week ago.

On the other side of the world, it is worth noting that the major Mexican stock market index recorded a negative performance of -4.4% over one week ago as the result on the referendum about the new Mexico City’s airport mark a premature end of the honeymoon between the Mexican population and the new President Lopez Obrador.

 

Categories: Markets

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