Chinese stocks rose strongly after solid economic data made investors confident in China´s strengthening economy.
The major indexes finished the week with mixed results. Good news on the coronavirus vaccine gave some hope and investors reacted positively, but the pandemic is worsening in many regions of the country, casting shadow over the initial euphoria. The Dow Jones Industrial Average and the S&P 500 Index lost 0,7% for the week, while the NASDAQ Composite Index finished the week with 0,2% gain. The rise in oil prices lifted the energy sector as investors hope for a global recovery in 2021. Health care and utilities shares lagged.
The Federal Reserve kept its cautious stand as weekly jobless claims rose for the first time in over a month from 711.000 to 742.000. Retail sales grew at the slowest pace (0,2%) since April. Industrial production rose and housing sector sales and construction indicators reached their 2006 level.
European shares rose for a third consecutive week as investors´ became optimistic on potential coronavirus vaccines. However, gains were curbed as European countries were introducing harsh restrictions. The pan-European STOXX Europe 600 Index ended the week 1.15% higher, while Germany’s DAX Index advanced 0.46%, France’s CAC 40 gained 2.15%, and Italy’s FTSE MIB climbed 3.84%. The UK’s FTSE 100 Index added 0.55%.
The EU recovery package which would help economies with a 1.8 trillion EUR fiscal package was blocked by Poland and Hungary. The EU and the two countries are holding talks to resolve the stand-off situation.
The UK and the EU keep working remotely to reach a post-Brexit agreement on trade. Three main areas of contention persist: a level field for companies, fishing rights and settling trade disputes. Several countries urged the European Commission to implement contingency measures in case of no deal.
Japanese stocks ended the week with modest gains. The Nikkei 225 Stock Average advanced 0.6% (142 points) and closed at 25,527.37. It climbed above 26,000 on Tuesday but trended lower for the remainder of the week, holding its gains on 7.9% Year to date. The large-cap TOPIX Index and the TOPIX Small Index, broader measures of Japanese stock market performance, also recorded positive returns. The yen strengthened versus the U.S. dollar and traded near JPY 104on Friday.
Japan recorded its fastest quarterly GDP growth for the third quarter. The economy grew at an annualized 21.4%, beating the 18.9% consensus estimate. The main growth driver was the resurgence in global and domestic auto demand and a decline in imports.
Prime Minister Suga and the International Olympic Committee President Thomas Bach agreed that the Tokyo Olympics are to be held next year. Reports suggest that visitors to the hosting country would need to be vaccinated to avoid the 14-day quarantine period. The Olympic games are scheduled to be held from July 23 to August 8 2021.
Chinese stocks rose strongly after solid economic data made investors confident in China´s strengthening economy. The benchmark Shanghai Stock Exchange Composite Index added 2.04%. In fixed income markets, the yield on the sovereign 10-year bond increased six basis points to 3.34%. In currency trading, the renminbi strengthened by 0.6% against the U.S. dollar to close at 6.570. The People’s Bank of China (PBOC) injected RMB 800 billion (about USD 121 billion) in medium-term loans into the banking system and left interest rates on hold for the seventh straight month. The central bank also kept its one-year medium-term lending facility rate to financial institutions unchanged at 2.95%.