Weekly markets recap 2.11.2020
Last week we saw the worst weekly declines in markets since March. Rising coronavirus cases and election uncertainty weighed on sentiment. The major benchmarks fell into correction territory on Friday morning, which means 10% lower from recent highs. Information technology and consumer discretionary shares fell the most within the S&P 500. The small utilities, materials, and real estate sectors held up best, while the Cboe Volatility Index (VIX) reached its highest level since early June.
The bearish sentiment overshadowed positive news during the week, for example AstraZeneca´s reporting that its vaccine candidate produced a positive immune response in elderly people. Also U.S. gross domestic product (GDP) had increased above expectations at an annualized rate of 33.1% in the third quarter. Weekly jobless claims came in lower than forecast and continuing claims fell sharply from 8.5 million to 7.8 million. Durable goods orders had risen more than expected (1.9%) in September, with core capital goods (excluding defense and aircraft) orders reaching a six-year high. Factory activity has also been improving and personal income and spending rose more than expected in September.
European shares tumbled the most since March, as investors worried that lockdowns could push the eurozone economy into a double-dip recession. Tan-European STOXX Europe 600 Index ended the week 5.56% lower, while Germany’s DAX Index dropped a whopping 8.61%, France’s CAC 40 lost 6.42%, and Italy’s FTSE MIB slid 6.96%. The UK’s FTSE 100 Index declined 4.83%.
The ECB left its monetary policy unchanged, keeping its deposit rate at -0.5% and its emergency bond-buying program at EUR 20 billion a month. Although growth was still below the levels seen last year, the eurozone economy rebounded in the third quarter. According to Eurostat the GDP grew 12.7% after contracting 11.8% in the second quarter. The German and Spanish economies expanded faster than expected
Japanese stocks finished lower for the week. The Nikkei 225 Stock Average declined 2.29% (539 points) and closed at 22,977.13. The large-cap TOPIX Index and the TOPIX Small Index, broader measures of Japanese stock market performance, also recorded negative results. U.S. and Europe market developments weighed on sentiment, and some quarterly earnings reports released late Thursday seemed to disappoint investors and sparked a sell-off at the end of the week. The yen strengthened against the U.S. dollar and traded at about JPY 104.5 per U.S. dollar on Friday. Both the yen and the greenback benefited from increasing demand, as investors are relocating from riskier assets to safe havens.