Weekly Market recap: 10 stories to remember

Read the 10 stories to remember from the week which ended September 18. 

 

Story #1: U.S stocks fell for the 3rd week in arrow
The major U.S. stock indexes fell for the third week in a row, but this week’s decline was much smaller than the previous week’s pullback. Merger news and some renewed COVID-19 vaccine optimism were offset by worries that the Federal Reserve’s monetary policy was becoming less effective in supporting the recovery. Trading volatility was heightened Friday by the quarterly phenomenon known as “quadruple witching,” when four types of stock options and futures expire simultaneously. On a year-to-date basis, the Dow Jones is down over 3% while the S&P 500 up just over 2%.

Story #2: Style rotation
Value stocks and small caps outperformed, as investors continued to reduce bets on some of the internet and information technology giants that have led the market in recent months. Indeed, FANG Stocks plunged to their lowest since late July and are now down 17% from their highs. Meanwhile, Energy stocks led the gains within the S&P 500 Index. U.S. small-cap stocks had a breakout week, outperforming large caps by a wide margin. The Russell 2000 Index (a small-cap benchmark), gained nearly 3%. On a year-to-date basis, however, small caps continue to lag far behind large caps.

Story #3: European equities stable despite rising covid cases
The pan-European STOXX Europe 600 Index overcame concerns about a resurgence in the number of coronavirus cases to eke out a 0.2% gain. Hans Kluge, the World Health Organization's European director, warned that Europe was facing a "very serious" situation as the number of new coronavirus cases reported weekly in Europe hit 300,000 for the first time.

Story #4: Oil recovery
After two weeks of declines, U.S. crude oil prices recovered ground, climbing back to around $41 per barrel. Much of the week’s gain came on Wednesday due to a large and unexpected drawdown in domestic oil inventories and Saudi Arabia’s efforts to force production cuts by other major oil exporters.

Story #5: FOMC Near-zero rate outlook
The U.S. Federal Reserve kept interest rates unchanged and signalled that it expects to keep its benchmark rate near zero for at least three more years. All 17 Fed officials who made projections said they expect to keep rates near zero at least through next year, and 13 projected rates would stay there through 2023.Investors seemed disappointed by the lack of details in the Fed’s updated rate guidance and the fact that the central bank made no changes to its quantitative easing (QE) program. Lingering fears that the Fed’s extreme monetary accommodation had reached the limits of its influence appeared to weigh on the market. Indeed, Fed Chair Jerome Powell repeated his call for a stronger fiscal response to help the recovery.

Story #6: Mixed Economic news
The week’s economic data came in mixed. Core US retail sales fell 0.1% in August, while July’s robust gain was revised lower (to 0.9% from 1.4%)—offering evidence to some that the expiration of extended unemployment benefits was threatening the recovery. Weekly continuing and initial jobless claims hit new pandemic lows but remained elevated, at 12.6 million and 860,000, respectively. Overall housing starts in August missed expectations, but starts of single-family homes remained robust, and building permit data were encouraging. Meanwhile, a monthly gauge of U.S. consumer sentiment climbed to the highest level since March of this year. However, the index remains below its level in February, before the coronavirus pandemic began to weigh heavily on the economy.

Story #7: Spending deal
Although Democrats and Republicans remained at odds over another coronavirus economic relief package, congressional leaders reported progress on another front. Leaders agreed on the broad outlines of a short-term spending measure that could avert a potential government shutdown next month.

Story #8: BoE warns coronavirus, hard Brexit could slow recovery
The Bank of England (BoE) left its key policy measures unchanged, as expected. However, monetary policymakers indicated that the central bank was ready to take further action if needed, highlighting the risks posed to the stronger-than-expected economic recovery by a resurgence in coronavirus cases, the ending of the government’s job support program, and a chaotic end to the Brexit transition period. The BoE also said it would “begin structured engagement on the operational considerations” of negative interest rates with the Prudential Regulation Authority.

Story #9: Prime Minister Suga takes the reins from Abe
As was widely expected, Yoshihide Suga was voted in as Japan’s prime minister by both houses of parliament on Wednesday, September 16. He replaces Shinzo Abe, who is leaving his post due to illness. Suga, who is 71 years old, will fill the remainder of Abe’s term, until September 2021.

Story #10: Only China’s economy will grow this year, says OECD
Chinese stocks rallied as a batch of indicators highlighted the country’s economic momentum, and investors hoped for more fiscal stimulus to boost the coronavirus-hit economy. On Wednesday, the Organization for Economic Cooperation and Development (OECD) raised its 2020 growth outlook for China to 1.8% from a 3.7% contraction it projected in June, crediting the country’s rapid control of the coronavirus. China is the only country expected to see positive economic growth this year, while all G-20 countries will have suffered recession, the OECD said in its latest economic outlook on Wednesday.

 

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