Read the 10 stories to remember from the week which ended October 2.
Story #1: President tested positive for COVID-19
President Donald Trump and First Lady Melania Trump tested positive for COVID-19 on Thursday, after learning that a presidential aide, Hope Hicks, had tested positive following a campaign trip with the president. The announcement sent stock futures sharply lower on Thursday evening but the major benchmarks moderated their losses when trading began Friday morning. The White House announced that the president was experiencing only mild symptoms and that he was flown to Walter Reed National Military Medical Center out of an abundance of caution.
Story #2: Positive weekly returns with U.S small caps outperforming U.S large caps
The US large-cap equity indexes broke a string of four weekly losses and moved 1% to 2% higher. At Friday’s close, the S&P 500 was down 6% from its early September record high, the NASDAQ was down 8%, and the Dow was 4% lower. U.S small-caps outperformed U.S Large-Caps last week. Most sectors within the S&P 500 Index recorded modest positive returns, with the exception of energy stocks, which added to their sharp recent declines.
Story #3: September setback
The week rounded out the third quarter, which saw healthy returns for all the major U.S equity benchmarks. However, last month’s 3.9% decline in the S&P 500 snapped a string of five monthly gains in a row. In September, energy was the weakest sector, with a decline of 14.6%; materials was the strongest, with a 1.1% gain. The performance of the NASDAQ from April through September was the index’s best two-quarter result since 2000, while the S&P 500’s performance was the best since 2009. The NASDAQ surged 45% over the past six months, while S&P 500 gained more than 26%.
Story #4: European equities rebound
Shares in Europe rebounded as investors snapped up beaten-down stocks, especially in the financials sector. This advance in stocks took place while European countries announced more targeted actions to curb the resurgence of coronavirus cases. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 2% higher. Meanwhile, the 10-year German bund yield fell markedly as worries resurfaced over the effect of a second coronavirus wave on the economic recovery as well as low inflation. Peripheral eurozone bond yields also fell on the week, with the 10-year Italy 10-year bond yield trading at all-time low.
Story #5: Eurozone faces deflationary pressures
Eurozone consumer prices fell for a second consecutive month in September, with the year-over-year inflation rate hitting a four-year low of -0.3%, according to an initial estimate. Tumbling oil prices and weaker prices for non-industrial goods were key deflationary factors. Earlier in the week, European Central Bank President Christine Lagarde told a committee of the European Parliament that “the sharp decline in economic activity earlier this year has weakened price pressures" and warned that “inflation is expected to remain negative over the coming months.”
Story #6: EU-UK trade talks continue
The Times newspaper reported that unidentified officials said that EU and UK negotiators had found common ground for a trade deal. An EU official, however, dismissed this claim as “UK spin.” Later, EU sources cited by Reuters said that areas of disagreement remained and that the talks would continue next week and until an October 15–16 EU leaders’ meeting. As negotiators met, UK members of Parliament approved a draft law to create an internal market once the post-Brexit transition ends in December. This bill contains clauses that would override sections of the withdrawal accord agreed to last year, prompting the European Commission to take legal action against the UK for infringing on these terms.
Story #7: Oil and Copper collapsed
Copper and Crude Oil declined sharply last week as Growth dears re-emerged. U.S. crude fell about 8% for the week, trading at around $37 per barrel on Friday. Soft demand for transportation fuels is one of the key factors that has recently weighed on broader oil consumption, putting pressure on prices. The copper price rally came to an abrupt halt on Thursday with the bellwether metal experiencing one of the worst one-day price drops on record. On the Comex market, copper for delivery in December fell 5.9% to a low of $2.8540 a pound amid heavy selling. It was the biggest decline since mid-March at the height of the covid-19 induced sell-off, which sent the copper price crashing to below $2.00 a pound – levels last seen during the global financial crisis.
Story #8: Mixed U.S jobs report
The major market news Friday morning was the monthly U.S payrolls report, which showed that employers added 661,000 jobs in September, well below consensus estimates of around 850,000. Government employment fell by 216,000, highlighting growing fiscal stresses for states and localities and offsetting some of the bounce back in leisure and hospitality hiring (318,000 jobs). The workforce participation rate also slipped to 61.4% from a post-pandemic high of 61.7% in August. Weekly jobless claims, reported Thursday, were more encouraging, with the number of Americans filing for unemployment reaching a post-pandemic low of 837,000.
Story #9: The Coronavirus relief package saga
On Thursday evening, the U.S. House of Representatives narrowly passed a Democratic bill that proposes a $2.2 trillion coronavirus relief package, which appeared unlikely to be taken up in the Republican Senate and indicated to some that negotiations were on hold. On Friday, however, Pelosi announced that the House would take up legislation targeted at relief for the airline industry. During the week, carriers United and American announced plans for a combined 32,000 job cuts in the absence of further government support.
Story #10: China recovery
China’s purchasing managers’ index (PMI) readings for September underscored the country’s strong recovery. The private Caixin survey showed that manufacturing PMI remained at a high level, boosted by new export orders. An index for smaller enterprises came in above 50, the first time it landed in expansionary territory since May. Positive news also arrived on the services front, as the business activity index for nonmanufacturing came in at 55.9, its strongest level since November 2013. The strong economic data reduce the likelihood that Beijing will roll out fresh monetary and fiscal stimulus measures and suggest that the PMI cycle may be close to a peak. Meanwhile, the latest COVID-19 data offered more evidence of China’s success in curbing the virus, with just 12 new imported cases reported.
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