Read the 10 stories to remember from the week which ended November 13.
Story #1: Stocks gains following vaccine news
Most of the major equity indices added to the previous week’s sharp gains, bolstered by positive vaccine news. Indeed, Pfizer announced that preliminary data showed that the coronavirus vaccine candidate it had developed in partnership with Germany’s BioNTech was over 90% effective in preventing infections—a level well above expectations. All of the major U.S equity indexes touched all-time intraday highs in early trading Monday but surrendered much of their gains at midweek, before rebounding again on Friday. The Dow Jones and the smaller-cap benchmarks performed best, while value stocks easily outperformed their growth counterparts. The Nasdaq Index lagged, and tech shares within the S&P 500 Index trailed most other sectors.
Story #2: Vaccine optimism triggered market rotation
The Pfizer news prompted a sharp rally in cyclical shares, especially those of travel and leisure-oriented firms. Energy stocks rallied 16% - their best week ever - as oil prices rebounded, and bank shares recorded their best week since June as they benefited from an initial sharp rise in longer-term bond yields. Airlines had their best week since June. Conversely, investors sold out of “stay-at-home” stocks, such as Amazon.com and Netflix. We note that “Momentum stocks” suffered their second worst week in history, the momentum market neutral index crashing over 13%. FANG stocks had their worst week since July.
Story #3: Growing signs that the pandemic would worsen before it got better capped gains
After Monday surge, equity indices consolidated as market fears the pandemic could get worse before it gets better. In the U.S, case count and hospitalizations continued to rise significantly in nearly every state, with some cities reporting new strains on their hospital systems. News on Thursday that Chicago was considering reinstating stay-at-home orders and that New York might shut down its school system seemed to particularly concern investors. In Europe, France said there would be no easing of the lockdown for two weeks, as the number of hospitalizations had exceeded the peak reached during the first wave of coronavirus infections. In Germany, Chancellor Angela Merkel said that the number of coronavirus infections was still too high even if rapid increases showed signs of slowing, suggesting that the partial lockdown might be extended into December, Bloomberg reported.
Story #4: The broader political backdrop also remained uncertain.
President Donald Trump refused to concede the election, while reports emerged that the White House was dropping out of negotiations over a new stimulus package. The president also issued an executive order banning U.S. investments in firms declared to have ties to the Chinese military.
Story #5: Long-term Treasury yields hit highest levels since March
Treasuries were dumped massively on the vaccine news and then investors spent the rest of the week buying them back. Still, the yield on the benchmark 10-year U.S. Treasury note ended higher for the week. Early in the week, long-term yields surged to their highest levels since March on encouraging news about Pfizer’s late-stage vaccine trial. However, yields decreased on Thursday amid fears of new lockdowns and weak inflation data, with the headline and core consumer price index readings surprising investors by remaining unchanged in October.
Story #6: Shares in Europe rallied with global markets
European equities surged on encouraging news regarding the development of a vaccine to combat the novel coronavirus, although surging coronavirus infections and lockdowns in key European economies capped the gains. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 5.13% higher. Major European indexes also posted strong gains: Germany’s DAX Index climbed 4.78%, France’s CAC 40 surged 7.45%, and Italy’s FTSE MIB added 6.21%. The UK’s FTSE 100 Index rose 6.88%.
Story #7: ECB Lagarde hints at more stimulus
At the ECB’s annual symposium, President Christine Lagarde signaled that the central bank would expand its pandemic emergency purchase program (PEPP), which has bought more than EUR 640 billion of bonds, and its targeted longer-term refinancing operations (TLTROs), which have lent almost EUR 1.5 trillion to banks at accommodating rates, by year-end. “All options are on the table,” but the PEPP and TLTROs had “proven their effectiveness in the current environment” and were “therefore likely to remain the main tools for adjusting our monetary policy,” she said. Her comments appeared to rule out any further reduction in the ECB’s deposit rate, currently at -0.5%.
Story #8: Another setback for Chinese Technology companies
Earlier in the week, Chinese equity investors received unwelcome news after the government released a draft of antitrust guidelines aimed at curbing the power of the country’s leading internet-based platforms. The proposed antitrust laws from the State Administration for Market Regulation were the second recent setback for China’s top internet companies after financial regulators abruptly pulled the IPO of fintech company Ant Group on November 3. The uptick in regulatory actions affecting China’s online companies comes as authorities worldwide have raised concerns over the power and influence of digital platforms and their anticompetitive practices, though China is the first to issue new rules for its internet industry.
Story #9: Strong rebound by Turkey equities
Turkish stocks, as measured by the BIST-100 Index, returned about 8.3% over the week. Shares were buoyed by strength in world markets. Investors also seemed to be optimistic about the Turkish government’s new economic management team. As mentioned a week ago, on the heels of significant lira weakness, President Erdogan removed central bank Governor Murat Uysal by the end of the week. Two days later, Treasury and Finance Minister Berat Albayrak resigned from his position. In response, Erdogan appointed Naci Ağbal to be the new head of the central bank and Lutfi Elvan to be Treasury and Finance Minister.
Story #10: Bitcoin surged above $16,000
Bitcoin had a strong week, rising above $16,000 for the 1st time since January 2018. The price surge came after rising belief in wider adoption of the #cryptocurrency was stirred up #digital payment companies such as Paypal or Square. Some famed investors also revealed that they own Bitcoin and consider it as an asset class with a lot of potential.
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