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A burst of volatility hit the markets finally this week after most of October that was relatively quiet. Sudden wave of Covid-19 cases, new lockdowns in Europe and the presidential elections uncertainty all added up together. Indices are down 8-10% from their tops now. We also had a bunch of macro data and 3Q20 reports.
Most of the companies have reported better than expected numbers, but there has also been negative surprises like in case of Apple’s iPhone sales data (16% down) and no guidance about the coming quarters.
Last week
-> Already on Monday the markets kicked off the week with a substantial drop (Dow down 650pts). The market started to price in the election risk just just around the corner. The coronavirus headlines kept hitting the wires as well over the weekend and continued throughout the whole week.
-> The stay-at-home trade continued on Tuesday. Online retailers like Shopify (SHOP) or Amazon (AMZN) outperformed. So did other stocks positively correlated with virus cases (Zoom (ZM) in the front).
-> Sell-off continued on Wednesday as well with most indices down 3% or more. Substantial pandemic related curbs were reestablished in France and Germany announced a four-week rolling lockdown. Some stated in US closed dining indoors.
-> Thursday brought a breather to the downside volatility and markets bounced. They were boosted by the US GDP data, which showed a 33.1% annualized growth rate for 3Q20. Expectations were at 32%. Paradoxally to were we stand rigth now (deep in recession), this was the biggest GDP growth on record for USA. Just remember that is was preceded by the biggest ever drop a quarter before. Major positive drivers were reviving consumption and residential investments. Here’s a nice long-term presentiation of US GDP ups and downs:
-> Thursday after close tech giants like Apple (AAPL), Amazon (AMZN) and Google (GOOG) reported numbers for 3Q20. All three beat the expectations. That wasn’t enough though as investors seem to have turned their focus to the future, asking if a slower growth will enable to justify current lofty valuations of the tech space. AAPL shares were down 5% overnight after their disappointing iPhone revenues were revealed, AMZN was down 1% after it announced it plans more Covid-19 related capex that the street has expected and FB was trading flat overnight as it said it “sees uncertainty ahead”.
-> GLP member Ubisoft (UBSFY) cut its FY net booking outlook on Thursday night to eur2.2b-2.35b while reportgin numbers. Stock dropped 4.5% on Fri (-8.4% on the week).
-> Friday remained very volatile and all indices again ended in the red. This was the worst week for market in over 5 months. Next week is going to be possibly just as volatile. CBoT volatility index VIX ended at @ 38ish.
-> Effective weekly index changes: S&P500 -5.6%, Nasdaq -5.5%, EuroStoxx600 -5.6%, DAX -8.6%, Nikkei225 +2.3%.
Other markets events:
-> Bonds: the US yield curve (10y-FF) traded with no big signs of flight to quality, which is surprising given the volatility (the curve ended @ 70bps), the German curve (10Y Bunds-3M) narrowed to 11bps with 10Y Bunds at -0.62%. High Yield Spreads widened a bit to 5.25.
-> Commodities (ex oil): Gold was down 1.4%on week. The commodity keeps consolidating around the $1900/ounce lvl
-> Oil: lost over 10% as lockdowns were being reestablished around the world.
-> Currencies: dollar revival across the board this week DXY (Dollar Index) +1.4% on week, EURUSD -1.8%.
Major macro events: (times are CET; source: tradingeconomics.com):
Next Week’s major macro events:
Yours!
PC
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