Company / Analytics

Week 26 in Brief

How did the major indexes perform?

US stocks ended the week lower, concerned by a resurgence in the number of coronavirus cases that have rolled back reopening measures in some states. Meanwhile, investors were also parsing the results of the Federal Reserve’s bank stress tests which resulted in a cap on dividends and stock buybacks.

• The Dow Jones Industrial Average dropped 855.91 points, or 3.3%, to 25,015.55 this past week, and the S&P 500 index fell 2.9%, to 3009.05, with the S&P’s financial sector SP500.40, sinking 4.3%, and the energy sector SP500.10 3.5% lower. All 11 sectors of the S&P 500 closed deep into negative territory on Friday.
• The tech-heavy Nasdaq Composite lost 259.78 points to reach 9,757.22, a fall of 2.6%, driven by a decline in shares of social media giants.
• For the week, the Dow lost 3.3%, the S&P 500 notched a 2.9% decline, and the Nasdaq fell 1.9% for the period.
• The U.S. economy shrank by 5% in the first quarter of the year, the Commerce Department reported Thursday. Forecasters expect a worse decline during the quarter that ends next week.
• JPMorgan, Bank of America and Citigroup all rose more than 3% as investors cheered word the Fed and other bank regulators will ease restrictions imposed by the Volcker Rule enacted to curb banking excesses after the 2008 crisis.
• Meanwhile, Shares of Facebook and Twitter sank in midday trading Friday, after Netherlands-based consumer goods giant Unilever said it was halting U.S. advertising on the social media platforms for at least the rest of 2020, citing the companies’ lack of response to hate speech on their platforms. Unilever joins several other companies that have pulled advertising from Facebook, including Verizon Communications and Ben & Jerry’s.
• Facebook’s stock dropped 7.2% Friday and has now lost 9.7% since closing at a record of $242.24 on Tuesday. Twitter shares shed 6.7% and have tumbled 20.1% since closing at a four-month high of $36.64 on June 8. The stocks underperformed the broader stock market Friday by a wide margin, leading to the decline of the Nasdaq index.
• Coronavirus cases rose across the United States by at least 39,818 on Thursday, the largest one-day increase yet. As of Friday morning, the U.S. had more than 2.4 million confirmed cases and more than 124,000 deaths, according to data compiled by Johns Hopkins University. However, the U.S. Centers for Disease Control and Prevention (CDC) said on Thursday that the true number of infections could be 10 times higher than the official count. The governor of Texas temporarily halted the state’s reopening on Thursday as infections and hospitalizations surged.

European markets closed lower amid coronavirus fears, in a week that was dominated by corporate news centred around Wirecard.

• The pan-European Stoxx 600 closed 0.4% lower, with most sectors and major bourses in negative territory. The FTSE 100 gained 0.20%, while the DAX led the CAC 40 lower.
• It was a big week for corporate news in Europe. Wirecard filed for insolvency on Thursday, unable to account for a $2.1 billion black hole in its balance sheet and owing $4 billion to creditors. The stock has fallen more than 90% since last week and analysts forecast it could drop to zero. Wirecard shares tumbled another 64% Friday to trade at just 1.28 euros per share.
• Lufthansa shareholders on Thursday backed a $10 billion German government bailout package to rescue the embattled carrier after major shareholder Heinz Hermann Thiele dropped his opposition to the plan. The airline group’s stock price slumped over 6% and closed trading at 8.994 euros on Friday.
• Meanwhile, Reuters reported Thursday night that the Dutch government has agreed to a 3.4 billion euro rescue deal with France for Air France-KLM, as airlines continue to reel from months of worldwide travel restrictions.

Asian markets followed Wall Street, reacting to U.S. regulators’ decision to remove some limits on banks’ ability to make investments.

• The Nikkei 225 in Tokyo rose 1% to 22,488.95 while Seoul’s Kospi gained 0.7% to 2,128.23. Hong Kong’s Hang Seng lost 0.4% to 24,671.06.
• The S&P-ASX 200 in Sydney added 1.1% to 5,879.50. New Zealand, Singapore, and Jakarta also advanced.
• Chinese markets were closed for a holiday.

Currencies

• The dollar index stood at 97.360, having pared a large part of this week’s losses.
• Against the yen, the dollar traded at 107.17 yen, having gained 0.5% in the overnight session.
• The euro eased to $1.1221, losing steam after hitting a one-week peak of $1.1348 on Tuesday though the currency has maintained weekly gains of about 0.4%.
• Sterling slipped to $1.2422, off this week’s high of $1.2541 touched on Wednesday.

Commodities and other assets

• Oil prices followed equities lower. The international benchmark Brent crude dropped 0.8% to $40.74 a barrel, while the West Texas Intermediate, the US marker, fell 1.2 % to $38.25. Investor worries about oil demand persisted a day after the IMF predicted a deeper global recession than previously thought. A record crude supply cut by the OPEC and allies has kept the oil market much stronger than in April when Brent hit a 21-year low below $16 a barrel and U.S. crude turned negative. Investors are waiting to see if OPEC+ will extend their record cut beyond July.
• Investors piled into physically-backed gold ETFs to secure hard assets amid expectations of continued global ultra-low or negative interest rates and currency debasement. Gold for August delivery, the most active contract on the Comex market in New York, touched a high of $1,786.10 an ounce, the highest since October 2012 and up 17% so far this year.

The week Ahead?

Markets will remain tuned to virus news in the coming week, as the battle between stimulus-fueled optimism and second wave fears rages on. The US virus count might be what tips the scales, not just for stocks but for currencies also, as risk appetite has become the dominant force in the current volatile market.