• The London Financial

Weekly Markets Round-up: 31 August - 4 September 2020


By Charles Heighton (King's College London) - VP of Trading at King’s Global Markets


Keeping it brief:

US markets started the week tepidly, but by Thursday the markets were cratering back to earth in a much-needed pullback. The cause of this fall is hard to identify; it may just be the investors coming back to reality. European stocks also had a red week virtually across the board. Unsurprisingly, Asian stocks got caught up in these declines and fell too.


The data:

Source: MarketWatch, showing the five-day performance.

The charts:

Charts' source: TradingView, showing a five-day period.


Blow by blow:


Monday:

Asian markets copied sentiment from Wall Street on Friday. However, European and American markets mostly fell.


APAC:

  • Markets moved mostly higher following Friday’s session in the US.

  • Stronger-than-expected industrial production in Japan bolstered markets.

  • Japanese trading companies gained after Berkshire Hathaway disclosed positions in the market leaders.

  • Yoshihide Suga, a close ally of Shinzo Abe, is also reportedly in line to be Prime Minister.

  • This would probably lead to a continuation of Abe’s monetary and fiscal policies.

  • Chinese PMI data was mixed: manufacturing was below expected, while non-manufacturing was above.

  • The Big Four Chinese banks all posted weaker profits.

  • Sinopec, the largest domestic oil company, also posted its first loss since 2003.

EMEA:

  • UK bank holiday meant that the FTSE did not trade.

  • UK Treasury is exploring a triple tax on things like pensions to plug a hole in the budget.

  • Quiet session due to the UK bank holiday.

  • UK reports claim that negotiators are willing to walk away from the EU if demands are not met.

  • Stocks ended lower, weighed down by financials.

  • German and Italian inflation data was hugely disappointing.

  • Interestingly, travel and leisure stocks were the biggest gainers in Europe in August.

AMER:

  • S&P ended slightly lower but posted the best gain in August since 1986.

  • Energy stocks declined the most.

  • MSCI World Index rose 6.6% in August — the best rally since 1986.

  • Dow also ended lower, but the NASDAQ was kept positive by tech stocks.

  • Apple's and Tesla's stock splits at the open causing a rally in those stocks.

  • Investors were spooked by the US passing 6 million confirmed virus cases over the weekend.

Beyond stocks:

  • WTI crude fell.


Tuesday:

A very mixed day across the board. Asia was cautious while Europe was choppy. US markets rose once again, unsurprisingly driven by tech stocks.


APAC:

  • Cautious session after losses in EMEA and AMER markets on Monday.

  • Australian stocks fell after an Aussie television anchor was detained in China as tensions between the two countries rose.

  • Stocks in the Philippines tanked as cases continued to rise.

  • Indian stocks rose after announcements from the central bank.

  • South Korean stocks gained after stimulus was announced and cases fell.

  • Chinese Caixin Manufacturing PMI hit its highest level in over a decade.

  • Causing a rally in stocks across the region.

  • Japanese stocks closed flat but trading houses gained again based on Buffett’s investment.

EMEA:

  • Most markets closed down.

  • FTSE declined 2%, making up for the lost trading day on Monday.

  • Travel restriction uncertainty in the UK weighed on the FTSE.

  • Despite a choppy session, tech stocks rallied.

  • Apple suppliers got a boost after a report claimed that 75 million 5G iPhones have been ordered by Apple.

  • A European manufacturing activity survey showed a small recovery in August.

  • Travel and leisure stocks performed the worst on news that Portugal might be added to the UK quarantine list.

  • Banks were also hit hard on expectations of higher bankruptcies towards the end of the year.

AMER:

  • Indices moved slightly higher, driven by tech stocks.

  • Apple had a strong day based on the report explained above.

  • Zoom also soared after a 30% increase in its revenue forecast.

  • ISM manufacturing data showed an increase in factory activity, to a high not seen since late 2018.

  • Employment data continues to lag behind.

  • Tesla fell after announcing a share sale programme worth $5 billion.

Beyond stocks:

  • The dollar continued to weaken, pushing the pound up to its highest level this year.

  • The euro also briefly reached the 1.20 level against the dollar, a high not seen since early 2018.


Wednesday:

A mostly positive day as markets predicted ECB action. US tech stocks declined slightly but the indices still rose as defensives gained.


APAC:

  • Markets were mixed.

  • ASX gained, driven by materials stocks

  • Hang Seng fell due to a PBOC liquidity drain.

  • Australia had a second negative GDP reading, marking the first recession in decades.

EMEA:

  • Markets closed higher.

  • Investors are expecting more stimulus from the ECB.

  • Data showed that the Eurozone was now in deflationary territory.

  • Tech stocks had the strongest close in 19 years.

  • Industrial and chemical stocks also rebounded.

  • German retail sales fell shockingly in July.

  • Banks lagged.

AMER:

  • US private companies added significantly fewer jobs in August than predicted.

  • Stocks climbed.

  • Defensive stocks led the gains.

  • Apple, Tesla, and Zoom all fell, holding the NASDAQ back.

  • Reports of stimulus discussions also propelled markets higher.

Beyond stocks:

  • USD rallied.


Thursday:

A significant sell-off occurred in US and European markets with no discernible cause.


APAC:

  • Mixed session, but some gains based on US moves in the previous session.

  • Data showed that Chinese service sector activity increased in August.

  • Employment in the service sector also rose, reversing a negative trend that started in February.

EMEA:

  • French stimulus worth 100 billion EUR initially boosted the French CAC, but it closed down due to selling in the afternoon.

  • European stocks moved lower with the US markets.

  • FTSE closed 1.5% down.

  • Stoxx 600 closed down 1.4%.

  • British Services PMI showed increased job losses in August.

AMER:

  • Tech stocks declined significantly.

  • Apple declined by 8%.

  • Tesla and Zoom fell even further.

  • The VIX soared above 30 for the first time since mid-July.

  • US unemployment claims were higher than expected but did decline from last week.

  • US services industry growth slowed in August.

  • Mitch McConnell expressed doubts regarding a second stimulus deal.

  • This possibly caused the sell-off.

Beyond stocks:

  • ECB members are indicating a desire to control the increasing price of the EUR.

  • Gold fell.


Friday:

Another red day as selling continued but later stabilised.


APAC:

  • Most markets fell following the US session on Thursday.

  • Hong Kong stocks had the worst week in over three months due to the US sell-off.

  • Reports emerged that China may dump US Treasuries as tensions rise between the two powers.

  • Falls in consumer staples and financials led declines rather than tech stocks.

EMEA:

  • Financials performed well after merger talks between two Spanish banks.

  • FTSE hit a low not seen since May.

  • Driven by fears of a no-deal Brexit.

  • Data showed a slowing recovery in the US construction industry.

  • Housebuilders fell significantly after the Competition and Markets Authority announced an expanding investigation into leasehold homes.

  • German industrial goods orders rose by less than expected.

  • Indices fell after a volatile session.

  • Basic resources stocks rose after metal prices gained.

AMER:

  • A deal has now been made to avoid a government shutdown.

  • Unemployment fell to 8.4% in August as employers added 1.4 million jobs in the US.

  • Tech stocks fell again, driving the market lower especially at the open. As the day wore on, the markets did calm slightly.

  • The markets closed between 0.5% and 1.3% down.

  • Algorithmic trading exacerbated the declines.

  • The VIX fear index approached 40, reaching an eleven-week high but then declined.

  • The FT broke the news that SoftBank has placed billions of dollars’ worth of calls on individual US tech stocks partly fuelling the August rally.

  • This was speculated on by ZeroHedge on Thursday.

  • Consumer discretionary, communications, and technology stocks fell the most.

  • Financials and airlines gained.

Beyond stocks:

  • The dollar rose due to market volatility.

  • The Turkish lira hit a record low due to inflation concerns.


By Charles Heighton (King's College London) - VP of Trading at King’s Global Markets


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