Weekly market review
Week ending 12 August 2016
Stocks rallied globally as higher oil prices and strong earnings reports from US retailers helped boost confidence. The three main US stock markets (Dow, S&P, and Nasdaq) all closed at record highs on Thursday. US stock market valuations remain near their most expensive levels in more than a decade, but the VIX (a popular measure of the volatility of the US stock market) remains at low levels. In Europe, the Eurostoxx 600 erased all of its post- Brexit losses to end the week up 1.5%, while the UK stock market breached the 6,900 mark for the first time this year on Thursday, enjoying its highest close in more than 14 months, closing the week on 6914.11.
Global sovereign yields were broadly lower, with the 10-Year US Treasury bond yield falling to 1.52% on the back of weaker productivity growth and disappointing retail sales data. Long-term UK government bonds rallied to record low yields as the Bank of England’s asset purchase program was met with an under-supply of long term bonds. The global hunt for income has now pushed yields on US and European high yield bonds to their lowest levels in over a year.
A relatively quiet week for economic releases translated into a more muted week for currencies. The US dollar traded mostly flat, but sold off on Friday morning in response to weaker retail numbers, ending the week down 0.7%. The British pound fell through $1.30, selling off to post-Brexit vote lows, as data signalled weaker manufacturing production and a widening trade deficit.
Crude oil traded in a choppy pattern leading up to the International Energy Agency report on Thursday, which suggested oil production would lag demand in the third quarter of this year. The Saudi energy minister said the country “would take any action to help” the market stabilise, further fuelling West Texas Intermediate’s (a grade of crude oil used as a benchmark in oil pricing) rally, to end up 6.4%
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Source: Goldman Sachs Asset Management. Adapted by FundCalibre. This material is for information purposes only and does not in any way constitute financial advice.