TrackInsight: Risk-on Mood Ahead of Thanksgiving

12/01/2020 | 11:00am

Week from 23 to 29 November 2020

1.12.2020 Global Flows Map

Week from 23 to 29 November 2020

The least we can say is that the weaker jobs data in the U.S. (unemployment claims rising to 778,000), the disappointing consumer confidence index (dropping to 96.1 in November) and stay-at-home measures did not thwart the rally on Wall Street.

Vaccine optimism and increasing political clarity with Joe Biden’s choice of Janet Yellen for Treasury secretary indeed lifted the U.S. indices to record highs before Thanksgiving. The Dow Jones Industrial Average broke the psychological level of 30,000 for the first time on Tuesday, jumping 2.21% week-over-week, or 647 points. The S&P 500 was up 2.27%, notching an all-time closing high (3,638.35) on Friday, while the Nasdaq Composite added 2.96%. Small cap stocks did even better (Russell 2000 up +3.92%).

Consumer discretionary (+2.96%), financials (+4.60%), and energy (+8.51% WTD, boosted by surging prices for WTI crude oil: +8%) paved the way for the broader market rally. Industrials were also pushed higher (+2.43%) as investors rushed into airlines stocks (United Airlines up 13.53%, American Airlines Group up 19.55%). Utilities (+0.24%), health care (+0.51%) and consumer staples (+0.59%) were the poorest performers this week.

European stock markets fared well (MSCI EMU up 1.84%, fourth positive week in a row) and APAC markets followed suit thanks to strong data from China and Japan (Hang Seng up 1.68%, Nikkei up 4.38%) reflecting the ongoing global economic recovery in Asia-Pacific.

Government bonds closed mostly flat: U.S. 10-year T-note yield at 0.84%, +1bp over the week; Germany 10-year Bond yield at -0.59%, -1bp.

Once again, demand for IG corporate bonds (+0.07% in Europe, +0.40% in the U.S.) and high yield bonds (+0.67% in Europe, +0.59% in the U.S.) showed no sign of abating. Emerging debt moved in the same direction (+0.35% in local currencies).

Unsurprisingly, risk-on mood weighed on precious metals. As investors turned to risky assets, gold and silver fell sharply (spot: -4.45% and -7.69% respectively). The yellow metal closed below $1,800/Oz for the first time since July.

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