The Weekly Update

US Treasury yields across the curve fell 1-2 basis points on the week with 10-years closing at 3.04%: ebbing back towards the 3% level for the third week in a row. The stable US Treasury markets contrasted widening spreads in emerging market and high yield debt by 14 basis points, referencing the JP Morgan EMBI+ and Bloomberg Barclays US Corp High Yield. Furthermore global equities endured another challenging week with the S&P 500 down a further -3.8%. After the painful -7% in October, the index seemed to bounce with optimism in the first half of November, but this has now been erased moving into the closing week of November.

The losses continued over threats to global trade and concerns over global economic growth including worries over a no deal Brexit, Rome’s brinkmanship with the European Commission and the first Asia-Pacific Economic Cooperation summit with no joint declaration in 20 years. Alongside the macro concerns bullish corporate earnings sentiment, particularly across the technology sector, has continued to waver with the likes of Apple now down over 20% this month after it lost a further 5% last week. And although technology and consumer discretionary stocks led the decline defensives like utilities and staples still also broadly declined -1%.

Tuesday (API crude inventory day) was again a bad day for oil prices. Brent crude, having declined 6% on November 13th, declined a further 7% on the 20th, in two of the most volatile trading days ever. The 7th straight week of declines was also the largest at almost -12%, or -$8 per barrel, with prices closing the week at $58.80 down -32% from their peak in early October. The outlook for fundamentals deteriorated but the fall was also spurred by technical factors, unwinding and contracting liquidity as year-end approaches. Markets are now looking ahead to the OPEC meeting on the 6th December and any to cut exports.

In the week ahead, we have German IFO Business Climate data and the Chicago Fed National Activity Index on Monday; French consumer confidence on Tuesday and Germany’s on Wednesday and Eurozone business confidence data on Thursday; also on Thursday are Japan retail sales, Germany unemployment and CPI and the US FOMC minutes; lastly on Friday we have PMI data on China and Eurozone inflation data.

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