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Weekly world markets review 31/08-04/09/2020

What goes up by a lot must come down
posted onSeptember 5, 2020
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World markets were mostly lower this week. The global benchmark for stocks had its best August on record but September started with a tech sell-off. Expectations of further stimulus measures combined with better-than-expected economic data continued to be supportive of equity prices making August the best month for markets since April. The S&P 500 climbed more than 7% last month and Information technology was the sector leader with a 12% gain. Stocks surrendered those gains and accelerated to the downside on Thursday with major US equities indices plunging the most in almost 3 months.

AMERICAS
US Stocks finished the week lower, as investors took profits after a staggering rally in August, when the outperformance and resilience of the technology sector had been remarkable.The S&P 500 finished Monday with modest losses,  The market climbed on Tuesday and Wednesday but on Thursday, a sell-off in the tech sector triggered a bloodbath on Wall Street with the S&P 500 falling 3.5%, its worst session since March.  

In Canada, the S&P/TSX Composite Index dropped 1.3% on Friday, as a rout in the US tech sector outweighed higher than expected job creation. Jobs figures showed Canada added 245,800 jobs in August, while the unemployment rate dropped to 10.2% from 10.9% in July. Canada's benchmark index saw every sector losing ground this week with technology leading the losses.  

ASIA/PACIFIC
Japan was the best-performing developed market for the week. Investor sentiment for the country received a boost when  Warren Buffett's Berkshire Hathaway announced that it had invested $6.2 billion in five of Japan's major trading houses. The purchases represent one of Berkshire Hathaway’s largest-ever investments in Japan. In July economic news, the unemployment rate increased to 2.9%, retail sales were down 2.8% YoY but industrial production was up 8%, rising at the fastest pace on record. The country's service sector was down in August.

Mainland Chinese stock markets fell. However, China's manufacturing and services sectors were both up in August, proving that the country's recovery continued. In Australia, the ASX200 shed $56 billion of value on Friday, eroding two buoyant days with a 3.1 per cent plunge as a sell-off in the tech sector triggered a bloodbath on Wall Street on Thursday. It was Australian benchmark's worst performance since May 1.

EUROPE

European shares pulled back with the pan-European STOXX Europe 600 Index ending the week 1.76% lower. France outperformed after  Prime Minister Jean Castex revealed on Thursday a €100 billion stimulus plan which is aimed at creating 160000 jobs nationwide by next year. Eurozone's economic front delivered many key data points this week. Producer prices were down by 3.3% YoY in July and retail sales fell 1.3% MoM. Manufacturing PMI stood at 51.7 in August and services PMI was down to 50.5 last month. Unemployment climbed in July reaching 7.9% while inflation was -0.2% in August, the first decline since May 2016, putting pressure on the European Central Bank (ECB) to inject
more stimulus. 

What was the driver for this week's downturn? Maybe investors simply concluded that some of the large tech names had become overvalued and that it was time to take profits. Maybe they are starting to turn cautious, realising the widening gap between valuations and fundamentals. The tech stocks decline is just a reminder that technology cannot resolve mankind's problems. 

Read our full world markets weekly report for free here. 16 pages covering geopolitics, finance, business, investing, trading, and more. 

The content of this review is for informational purposes only and should not be interpreted as specific investment advice.