The Long and Short of it, week ending 10 Nov 2023
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Another up week for major stock indexes with the Nasdaq Composite index strongly outperforming both the S&P 500 Index and the Dow Jones industrial Average. Interestingly, most of the week’s gains came Friday seemingly predicated on no real news. Longer-term Treasury rates were somewhat volatile last week, with falling rates mostly precipitating higher stock index levels and vice versa. Through Wednesday, 10-year Treasury rates fell 11bps, supported by existing expectations of “peak rates” (based on weakish economic data (in the U.S. and globally) and a better-than-expected 10-year Treasury auction. Rates reversed sharply Thursday after Fed Chair Powell’s comments that further rate increases may be necessary and following a worse-than-expected 30-year Treasury auction. Markets rallied sharply on Friday, moving all 3 major index levels higher on the week. For the week, the S&P 500 Index rose 1.3% to 4,415.24, the Nasdaq Composite Index gained 2.4% to 13,798.11 the Dow Jones Industrial Average increased 0.7% to 34,283.10, the 10-year U.S. Treasury rate rose 7bps to 4.65% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) appreciated 0.8%.
European stock markets moved lower last week with both the STOXX 600 and FTSE 100 Indexes declining less than 1 percent. A combination of weak economic data out of the euro zone, the UK and China and hawkish comments from the BoE, ECB and the Fed contributed to last week’s poor performance. Lower energy and base and precious metals prices – pushed lower predominantly by Chinese economy concerns - affected the commodity-heavy FTSE 100 Index the most contributing to its underperformance relative to the STOXX 600 Index. As-expected but weak euro zone retail sales and UK GDP growth mixed with increased expectations of “higher rates for longer” (promulgated by hawkish central bank comments) pressured both indexes lower over the week. Fed Chair Powell’s hawkish comments Thursday hit index performance Friday, moving both indexes markedly lower, in sharp contrast to U.S. markets which moved noticeably higher Friday after the close of European markets. For the week, the FTSE 100 Index fell 0.8% to 7,360.55, the STOXX 600 Index decreased 0.2% to 443.31, the 10-year Gilt rate rose 4bps to 4.33%, the 10-year Bund rate increased 7bps to 2.71% and the British pound and the euro weakened 1.2% and 0.5%, respectively, both versus the U.S. dollar.
Top performing ETPs over the week
| . | 3x Long ETPs | 3x Short ETPs | ||
|---|---|---|---|---|
| UK | +3x Rolls Royce (3LRR) | +15.1% | -3x Diageo (3SDO) | +30.3% |
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The Long and Short of it, week ending 10 Nov 2023
