The Long and Short of it, week ending 18 Aug 2023
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All 3 major stock market indexes moved noticeably lower last week pressured by growing “higher-rates-for-longer” concerns. Good economic data released last week, including better-than-expected retail sales and initial jobless claims, added to rate concerns pushing both nominal and real 10-year Treasury rates higher and, as a result, pressuring stock prices lower. Wednesday’s FOMC Minutes release also contributed to expectations of continued Fed vigilance, revealing most FOMC members continue to be worried about current and prospective inflation levels. The Atlanta Fed’s revision higher to its Q3 GDP growth forecast (also on Wednesday) added to higher-rate concerns as well. Reflecting higher-rate concerns, the 10-year Treasury rate rose 9bps with 10-year real rates rising 16bps and 10-year inflation expectations falling 7bps. For the week, the S&P 500 Index fell 2.1% to 4,369.71, the Nasdaq Composite Index dropped 2.6% to 13,290.78, the Dow Jones Industrial Average decreased 2.2% to 34,501.88, the 10-year U.S. Treasury rate increased 9bps to 4.25% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 0.6%.
European stock indexes moved lower again last week with the FTSE 100 Index significantly underperforming the STOXX 600 Index. Continued weak Chinese economic data dented luxury and commodity-related stock performance, helping move both index levels lower. “Higher-rates-for-longer” concerns also pressured index levels lower, with UK wage growth setting another record and Swedish inflation levels maintaining high levels. Interestingly, both euro zone and UK inflation levels continue to moderate, though core inflation levels increased more than expected offsetting better-than-expected headline inflation numbers. 10-year Gilt rates reflected higher-rate concerns, increasing 14bps over the week. 10-year Bund rates were unchanged, perhaps reflecting expectations of an ECB pause while maintaining current rate levels. For the week, the STOXX 600 Index decreased 2.3% to 448.44, the FTSE 100 Index fell 3.3% to 7,262.43, the 10-year Gilt rate rose 14bps to 4.67%, the 10-year Bund rate was unchanged at 2.62%, the euro weakened 0.7% and the British pound strengthened 0.3%, both versus the U.S. dollar.
Top performing ETPs over the week
| . | 3x Long ETPs | 3x Short ETPs | ||
|---|---|---|---|---|
| UK | +3x Barclays (3LBC) | -5.2% | -3x Glencore (3SGL) | +20.9% |
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The Long and Short of it, week ending 18 Aug 2023
