The Long and Short of it, week ending 20 Oct 2023
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Major stock indexes moved markedly lower last week, giving up sharp gains registered on Monday. Investor sentiment started the week re-invigored with lessened concerns surrounding Mid-East tensions and on perceived dovish comments from Fed officials. That sentiment began to shift Tuesday, however, after a much stronger-thanexpected retail sales report re-instilled Fed monetary policy angst, pushing 10-year Treasury rates almost 15bps higher and leaving stock indexes mainly unchanged. Renewed Mid-East concerns, U.S. imposed restrictions on AI chip sales to China and ever-increasing 10-year Treasury rates pushed stock markets lower Wednesday through Friday. Thursday’s Jerome Powell speech added to downward pressures with Chairman Powell saying he didn’t believe monetary policy was overly tight and that rates may need to stay high for a while. Thursday also saw an extremely weak existing home sales report with seemingly no real effect on Treasury rates or stock markets. Friday saw stock indexes drop 1% or more and saw 10-year Treasury rates move off of Thursday’s near 5% high both on no new news, For the week, the S&P 500 Index fell 2.4% to 4,224.16, the Nasdaq Composite Index dropped 3.2% to 12,983.81 the Dow Jones Industrial Average decreased 0.9% to 33,127.21, the 10-year U.S. Treasury rate rose 29bps to 4.81% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 0.5%
European stock markets also moved lower last week after registering gains early in the week. Higher commodity prices (precipitated by the BoC injecting liquidity and higher gold and oil prices due to Mid-East tension) and lower than-expected UK wage inflation helped move both STOXX 600 and FTSE 100 Indexes higher through Tuesday. Though gains, however, were overturned by growing concerns surrounding the Israel-Hamas conflict, weak earnings reports, higher long-term Gilt and Bund rates and a lukewarm UK CPI report. US restrictions on AI chip sales to China, no additional Chinese stimulus measures and weak industrial service activity and UK retail sales also added to market malaise. For the week, the FTSE 100 Index lost 2.6% to close at 7,402.14, the STOXX 600 Index dropped 3.4% to 433.74, the 10-year Gilt rate rose 27bps to 4.65%, the 10-year Bund rate increased 16bps to 2.89% and the British pound and the euro strengthened 0.2% and 0.8%, respectively, both versus the U.S. dollar.
Top performing ETPs over the week
| . | 3x Long ETPs | 3x Short ETPs | ||
|---|---|---|---|---|
| UK | +3x Diageo (3LDO) | +4.2% | -3x Rolls-Royce (3SRR) | +21.5% |
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The Long and Short of it, week ending 20 Oct 2023
