The Long and Short of it, week ending 23 June 2023
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A holiday-shortened trading week with all 3 major stock market indexes relinquishing a portion of previous week’s gains, each falling about 1.5%. Fed Chair Powell’s testimony before Congress (Wednesday and Thursday) concretizing the Fed’s ongoing fight against inflation (with Powell saying there’s a long way to go) as well as introducing additional banking system stress due to poor performing commercial real estate assets was the primary reason for last week’s decline. The prospect of higher rates and reduced expectations of an imminent rate cut in the face of weaker-than-expected manufacturing and services activity and continued relatively high jobless claims, also added downward pressure on index levels. While 10-year Treasury rates were slightly lower, the U.S. dollar reversed some of last week’s weakening, strength just over ½ percent, reflecting renewed higher-rate sentiment. For the week, the S&P 500 Index decreased 1.4% to 4348.33, the Nasdaq Composite Index declined 1.4% to 13,492.52, the Dow Jones Industrial Average fell 1.7% to 33,728.69, the 10-year U.S. Treasury rate decreased 3bps to 3.74% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 0.6%.
European stock indexes moved markedly lower last week, falling nearly twice as much as U.S. indexes. European markets moved lower early last week, reacting to hawkish testimony by Fed Chair Powell, a smaller-than-expected Chinese rate cut and a larger-than-expected UK inflation release. Thursday’s surprise ½ point BoE rate increase set the tone Thursday and Friday with the FTSE 100 and STOXX 600 Indexes falling close to 1% over those two days. Luxury, financial, mining and energy stocks fared the worst last week, performing poorly on increased concerns of central bank induced demand destruction. Perhaps reflecting slow-growth/recession concerns, both 10-year Gilt and Bund rates fell about 10bps while both the euro and British pound weakened relative to the U.S. dollar. For the week, the STOXX 600 Index fell 2.9% to 453.14, the FTSE 100 Index dropped 2.4% to 7,461.87, the 10-year Gilt rate decreased 9bps to 4.32%, the 10-year Bund rate fell 10bps to 2.36% and the British pound and euro weakened 0.8% and 0.4%, respectively, both with respect to the U.S. dollar.
Top performing ETPs over the week
| . | 3x Long ETPs | 3x Short ETPs | ||
|---|---|---|---|---|
| UK | +3x Rolls-Royce (3LRR) | +6.4% | 3x Glencore (3SGL) | +24.8% |
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The Long and Short of it, week ending 23 June 2023
