Kristal Weekly Feed I 23rd December 2019

In a hurry? Here’s a short summary of some major global headlines over the last week.

Positives

• S&P 500 posts biggest weekly percentage gain since September
• European stocks might reach a record high on the back of Brexit optimism
• Hong Kong stocks end higher on property gains

Negatives

• Moody’s warns of a possible fall in US junk bonds

Now, for more detail.

Positives

1. S&P 500 posts biggest weekly percentage gain since September

What You Should Know

Investor optimism about the developments in trade negotiations between the US and China led to an increase in consumer spending this week. As a result, US stocks hit record highs on Friday. S&P 500 recorded its biggest weekly percentage gain since November. In fact, the S&P 500 broke a two-year record of hitting the longest intraday highs since October 2017. It recorded a seventh straight intraday high while Nasdaq had eight sessions in a row with gains.

What You Should Look Out For

While consumer spending is the key to the economic growth of the US, the fear of recession has been a dampening factor this year. While the current surge is based on investor optimism, the holiday cheer or the Santa Claus Effect can also be a cause of this rally. Keep an eye open for the developments in the trade negotiation between China and the US over the coming months.

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2. European stocks might reach a record high on the back of Brexit optimism

What You Should Know

As the uncertain conditions surrounding Brexit are getting clear, investors have started buying into markets. This week, European stocks inched towards a record high as the Government announced confirmation of January 31, 2020, Brexit date. The STOXX 600 Index is headed towards the best fourth quarter since 2011.

What You Should Look Out For

While the Prime Minister, Boris Johnson has managed to secure a majority vote in the Parliament on the Brexit Bill, the next few weeks will see some amendments and changes in the Bill. The Conservative Party is optimistic about meeting the deadlines. However, in case of any unexpected developments or delays, the investor sentiment might get hurt leading to a direct impact on the market.

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3. Hong Kong stocks end higher on property gains

What You Should Know

Local property stocks were the major gainers last week in the Hong Kong market. The shares of Asia’s largest real estate investment trust, Link REIT climbed by 2.8 percent. Wharf REIC gained 2.8 percent too. Other property stocks like China Overseas Land and Investment climbed 2.1 percent and Hang Lung Properties climbed 1.9 percent. Despite the trade protests in Hong Kong and the US-China trade war, the Hang Seng Index has managed to be up by 7.8 percent from the end of last year.

What You Should Look Out For

According to the Associate Director at Prudential Brokerage, the coming week is expected to be sluggish due to the Christmas holidays. It is important to note that the Hong Kong protests are continuing with equal fervor. Also, while the trade tensions between China and the US seem to have eased, the next few months will be critical.

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Negatives

1. Moody’s warns of a possible fall in US junk bonds

What You Should Know

Moody’s Corporation has released a report which states that the significant rally in US junk bonds this year might be short-lived. It anticipates a significant fall since the riskier end of the corporate bond market is in a dangerous state. This year, the gains in the high-yield credit have ended up with the borrowing costs being out of sync with the overall business climate.

What You Should Look Out For

Moody’s believes that it is important for the fundamentals governing corporate credit quality to improve. If it doesn’t, then the spread between junk bonds and Treasuries might widen leading to a fall in yields and an implied rise in prices. Remember, if the markets go down, the losses can be huge in the fixed-income market.

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