2H October Global Market Recap
16th October 2020 – 31st October 2020
Stock markets in US and Europe tumbled in the second half of October amid the worrying Covid-19 resurgence and tougher lockdowns in Europe added to worries about the economic hit from the pandemic. Dow Jones Industrial Average Index sank 4.6%, marking the biggest monthly drop since March. The S&P 500 and Nasdaq dropped 2.8% and 2.3% respectively. Concerns were added when House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin failed again to close major differences on a fresh stimulus before the 3 Nov President Election. All major China stocks index posted monthly gains in October, buoyed by robust GDP, retail sales and industrial production data that pointed to an economic recovery from the pandemic fallout.
U.S. treasury yields have risen sharply across the tenors during the second half of October. The 10-year treasury yield rose by 19bps, registering the largest monthly climb in over two years ahead of U.S. presidential election. Across the board, Chinese government bonds has continued its upward momentum since April. In the second half of the month, the bonds fell by 7bps as foreigners piled in after the inclusion by FTSE Russell into its World Government Bond Index (WGBI). Overall, 10-year yields climbed by 3.3bps in the month.
Across the board, major CDS indices rose in the second half of October after falling in the first half as investors are fearful that rising coronavirus cases and delays on further stimulus could hit the US economy. Overall, the credit market has remained relatively stable as investors anticipate the upcoming US presidential election.
All the energy commodities except US natural gas declined substantially amid a resurgence of the coronavirus, which have the potential to decrease global demand. Brent, WTI and US Gasoline fell by 8.5%, 11% and 11.4% respectively. This has been the sharpest decline since the drop back in July. Natural gas spike by 11.3% as the average total supply of natural gas fell. A stream of supportive headlines from tech firms buying bitcoin as a cash reserve has push Bitcoin’s price up to become the top performing commodity in October, rising by 27.4%.