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Weekly Trend Update

Over the past week, the S&P500 printed a fresh record adding 0,7% (20,3% YTD) while the Nasdaq100 rallied 1,3% (25,5% YTD) with FB, AMZN and INTC all posting gains between 3% and 4% on the week that set them on break out mode. The US small cap index dropped however by -0,4% (16,6% YTD). As we highlighted yesterday, US stocks outperformed with the highlight of the week being D. Trump cheer leading efforts and J. Powell’s signalling that the Fed will cut rates (at least by 25bps at the end of the month) which took precedence on everything else including early indication of a poor earnings season. European shares took a step back with Eurostoxx50 dropping -0,9% (18,7%), underperforming the S&P500 by-1,6%. Both BASF and Daimler warned this past week of results that will be significantly weaker this year than last which plagued sentiment on the German Dax. DIA (SPDR DJIA TRUST) gained 1,5% (17,2%, Z-score 2,7). Diversified EM equities (VWO) dropped -0,2% (12,2%). CSI300 Chinese equity index (ASHR) also corrected, dropping -1,3% (26,6%). Russian shares (RSX) eked out some small gains 0,3% (27,6%). The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies dropped -0,3% (2,9%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 0,2% (2,2%). USDBRL sold off by -2,2% (-3,7%, Z-score -2,2). Friday’s COT report showed an end to the short covering of speculative EURUSD short position (which rose to -35.9k from -31.7k) while speculative interest to short GBP returned with the net short increasing by -8.7k to -73k. Speculators remained keen to stay net long of MXN which was evident from the short lasting negative effect of Mexico’s Finance Minister last week on the currency which was also supported by a strong Latam in general (and USDBRL breaking on the downside). 10Y US Treasury yields rose 9bps (-56bps) to 2,12% while 10Y Bunds climbed 15bps (-45bps, Z-score 2,2) to -0,21%. 10Y Italian BTPs rallied -1bps (-100bps) to 1,74%, continuing to outperform Bunds even as yields rose. US High Yield (HY) Average Spread over Treasuries climbed 5bps (-155bps) to 3,71%. US Investment Grade Average OAS climbed 0bps (-49bps) to 1,23%. In European credit markets, EUR 5Y Senior Financial Spread dropped -1bps (-51bps) to 0,59%. Gold outperformed stocks last week, gaining 1,2% (10,4%) while Silver started to outperform gaining 1,5% (-1,8%) with option risk reversals, option open interests as much as futures’ net positioning suggesting an accumulation pattern. Major Gold Mines (GDX) were the top performers of last week’s strong metals’ sector, rallying 3,2% (24,3%). Bitcoin rallied 7,9% (224,1%) despite Fed Chair Powell and D. Trump cautioning on Thursday and Friday about the risks that cryptocurrencies entail in respect to money laundering and financial stability, vowing to push for more regulation and transparency in the sector. Next to the bond selloff, the sputtering of the dollar, what looked like a bottoming formation in commodities was the third highlight of the past week as the Goldman Sachs Commodity Index rallied 3,2% (14,4%) while WTI Crude rallied 4,7% (32,6%) and DBA (Aggs) added 1,8% (-0,3%, Z-score 2,0). 

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