Encouraging economic data flowing out of the US boosted investors' sentiment drove stock prices higher amidst a worsening pandemic situation globally. The tech sector stole the limelight when Tesla and Apple saw its prices shoot through the roof, boosting the performance of the S&P 500, which inched 0.8% higher to close at record high levels in 6 months. Gold price lost some of its lustre last week as investors locked-in gains amidst a rising equity market.

 

In the News

  • The number of COVID-19 cases worldwide increased by over 1 million last week, hitting the 23 million mark, with more than 800,000 deaths. The spike in cases comes as several countries such as India, Iraq and Russia struggled to contain a new surge in cases. However, things are looking optimistic in the US as the downward trend of daily new cases continues.
  • US economic data was the focus of last week’s markets, showing signs of recovery albeit an uneven one. Existing home sales in July surged past expectations, hitting a record since December 2006, boosted by low mortgage rates and low inventory. 
  • Quarterly earnings season wrapped up on a strong note, as several major retailers posted earnings that exceeded analysts’ expectations.
  • Minutes of the July Fed Policy meeting revealed that members expect the ongoing pandemic to weigh heavily on economic activity, employment, and inflation in the near term and could pose considerable risks to the economic outlook over the medium term. While it is prepared to continue its support for the US economy, the timing of the support remains vague. 
  • The S&P 500 Index saw gains for the fourth straight week, as technology stocks led the index to reach a pre-pandemic record high. Tech-focused Nasdaq rose 2.32% over the week, steadily outperforming other major indices and extending its run of record highs.
  • Apple was the tech stock of week, as its market capitalisation hit a record USD 2 trillion last Wednesday, making it the first company in the world to do so. At the end of the week, its market capitalisation hit a USD 2.1 trillion.
  • All the excitement saw tech-focused NYSE FANG+ Index rising 7.38% last week, as the 0830EA, which aims to provide 2x the daily performance of the index, jumped 14.89% in MYR terms over the same period. 
  • The Chinese market also edged higher throughout last week as the postponement of its trade review with US slightly eased negative sentiments, with analysts predicting that the move was made to allow more time for China to improve its position in the initially agreed trade deal. 
  • However, tensions between both countries continue to loom as the US imposed fresh restrictions on Huawei Technologies, halting the supply of advanced chips from China and Taiwan, making production difficult to sustain beyond September. 
  • Chinese app TikTok confirmed its plans to challenge the Aug 6 executive order banning transactions in US, while the Trump administration are seeking to assure business in the US that WeChat is likely to stay in US, after realising the devastating impact of an all-out-ban on US companies.
  • Several Chinese consumer companies released its quarterly earnings last week, with Meituan Dianping reported a 152.4% net profit jump in the second quarter, while Pinduoduo’s earnings were up 67% last quarter from the same period last year. Tech giant Alibaba also posted a net income increase of 124% last quarter compared to last year.
  • Stellar earnings in consumer and tech stocks in the New China economy boosted the S&P New China Sectors Ex A Share Index by 2.72% higher – the strongest performer amongst China’s major indices. This led to the 0829EA to jump 2.41% higher to bring its YTD gains to 24.38% in MYR terms.
  • It was a short trading week locally, with glove counters seeing a recovery from its dip the week before. On a week-to week basis, the local KLCI index inched 0.8% higher, while the Dorsey Wright Technical Leaders Malaysia Index jumped 4.69%, riding on the positive momentum in the health care sector, pushing a 4.52% gain in the 0836EA.
  • Gold prices rebounded back to USD 2000/oz levels early last week, as uncertainties loomed over global markets. However, profit taking activities left the precious metal ending the week at USD 1930/oz levels. While gold prices still remain below USD 2,000/oz levels, the 0828EA is still seeing a YTD gain of 28.53% in MYR terms. 

 

On the Economic Data Front

  • US market recovering, albeit an uneven one:
    • Jobless claims climbed back to levels above 1 million ,with 1.1 million claims recorded last week.
    • However, the number of unemployed filing continuing claims dropped to the lowest since April, exceeding expectations.
    • Investors are anticipating a report on the second quarter GDP estimates this week, as its initial estimates of economic output showed an annualised contraction of 32.9%. 
    • Consumer spending appears optimistic, as restaurant reservations and debit and credit card usage hit peaks since the start of the pandemic.

  • European shares shows weakened performance:
    • Preliminary PMI readings indicated that growth in the Eurozone may have lost its momentum this month.
    • The composite output index for manufacturing and services fell from 54.9 to 51.6 in July, as a rise in infections and renewed travel restrictions dampened the service sector.
    • The UK economy showed signs of recovery when its composite PMI surged to an 82-month high of 60.
    • However, the latest talks with the EU on their post-Brexit relationship ended without significant progress, despite the urgency to reach an agreement before October’s leaders’ summit.

  • China reports encouraging earnings:
    • Earnings from consumer stocks exceeded expectations, as the domestic market continues to recover.
    • Online retail sales reached 5.15 trillion yuan in the first 6-months of this year, a 7.3% increase from last year.
    • The country has kept its benchmark lending rate steady for the 4th consecutive month last week, in line with expectations
    • The central bank added 700 billion yuan of one-year funding through its medium-term lending facility last week, more than offsetting upcoming bond maturities.

 

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A look at the performance of the TradePlus ETFs, and major global indices

 

 

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