Last week Europe and the US's major stock indices continued to adjust as investors worried about deteriorating economic data and escalating conflict in international trade. Both the US and China have maintained sharp positions and have not shown any signs of being willing to return to the negotiating table. Additional tensions were added by Japan's and Canada's decision not to select Huawei as a partner for the infrastructure for the next generation of data transmission.
Consequently, the major US indices further depreciated and ended the May in the red, making May the first negative month in 2019. This time the worst performing index was Dow 30, which lost 3% while the best performer was the Nasdaq Composite, which lost 2.4%. The S&P500 depreciated 2.6% to 2,750 points and ended the trading week below important support at 2,800 points and below the 200-day moving average. The index has corrected 6.6% from its all-time high.
China's stock index Shanghai Composite appreciated 1.6%, although overall volatility was low and in the last two months the index traded in a channel. Among economic data, the most important release was manufacturing sector's PMI, whose value decreased below the 50-point level again to 49.4, indicating that business representatives have negative expectations for the upcoming months and the trade war is having a significant impact on them. Overall, data from China is not very positive and the government is making an effort to keep the situation stable, therefore investors should not have high expectations that China will revive the world economy again.
In the US bond market, the difference between two and 10-year bonds remained at 0.2%. More importantly, bond yields of all maturities continued to decline rapidly. The 10-year bond yield decreased from 2.29% to 2.14%, which is the lowest point since September 2017. Overall, the bond market sends very clear signals that the economic situation is deteriorating and promises nothing good. Futures prices indicate about a 50% probability for an interest rate decrease in the next US Federal reserve meeting.
In the commodity market, sentiment remained negative. Deterioration in oil sentiment continued, with WTI's price decreasing 9.0% to 53.4 USD per barrel. There have been no fundamental changes in the oil market and such a sharp and sudden decline is more associated with a negative change in investor sentiment. In the metals market, copper decreased by 2.5%, aluminum increased by 0.8% and iron ore fluctuated around 96 USD/T.
Among different sectors, all of them recorded negative changes in value. The relative best performers were the financial and utilities sectors, whose value decreased 1.5% and 1.8% accordingly.
Meanwhile, consumer goods companies, whose value decreased 3.1%, have shown the worst results.
Last week a significant amount of attention was drawn to one of the biggest US retail chains, Costco.
Costco has generated 34.7 billion USD in revenue over the last financial quarter, which was in line with market expectations. In terms of revenue dynamics, comparing the sales of the same warehouses, revenue increased by 5.6% and was slightly above market expectations. Adjusted earnings per share amounted to 1.89 and were above the 1.83 investors had forecast.
After the announcement of results, Costco stock price marginally decreased and was around 240 USD. Over the last 12 months, its stock price has increased around 22%. The company pays quarterly dividends, which currently have a yield of about 1.1%.
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