Market Digest – Week Ending 9/13
A Russian proposal calling for Syria to hand over its chemical weapons stockpile found enough interest from both the US and Syria to remove the prospect of imminent US military strikes. Meanwhile, exports from China exceeded forecasts. Stock markets responded positively to both events, posting solid gains for the week. Bond prices were up modestly on mixed US economic news, while gold fell sharply, resuming its downward trend for the year.
S&P 500: 1,688 (+2.0%)
FTSE All-World ex-US: (+2.9%)
US 10 Year Treasury Yield: 2.89% (-0.05%)
Gold: $1,324 (-4.7%)
USD/EUR: $1.330 (+0.9%)
- Monday – Syria said it welcomed a Russian proposal to hand over its chemical weapons and the White House said it would “take a hard look” at the proposal.
- Monday – Chinese exports climbed 7.2% in August from a year ago, well ahead of expectations.
- Tuesday – Apple introduced two new iPhone models, including a lower priced version. Shares fell as investors were disappointed by a lack of any surprise announcements.
- Wednesday – Verizon sold $49 billion of new debt to fund its acquisition of Vodafone’s share of its wireless business. The ten year bonds were sold with a yield ranging from 4.9% to 5.1%.
- Wednesday – The UK unemployment rate unexpectedly fell to 7.7%.
- Thursday – NASA announced that its Voyager 1 space probe became the first spacecraft ever to leave our solar system. Launched 36 years ago, it is now over 11 billion miles from the sun.
- Thursday – Dell announced its shareholders approved a $25 billion buyout led by founder Michael Dell and private equity partner Silver Lake.
- Friday – Retail sales rose 0.2% in August, trailing estimates.
The markets seemed pleased with a decreased likelihood of US military action against Syria in the short term. We don’t have any special insight into the future in Syria, but we are skeptical that a Russian diplomatic offer will provide final resolution. Expect Syria to stay in the news through the fall.
This was the second consecutive week global equity markets rose with international stocks leading the way. One or two weeks don’t make a trend, but the pattern is worth watching. Many in the US have abandoned international developed and emerging market stocks due to poor performance this spring and summer. For those who currently lack global diversification, it may be time to reconsider.
At $49 billion, the Verizon debt sale was a massive one. Despite paying slightly higher rates than some expected in order to generate volume, the offering was a success and demand was strong. Yields may be rising, but there is still a need for fixed income and the bond market remains healthy.