The charts that matter: a surprisingly uneventful week in markets

published 3 October 2020

Welcome back – first things first, don’t miss this week’s podcast, in which Merryn talks to the team at Amati Global Investors about their favourite small-cap stocks, and particularly opportunities in healthcare and biotech.

Also, don’t miss this week’s issue of MoneyWeek magazine, in which we ask, are monopolies destroying capitalism, as many people on both sides of the political divide seem to believe? Or is it more complicated than that – and is probable government intervention only going to make things worse? Get your copy now - you get six weeks free plus a free report on gold investing.

And if you’ve ever struggled to understand what bonds are or how they are priced, then please watch our latest “Too Embarrassed To Ask” video for a quick beginner’s guide.

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Here are the links for this week’s editions of Money Morning and other web stories you may have missed.

Monday: What are “fallen angels” – and why have they been such good investments?
Merryn’s blog: Are we really in a stockmarket bubble?
Tuesday: Investors are shunning UK stocks – but they might regret that in a year’s time
Wednesday: Two commodities that could lie at the heart of the next resources bubble
Thursday: It’s getting harder for big investors to ignore gold
Friday: Trump’s Covid diagnosis has rattled markets – but you should sit tight

Now for the charts of the week.

The charts that matter

Gold clawed back some ground this week, helped partly by the market reaction to the news that Donald Trump has tested positive for Covid-19.

(Gold: three months)

Gold was also helped by the fact that the US dollar index (DXY – a measure of the strength of the dollar against a basket of the currencies of its major trading partners) gave back some of its recent gains.

(DXY: three months)

Even the Chinese yuan (or renminbi) strengthened against the dollar again this week (when the black line below rises, it means the yuan is getting weaker vs the dollar) as the US currency was generally weaker across the board.

(Chinese yuan to the US dollar: since 25 Jun 2019)

Yet again, the yield on the ten-year US government bond didn’t change much.

(Ten-year US Treasury yield: three months)

The yield on the Japanese ten-year more than doubled this week. That sounds like a huge move, but it was from 0.007% to 0.019%, so in reality it’s nothing.

(Ten-year Japanese government bond yield: three months)

The yield on the ten-year German Bund fell back a bit.

(Ten-year Bund yield: three months)

Copper fell this week as concerns grow about the impact of fresh coronavirus outbreaks on global economic activity.

(Copper: nine months)

The Aussie dollar rebounded this week as the US dollar drifted lower.

(Aussie dollar vs US dollar exchange rate: three months)

Cryptocurrency bitcoin fell somewhat towards the end of the week, but well within the sort of range you’d expect from the cryptocurrency.

(Bitcoin: three months)

US weekly jobless claims were lower than analysts expected. There were 837,000 new claims, down from 873,000 last week (that was revised a little higher from 870,000). The four-week moving average fell to 867,250 from 878,250 previously.

More importantly, the US non-farm payrolls data for September came out on Friday. US workplaces only added 661,000 jobs, compared to expectations for 850,000. That said, the August gain was revised up to 1.49 million jobs from 1.32 million, so that was quite an improvement. Also the unemployment rate fell to 7.9% from 8.4%, which beat analysts’ expectations.

It’s going to be difficult to get a reliable picture of what’s going on for quite some time, so the relatively muted market reaction wasn’t surprising.

(US jobless claims, four-week moving average: since Jan 2020)

The oil price (as measured by Brent crude) continued to drop this week as the threat of more lockdowns hangs on demand.

(Brent crude oil: three months)

Amazon gained this week as the Nasdaq index recovered some ground from its recent falls.

(Amazon: three months)

Tesla also ended the week higher.

(Tesla: three months)

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John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.