Market Review

Global Markets Weekly Update

Review the performance of global stock and bond markets over the past week, along with relevant insights from T. Rowe Price economists and investment professionals.



Value stocks continue to regain ground

Stocks recorded a second consecutive week of solid positive returns, with slower-growing value stocks again gaining ground against more highly valued growth shares. At its peak Thursday, the S&P 500 Index moved within 10% of its all-time high, pulling it out of correction territory, according to some definitions. Meanwhile, the technology-heavy Nasdaq Composite Index climbed within almost 3% of its February peak before falling back. Utilities stocks outperformed, while energy stocks moved lower on reports of an increase in domestic crude inventories. Markets were closed on Monday in observance of Memorial Day.

Optimism about the gradual reopening of the global economy seemed to be the primary driver of sentiment. As restrictions on public gatherings continued to be lifted and retail establishments and restaurants received permission to serve customers in limited numbers, the daily number of new confirmed coronavirus cases rose moderately in some states but perhaps not as much as feared. T. Rowe Price traders noted that investors also seemed encouraged by news of human trials of a possible vaccine for COVID-19 under development by Novavax.

Economic data surprise on the upside

The week’s economic reports also appeared to be less bleak than many had anticipated. April durable goods orders outside of the volatile transportation segment fell 7.4%, roughly half as much as anticipated. Another 2.12 million Americans filed for unemployment benefits over the previous week, which was slightly above expectations, but investors seemed reassured that the number continued to trend downward. Continuing claims for unemployment benefits also fell unexpectedly by roughly 4 million. Housing data were mixed. Sales of new homes rose at a robust pace in April, but pending home sales fell by nearly 22%, more than expected.

China’s passage of legislation restricting the autonomy of Hong Kong resulted in sharp criticism from U.S. officials and appeared to drain some of the positive sentiment, particularly late in the week (see China section below). Shares in Facebook and Twitter also came under pressure after President Donald Trump threatened to tighten regulations on social media platforms following the latter’s posting of a fact-check notice regarding one of his tweets. On Thursday, the president signed an executive order accusing the platforms of engaging in “selective censorship” and calling on the Federal Communications Commission to investigate whether they were operating in “good faith.”

Assets continue to flow into muni market

Longer-term bond yields ended the week slightly lower as U.S.-China tensions counterbalanced optimism about economies reopening. (Bond prices and yields move in opposite directions.) The broad municipal market extended its May rally, generating positive returns and outperforming Treasuries through most of the week. According to Lipper, muni bond mutual funds experienced inflows of roughly USD 1.8 billion for the seven days ended May 20, marking the largest weekly inflow figure for the asset class since late February. Due the holiday-shortened week, however, new issuance and secondary trading activity in the muni market were relatively muted.

The investment-grade corporate bond market saw steady primary market activity throughout the week, and the volume of deals exceeded expectations. T. Rowe Price traders reported that the new issues were generally met with solid demand, and credit spreads narrowed across most market segments.

Another week of strong inflows to high yield funds contributed to positive sentiment and helped the market absorb a heavy slate of new deals. Fallen angels—issuers that have recently lost investment-grade status—continued to perform well amid strong interest. In credit-specific news, car rental company Hertz Global filed for Chapter 11 bankruptcy protection late the previous Friday due to travel restrictions causing a collapse in demand for its vehicles. The Chapter 11 filing allows Hertz to continue operations as it works to pay creditors and turn its business around.

U.S. Stocks1
Index Friday's Close Week's Change % Change YTD





S&P 500




Nasdaq Composite




S&P MidCap 400




Russell 2000




This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.
Source of data: Reuters, obtained through Yahoo! Finance and Bloomberg. Closing data as of 4 p.m. ET. The Dow Jones Industrial Average, the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments of the U.S. equity markets by market capitalization. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock exchange and the National Market System. Frank Russell Company (Russell) is the source and owner of the Russell index data contained or reflected in these materials and all trademarks and copyrights related thereto. Russell® is a registered trademark of Russell. Russell is not responsible for the formatting or configuration of these materials or for any inaccuracy in T. Rowe Price Associates’ presentation thereof.



Stocks in Europe posted strong gains, as optimism fueled by reopening economies and proposals for more European stimulus offset fears of a second wave of coronavirus infections and increased U.S.-China tensions. The pan-European STOXX Europe 600 Index ended the week 3.0% higher. Germany’s DAX Index climbed 5.01%, the CAC 40 in France advanced 6.02%, and Italy’s FTSE MIB Index gained 4.90%. The UK’s FTSE 100 Index added 1.32%. Peripheral eurozone bond yields, meanwhile, fell markedly on the week. Comments from European Central Bank Vice President Francois Villeroy de Galhau sparked fresh hopes of further stimulus and helped to send the Italian 10-year bond yield from around 1.6% on Monday to 1.44% on Friday. Optimism over a proposed European recovery fund also suppressed yields.

EC unveils EUR 750 billion recovery package

European Commission (EC) President Ursula von der Leyen unveiled a EUR 750 billion pandemic recovery plan. The EC would borrow from the market and distribute two-thirds of the funds in grants and the rest in loans, meeting some of the objections of Austria, Sweden, Denmark, and the Netherlands. Spain and Italy would be the main beneficiaries. T. Rowe Price International Economist Tomasz Wieladek says this budget proposal is a workable compromise that addresses a lot of political sensitivities at once, which makes it more likely that all EU countries will agree to it sooner rather than later. Although the proposal will have a significant macroeconomic impact, it is a moderate package instead of a fiscal bazooka. Consequently, he believes that the European Central Bank (ECB) will need to keep on ensuring that peripheral bond yield spreads remain low in the medium term.

Germany’s ruling coalition is working on a stimulus plan of between EUR 50 billion to EUR 100 billion, officials were quoted as saying. This comes on top of the EUR 750 billion rescue package and the suspension of debt limits approved by parliament in March.

Lagarde sees deeper recession

ECB President Christine Lagarde warned that the eurozone economy will shrink by 8% to 12% this year, in line with the more severe scenario outlined by the ECB last month, because of the “sudden stop of activity” caused by the coronavirus.

The ECB is widely expected to increase its asset purchase programs for this year at its policy meeting on June 4. Executive Board member Isabel Schnabel hinted as much in an interview with the Financial Times, when she said that “if we judge that further stimulus is needed then the ECB will be ready to expand any of its tools.” Her comments came after Villeroy de Galhau told an online conference that low inflation provides room to act rapidly and that, in line with the ECB’s mandate, policymakers will probably need to go even further.

BoE's Bailey: Risk of longer, harder UK recovery

In an article for newspaper The Guardian, Bank of England Governor Andrew Bailey said that the UK economy risks taking longer to recover from the impact of the coronavirus than the central bank expected earlier this month. He stressed that the BoE stands ready to provide further support for the economy if needed as the UK begins to reopen.

Macron OKs aid for French auto industry

President Emmanuel Macron announced an EUR 8 billion plan to revive France’s motor industry, with EUR 5 billion destined for Renault. The plan includes increased subsidies for buyers of electric and hybrid cars and support for research into hydrogen power and self-driving cars. It aims to ensure that the country’s automotive assemblers and suppliers survive the crisis and emerge in the years ahead as leading global manufacturers and exporters of clean vehicles.

The German government approved a EUR 9 billion bailout for airline Lufthansa, the largest airline rescue in Europe. However, unlike other rescues, the state will take a 20% stake in Europe’s second-biggest airline and will have two supervisory board seats. The aid will have to be approved by the EC.


Japanese stocks surged during the week. The Nikkei 225 Stock Average advanced 1,490 points (7.3%) and closed at 21,877.89. Despite the solid advance, the Japanese stock market barometer is still 7.5% lower for the year-to-date period. The large-cap TOPIX Index and the TOPIX Small Index—broader measures of Japanese stock market performance—also recorded strong weekly gains, but they, too, are under water -9% and -11%, respectively, for the year to date. The yen was little changed versus the U.S. dollar for the week.

State of emergency lifted across Japan

Prime Minister Shinzo Abe announced in a Monday afternoon press conference—based on the advice of the government’s panel of experts on coronavirus issues—that he was lifting the state of emergency for the remaining five prefectures that were still on lockdown orders. Investors turned bullish on the news, and stocks staged an impressive rally. Lifting the restrictions in the greater Tokyo region, which generates about one-third of Japan’s gross domestic product (GDP), is viewed as vital to Japan’s economic recovery. Abe’s announcement comes a week earlier than expected, reflecting an acceptable decline in new cases in the remaining lockdown areas and because medical care, monitoring, and testing capacity had improved. The Japanese public is still being asked to remain cautious about spreading the coronavirus, which has infected upwards of 16,000 people in Japan, resulting in more than 800 deaths.

Japan unveils a second round of stimulus measures

On Wednesday, May 27, the government announced Japan's second fiscal 2020 supplementary budget, totaling JPY 117 trillion (USD 1.1 trillion). The latest stimulus package brings total supplementary additions to JPY 230 trillion. The total represents approximately 40% of Japan’s annual GDP. However, critics note that the total economic package has been watered down by various add-ons, and the fiscal benefit to the economy is considerably smaller than the headline number, while the first round of stimulus has been slow to reach individuals and companies. The ruling coalition expects to pass the latest subsidy add-ons in the current Diet session, which runs through June 17. The subsidy add-ons include monetary support for small-business leases, companies that keep employees on their payrolls, unemployed workers, and single-parent households.

According to Reuters’ government sources, the regime intends to increase Japanese government bond (JGB) issuance in fiscal 2020 (ending March 31, 2021) to approximately JPY 210 trillion (USD 2.0 trillion), representing the largest amount of bond issuance since comparable data have been available. The JPY 60 trillion increase in government bond buying, which is expected to begin in July, will be composed of higher monthly issuance of 10-year bonds (JPY 2.6 trillion), 20-year bonds (JPY 1.2 trillion), and 30-year bonds (JPY 0.9 trillion). The additions come on top of already approved JGB issuance totaling JPY 153 trillion to offset the economic impact of the coronavirus pandemic on the economy.


Investors in Chinese equity markets were in a cautious mood ahead of President Trump's response to Beijing’s move to curtail Hong Kong’s autonomy by imposing national security laws on the territory. Flows were light with many investors waiting on the sidelines. The Shanghai Composite A-share index edged 1.4% higher over the week, while the CSI 300 large-cap index gained 1.1%. Investors worry that a punitive U.S. response to China could result in a tit-for-tat escalation from Beijing, further straining ties between the two countries and dampening prospects for a global economic recovery in 2020.

Rebound in industrial enterprise profits

Profits at China's major industrial firms improved in April, according to official data released on Wednesday. April's annual decline narrowed to 4.3% after a much steeper 34.9% drop in March. On a year-to-date basis, the profit squeeze eased from -29.5% in March to -17.2% in April for private enterprises but was unchanged at -46.0% for state-owned enterprises. Government statistician Zhu Hong warned that April's improvement was unlikely to last given a slow recovery and falling industrial prices.

Hong Kong backlash against proposed national security law

On Wednesday, U.S. Secretary of State Mike Pompeo told Congress that Hong Kong was no longer sufficiently autonomous to merit special treatment. Many analysts agree that the potential withdrawal of U.S. trade privileges would have a negligible direct impact on Hong Kong as its main focus is on merchandise trade. Hong Kong’s domestic exports are much smaller than in 1997, when the post-handover U.S. trade regime for Hong Kong was agreed upon. Trade in the services category, which is far more important, is not affected.

Investors worry that there may be longer-term implications for Hong Kong’s future as an Asian financial services hub and business center for the 1,300 American companies operating there. In April, Fitch cut its ratings for Hong Kong to AA-/Stable, citing rising economic, financial, and sociopolitical linkages with China as justification.

China's efforts to exert greater political control over the city are expected to meet strong local resistance that could further damage the local economy. Hong Kong saw the return of political protests during the week, including calls for a strike on Wednesday when Hong Kong lawmakers passed a bill making it an offence to insult the Chinese national anthem.

Hong Kong receives a shot in the arm from MSCI

MSCI announced a deal with Hong Kong Exchanges & Clearing Ltd. (HKEX), the listed company that manages the local stock exchange, to sell 37 futures and options contracts based on its Asian and emerging market indexes. It will stop licensing indexes for most derivatives products with HKEX's counterpart in Singapore, SGX, which saw its share price fall 12% on the news. MSCI’s Chief Executive Officer Henry Fernandez said Hong Kong's attractions were a larger customer base, particularly access to Chinese institutional and retail investors, and the large market for index options that HKEX has developed.

The National People's Congress (NPC)

The annual NPC provides the Chinese Communist Party leadership with an opportunity to showcase its achievements to the nation. After the review of economic policies and announcement of a new national security law for Hong Kong on day one of the NPC, the sessions this week were of more interest to a domestic audience than to overseas investors. The NPC Finance Committee suggested that company and criminal law be revised to support China's new securities law, increasing the penalties for financial fraud and other offences.

China's more assertive geopolitical and foreign policy stance under President Xi Jinping was clearly visible at the 2020 NPC. Defense Minister Wei Fenghe criticized the U.S. for its “suppression and containment” of China since the start of the coronavirus pandemic. Beijing will increase China's defense budget by 6.6% in 2020, while central government spending on education, science, and public services will be cut.

Officials appear to want to avoid return to trade war

At the NPC, China's leaders repeated their intention to fulfill the terms of the phase one trade deal with the U.S. So far, imports of U.S. products have fallen far short of what was promised in February. Trade between the two countries was heavily disrupted by the coronavirus, and China’s imports of U.S. manufactured goods are running 40% below target. For agricultural imports, the shortfall is even bigger, at around 60%. The recent acceleration in large-scale orders for U.S. agricultural produce suggests China is making an effort to catch up.

Other Key Markets

Brazilian shares gain as currency continues to strengthen

Stocks in Brazil, as measured by the Bovespa Index, returned about 5.7%. Brazilian shares climbed amid hopes for a rapid development of an effective COVID-19 vaccine and optimism about a robust global economic recovery as nations reopen for business. Gains were tempered somewhat by tensions between the U.S. and emerging markets heavyweight China.

The real strengthened during the week, extending a rally that started last week following comments from the central bank president in which he expressed a willingness to stabilize the real via currency market interventions. Nevertheless, the real has fallen sharply against the U.S. dollar in the year-to-date period. One notable benefit from this year’s currency weakness is that it has made Brazilian exports cheaper to the rest of the world, resulting in a record current account surplus in April. T. Rowe Price sovereign Analyst Richard Hall believes the current account data that were released early in the week were impressive, and while he acknowledges that net foreign domestic investment flows were softer, he also notes that the overall basic balance reached its highest level in years.

Indian shares benefit from reopening optimism

Indian stocks, as measured by the S&P BSE Sensex Index, also returned about 5.7%. The market was closed for a holiday on Monday. Stocks rose strongly in anticipation of the Indian economy reopening for business. The nationwide lockdown, which started in late March and has been extended a few times, is currently scheduled to stay in effect through the end of May. Starting in June—even though the nationwide number of confirmed coronavirus cases continues to climb—the Indian government will permit certain areas with relatively low coronavirus infection rates to relax some of their restrictions. Additionally, some regional governments will be given greater leeway to determine how to manage and ease the lockdown limits in their territories.

Geopolitical tensions between India and China have been rising since a skirmish between Indian and Chinese troops near a disputed border region in early May. In recent days, each country has been increasing its military presence in the Ladakh region, and meetings between Indian and Chinese representatives have yet to diffuse the situation. U.S. President Trump has even offered to mediate the border dispute. While an escalation in tensions would be unwelcome, it would not be surprising for the standoff to persist for some time. T. Rowe Price Credit Analyst Chris Kushlis recalls that a similar border dispute several years ago between the two nations lasted for several months but was ultimately resolved through diplomacy.

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