Overview: Stocks across the globe were mixed last week as July came to a close. International developed markets traded lower as political risks from the U.S. intensified and European earnings lagged. For the week, emerging market stocks (MSCI EM) were up about 1.8%, and non-U.S. developed stocks (MSCI EAFE) were down about -2.1%. In the U.S., impressive technology earnings from the mega-cap companies such as Apple, Google, and Facebook helped equities move higher, with the S&P 500 index up 1.8% for the week. This was despite a sharp decline in second-quarter GDP and another increase in initial jobless claims, factors potentially dimming hopes of a strong economic recovery. In bonds, global yields continued to fall last week as investors reacted to weak economic data buying Treasuries. The 10-year Treasury yield fell 0.05% (5 basis points) to end the week near record lows at 0.54%.
Economic Data: Gross domestic product (GDP) numbers were reported in both the U.S. and Europe last week. The first estimate of the U.S. second-quarter GDP revealed a -32.9% annualized decline, the largest drop in the post-war era. Consumer spending (-34.6%) and business investment (-27%), and home construction (-39%) were the biggest contributors to the decline. This was partly offset by a 17% surge in federal spending. In Europe, the Euro area second-quarter GDP contracted by -12.1% quarter-over-quarter, with greater than expected declines in Germany (-10.1%) and Spain (-18.5%), and smaller than expected declines in France (-13.8%) and Italy (-12.4%). U.S. consumer confidence fell to 92.6 from 98.3 in July, more than expected amid renewed virus concerns. The University of Michigan Consumer Sentiment Index also fell to 72.5 from 73.2 the month prior.
Sources: Goldman Sachs Asset Management, Bloomberg
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