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Global Markets Weekly Update - USA

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BM.GE
13.11.18 19:41
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Stocks were higher but gave back a portion of their gains to end the week, large-cap indexes outperformed the technology-heavy Nasdaq
Composite Index and the smaller-cap benchmarks.

Slower-growing value stocks outpaced higher-valuation growth shares, within the S&P 500 Index, health care stocks outperformed.

Provider and insurer shares rose on Wednesday after the Democrats won a majority of seats in the House of Representatives, seemingly assuring a
continuation of subsidies under the Affordable Care Act.

Communication services stocks performed worst, held down by late declines in Netflix and video game stocks, furthermore energy stocks were also
weak, dragged lower by a sharp decline in oil prices.

Midterm elections on Tuesday dominated sentiment throughout the first half of the week, according to international traders.

Stocks recorded modest gains on Monday and Tuesday, as polls suggested that Democrats would take the House and that Republicans would
retain control of the Senate.

Stocks surged on Wednesday after those results were confirmed, with the S&P 500 recording its third-best daily gain over the past year.

Trading volumes during Wednesday’s rally were unimpressive, however—roughly 7% below the trend over the previous 20 trading days.

The prospect of legislative gridlock seemed to be a welcome one and many on Wall Street may have focused on a historical pattern of gains
following the midterms—stocks have rallied after every midterm election since 1946.

On the other hand many experts, analysts and managers point out that elections and other political developments are typically overshadowed by
more fundamental factors, such as the direction of monetary policy and longer-term economic forces.

The week’s economic data were mixed, Institute for Supply Management’s measure of service sector activity, reported Monday declined less than
expected in October and remained just below the record peak.

More concerning was a jump in producer price inflation, with much of the inflationary pressure coming from wholesalers and retailers.

Meanwhile a continued slide in oil prices led some to wonder whether global demand was slowing, calling into question the overall health of the
global economy, investors also worried about a continuing rise in oil inventories and the price of a barrel of domestic benchmark West Texas
Intermediate (WTI) crude fell into a bear market—down over 20% from a four-year high of about $76 in early October.

Mixed economic data and the lack of surprise in the election outcome kept longer-term Treasury yields roughly unchanged for the week.

Municipals saw heavy investor demand early in the week, coupled with limited supply from new issuance, which led to elevated activity in the
secondary market.

Credit spreads—the extra yields offered by investment-grade corporate bonds over Treasuries with similar maturities—tightened throughout most of
the week, supporting prices in the sector.

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