Market week: U.S. COVID-19 resurgence sinks markets
Vanguard shuts down four ETFs
North American stock indexes closed lower on the week, as investors fled risk assets against a backdrop of a resurgence in COVID-19 cases in several U.S. states, including Texas and Florida, where state governments began reversing recent loosening of some restrictions on businesses. Fears of a halt to nascent economic recovery as consumers lose confidence again drove investors to re-think and revise near-term corporate earnings prospects downwards.
Perhaps more critically, traders digested the U.S. Federal Reserve Board’s report on its annual stress test of 29 major U.S. banks and five foreign banks, which saw the Fed issue an order for big banks to preserve capital in the third quarter by capping dividend payments and suspending share repurchase programs.
The broad blue-chip S&P 500 Composite Index posted a 2.9% loss on the week as a consequence, while the technology-weighted Nasdaq Composite Index fell 1.9%, as shares of social media giant Facebook Inc. (NSD: FB) fell 8% on Friday, while Twitter Inc. (NSD: TWTR) dropped 7.4% as the companies faced an ad boycott by major advertisers, including Unilever, for what the advertisers said was their failure to implement policies to end hateful content and misinformation. Facebook CEO Mark Zuckerberg later announced that the company would meet advertisers’ demands, but the damage to share price on Friday had been done, and the Facebook lost 9.5% on the week. Twitter gave up 8.6% on week.
Crude oil prices slumped along with the stock market and for the same reason – traders’ fears that a resurgence of COVID-19 cases in the U.S. will stifle consumer demand for petroleum, driving the price of a barrel of West Texas Intermediate crude oil to a weekly loss of 3.2%. That slump hit Canada’s energy sector hard, resulting in a 9.7% week-over-week loss for the S&P/TSX Capped Energy Index. Feeling the effects of that downdraft in the key energy component, Toronto’s benchmark S&P/TSX Composite Index fell 1.8% on the week.
Fund news and updates
* Vanguard terminates four ETFs. Vanguard Investments Canada announced on June 19 that it will terminate four ETFs on or about Aug. 25
- Vanguard Canadian Short-Term Government Bond Index ETF (TSX: VSG). Assets: $52.8 million.
- Vanguard FTSE Developed Asia Pacific All Cap Index ETF (CAD-hedged) (TSX: VAH). Assets: $25.4 million.
- Vanguard FTSE Developed Europe All Cap Index ETF (CAD-hedged) (TSX: VEH). Assets: $27 million.
- Vanguard Global Liquidity Factor ETF (TSX: VLQ). Assets: $11 million.
In a release, Vanguard said it decided to “terminate the ETFs following a thorough ETF product review and believes it’s in the best interests of Vanguard’s investors by focusing on products which allow Vanguard to deliver value to investors through greater economies of scale.”
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