Market round-up: 6 - 10 July

Thomas Watts


This week

They say there are no free meals when it comes to investing, which by the end of the week rang true for the Chancellor of the Exchequer who on Wednesday had promised an additional £30 billion to head off an unemployment crisis, whilst also attempting to help an ailing hospitality sector with the enticement of half price dining out from Monday to Wednesdays.

While shares in restaurant and pub chains initially rose, by the end of the day and throughout the rest of the week they had sunk further as news of pubs being forced to shut again due to some customers testing positive for COVID-19, gave investors food for thought.

There was good news for the property sector as it was announced that house buyers will not pay stamp duty on the first £500,000 of a property's purchase price. Such moves come after the world’s sixth-biggest economy has shrank by up to 25% in March and April and could be heading for its biggest fall in 300 years, with the unemployment rate on course to more than double to about 10%, according to official projections.

It was not just the chancellor that has a lot on his plate this week as mixed employment data also gave his counterparts across the pond plenty to think about. Reports showed that new applications for US jobless benefits fell last week, but a record 32.9 million Americans were still collecting unemployment cheques in the third week of June, suggesting the US labour market was struggling to claw out of the COVID-19 pandemic slump. Complicating the data further, was the US celebration of Independence Day within the period, which can skew the figures due to the number of temporary roles created.

The gloom, however, had not spread to Asian markets in which saw the Chinese benchmark hit five-year highs throughput the week. A front-page editorial in the state-owned China Securities Journal has taken the majority of the credit for fuelling a strong rally in Chinese markets; Shanghai stocks jumped 5.7% after the publication said investors should look forward to the “wealth effect of the capital markets” and the prospect for a “healthy bull market.”

Next week

With the man in one of the most sought-after properties in Westminster announcing a cut in stamp duty for the first £500,000 of a house purchase, we should see some invigoration in the property sector going forward as those who were putting off moving house are perhaps tempted to taking the plunge.

However, there will be one address that will be catching economists’ attention on Monday and that is from Bank of England (BoE) Governor, Andrew Bailey. Due to participate in a panel discussion titled "Libor: Entering the Endgame", at a webinar cohosted by the BoE and their US counterpart, the Federal Reserve, we should expect some heightened volatility, especially in the currency markets. As heads of the world’s largest central banks, which controls short term interest rates, the heads of the BoE and Federal Reserve have more influence over the nation's currency value than any other person. Currency investors will scrutinise public engagements as they are often used to drop subtle hints regarding future monetary policy.

Central banks should provide a theme for the upcoming week as Wednesday sees the Bank of Japan release their commentary on the state of one of the world’s largest trading nations. With its export-heavy economy, Japanese economic data usually acts as a helpful device for judging the state of the broader global economy. With the outbreak of COVID-19, the world’s trade has slowed down dramatically, with many predicting this should be reflected in Japan’s industrial production numbers released earlier in the week, However, with a lifting of global restrictions to combat Coronavirus, and some green chutes both in the domestic Japanese and global economy, many will be hoping that Japan’s data shows some rebound from the depths it plumbed in March and April.

By the same token, many commentators will be hoping for signs of a rebound in retail sales data for the Eurozone, released on Thursday. The statistics, often used as a barometer for how the rest of the bloc’s consumers are spending their disposable income, will measure the total value of inflation-adjusted sales at the retail level. The data also feeds into consumer confidence numbers nicely and should take on added importance due to the global slowdown in trade, effecting Europe’s export driven economy directly.