Market Round-up 15-19 June

Thomas Watts


This week

A combination of hopes for a potential vaccine, and further central bank intervention to quell the destruction of the Coronavirus outbreak proved to be just the tonic for global markets as economies around the world inched their way back to returning to normality.
With some non-essential retailers opening their doors for the first time since March in the UK, it was across the Channel that optimism was on sale, as European markets recorded a 2.9% rise, their strongest in a month. Aggressive and coordinated stimulus from the world’s central banks has helped to power a rebound in European equity markets since an initial Coronavirus-fuelled crash in March, with the STOXX 600 index now only about 16% below its February record highs. Europe’s volatility index also retreated for a second straight day and was on track for its biggest daily percentage fall in a month.
Across the pond however, it was buy one get one free as The Federal Reserve declared it will start purchasing corporate bonds through the secondary market corporate credit facility, one of several emergency facilities used to shore up liquidity, whilst noises from the White House further boosted sentiment. A US news report also said the Trump administration was preparing a nearly $1 trillion infrastructure proposal, while talks that US firms may be allowed to work with China’s Huawei on new 5G standards eased trade jitters. 
It wasn’t just the sales that were super during the week, Thursday saw the Bank of England’s very own “super Thursday”, a positive jamboree of economic data releases taking place. Releasing their thoughts on the domestic economy, Andrew Bailey, Governor of the BoE commented that Britain’s economy is recovering quicker than they had predicted a month ago as the government eases its COVID-19 lockdown, but news from the labour market is mostly negative. To go with the data the Bank of England announced an additional £100 billion bond-buying programme. The news saw Sterling fall over 1% against the USD, to further discounted levels, while government bond prices were also marked down.
We don’t want to get too carried away by this. Let’s be clear, we’re still living in very unusual times.

Week ahead

With increasing amount of shops and retailers opening, not just in the UK but on the continent, the coming week should help us gauge if their rush to welcome customers back is well founded or not, as European Consumer Confidence numbers are released on Monday. 
With consumer confidence having taken a severe hit during the onset of the Coronavirus, many will be hoping Monday’s numbers for Europe, although not expected to be positive, will at least indicate some sort of bounce back from March’s nadir. The survey that is released is well respected amongst investors as around 2,300 consumers across Europe are asked to rate the relative level of past and future economic conditions, including their personal financial situation, employment and intentions for major purchases.
Purchasing will be firmly in investors’ sights this week as data about the largest purchase most will ever make, that of a house, will also make the headlines. With the US housing market the focus of the last major recession, it will be interesting to see just how much the impact of COVID-19 has had on existing home sales. Released by the US National Association of Realtors, the data acts as a leading indicator of economic health as the sale of a house triggers a wide-reaching ripple effect. For example, renovations are usually carried out by the new owners, a mortgage is sold by the financing bank, and estate agents are often paid a fee. 
In what is an unusually quiet week for economic data releases, the week Is rounded off by the Bank of England’s quarterly bulletin. Although the news usually has a limited market impact as some parts are released early, the document includes commentary on market developments and monetary policy operations, along with reports on a range of domestic and international economic issues and market research, making it valuable to many economists.