The UK basked in sunshine and recorded the hottest day of the year so far, but it was not all blue skies for investors as markets ebbed and flowed during the week.
In what was a fairly quiet week in terms of data releases, an overarching theme all week was the potential for a second wave of COVID-19 and spikes in cases from various countries. From Australia to Arizona, there were reports of increased numbers of cases, which gave investors plenty to consider.
The data was broadly upbeat, with European PMI data generally beating expectations in the two largest Eurozone economies, Germany and France. This data will help to support the thesis that economic data has now troughed and is beginning to recover.
US Durable Goods Orders again beat economists’ forecasts showing a steep rebound. The data measures orders received for long-term goods, which typically last three years or more and therefore are usual high-value orders. The only weak spot in the US came from the weekly US jobless claims, which was 1.5 million against 1.3 million consensus views. The report, however, was the 12th consecutive week of declining claims.
At a company level, one of the biggest stories this week was the allegations of fraudulent activity from Wirecard. The rumours led to a collapse in the German-listed company’s share price, once the darling of the German stock market, and sudden resignation of their long-standing CEO.
As the week closed out, equity markets advanced higher as investors shrugged off concerns around a second wave.
The week ahead sees the second quarter of 2020 end, as we transition into July and the second half of an already turbulent year. The second quarter was a substantial improvement for investors, with strong gains in risk assets, after significant falls in the first three months of the year.
The UK housing market is in the spotlight at the start of the week with a variety of residential house price data being released on Monday. Despite certain economists calling for a sharp decline in house prices, this is yet to materialise with pent-up demand and ultra-low mortgage rates supporting prices currently. Monday’s data will give us the latest insight into whether this trend is continuing.
Chinese manufacturing PMI data is published on Tuesday and is expected to show mild expansion in the sector, which would further evidence a recovery is taking hold. China is one of the key manufacturing hubs for the global economy and so analysts will be eagerly anticipating this data.
As we move through the week, we will receive manufacturing and services PMI data from the largest European economies too. With lockdown measures being eased across most of Europe and industries beginning to open again, markets will be hoping for a bounce back from the lows seen in April.
With the US market closed on Friday in observation of Independence Day, Non-Farm Payroll data, usually published on the first Friday of the month, is shifted to Thursday. The data provides an insight into US employment, which in turn has an impact on the consumers’ ability to spend within the economy. After two of the largest negative prints on record in March and April, May surprised to the upside, with 2.5 million jobs added to the economy, the highest number in decades. Economists will be hoping that the US economy is continuing to add jobs that were shed during the lockdown period in March and April.
The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in June 2020.