Market Round-up 29-3 July

Thomas Watts


This week

In a week which saw US President, Donald Trump, make a U-turn concerning face coverings, the concept of masking made both the political and economic headline. Long opposed to wearing a face covering in public, Wednesday saw President Trump remark that he is now very much "all for masks", adding that they make him look like the Lone Ranger.

A slew of US jobs data released during the week did its own job of masking the frailties of the world’s largest economy as a surge in cases of Coronavirus threatened a fledgling recovery. Data from Thursday showed that the US economy created a record 4.8 million jobs in June as more restaurants and bars resumed operations, but redundancies remained elevated. However, the reopening of businesses after being shuttered in mid-March has unleashed a wave of Coronavirus infections in large parts of the country. The middle of the week saw a record 52,000 cases of COVID-19 diagnosed, predominantly in the populous states of California, Florida and Texas. Several states are now starting to scale back or pause re-openings and, in some cases, send workers back home.

There was also bittersweet news this side of the pond as PMI data released on Wednesday showed that the UK economy was showing very slight signs of recovery. Domestic manufacturing levels rose to 50.1 from 40.7 in May, creeping back above the all-important 50 mark which indicates expansion, signifying growth for the first time since February.

Markets rallied towards the end of the week as further news of a vaccine buoyed investors who believed a cure would have to be found to really see the global economy return to normal. COVID-19 vaccine from US firm Pfizer and Germany's BioNTech was found to be well tolerated in early-stage human trials and pushed the FTSE 100 up nearly 1% and Eurostoxx 50 up by as much as 2.84%. Travel and leisure stocks were also soaring as the sector added 2.5% on the news that the government will end quarantine rules for those arriving from 75 countries, offering the British holidaymaker the chance to get at least some sun before Autumn rolls around.

Next week

The tone for the coming week could be set as early as Saturday as pubs and restaurants around the UK open their doors fully for the first time since mid-March. With Coronavirus cases beginning to rise again, next week could be a critical time for the leisure industry as consumers balance the risk of infection with dinner and a drink out. With a spike in those visiting their local watering hole expected, landlords and economists alike will be keen to see if there's a prolonged period of novelty.

From public houses to regular houses, the Bank of England releases its Housing Equity Withdrawal numbers on Monday, detailing the change in the total value of new home-secured loans that are not used for home purchases or improvements. The data is closely watched as movements in house prices can encourage or discourage people to borrow against the value of their homes. It will also be interesting to see what effect the Bank of England’s recent decision to cut interest rates to historic lows will have as such a move would make it cheaper to remortgage. The numbers should also reflect confidence in the economy; if consumers are optimistic then they tend to remortgage in order to spend on big ticket items; if people are pessimistic, they would rather pay off debts and keep loans to a minimum.

In a quiet week for economic data releases, the second half of the week sees the EU Commission release its economic forecast for the bloc. The forecast is particularly well respected for the depth of the research, which includes economic forecasts for all EU member states over the next two years, covering about 180 variables. The predictions also serve as the European Commission's basis for evaluating economic performance and trends of EU member states in regard to potential austerity measures and other forced spending cuts, especially as the economic impact of the COVID-19 outbreak continues.

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 July 2020.