Weekly Market Briefing – Week Beginning 27/7/2020

The market posted mixed performances last week after early gains were erased later on in the week. It is worth noting that the S&P 500 moved to within 3% of the pre-pandemic high in February. This move was largely due to positive news surrounding vaccine trials by Oxford University and AstraZeneca with another being developed by the Beijing Institute of Technology, CanSino Biologics, BioNTech and Pfizer. This was followed by the unlikelihood of additional large stimulus by the Federal Reserve and a potentially much lower unemployment benefit add-on in the US after the current scheme terminates. US stock market sentiments have also been hampered by the ordered closure of a Chinese consulate in Houston.

In Europe, the spillover uncertainty concerning increasing US-China tensions eroded early week gains from the historic 750bn Euro stimulus package. Despite the mixed performance, European economic data released last week impressed, with the Flash Eurozone PMI going up to 54.8. A figure of over 50 signals growth and vice versa. This is due to the increasing order inflows and decreasing job loss figures. Meanwhile the UK also enjoyed increased retail sales of 13.9%  in June as lockdown measures continue to be loosened and non-essential shops are allowed to open. The increase is greater than the consensus forecast of 7.3% and the increase in May of 12.0%

Earnings season enter its full swing this week with the 4 US tech giants Amazon, Apple, Alphabet and Facebook releasing data. Investors will follow Amazon’s earnings closely as online orders via Amazon jumped during lockdown periods and Apple’s figures that will reflect the impact of lowered consumer demand in Q2. The big 4 banking groups in the UK will also release its earnings with Barclays, Lloyds and NatWest due this week and HSBC in the following week. Their figures will be important for investors as they will shed light on how provisions against the fallout of bad loans in the pandemic will mean of the UK Banking Industry. Wizz air and IAG (owner of British Airways) are due to report this week as well as Royal Dutch Shell which will receive the spotlight on whether they will cancel dividend payments for the first time since WW2 as the firm suffers from a recession in global energy demands. 

On Tuesday Morning last week Gold hit a historic high at $1980.57 per troy ounce, marking an increase of over 30% so far this year, highlighting the challenges facing the global economy as a threat of a second wave pandemic arise and US-China relations worsen. The big question is whether it is already too expensive to buy Gold at such an overbought level. A Bank of America analyst reckons that Gold has the potential to hit $3000 per troy ounce in the next 15 months.

Finally, the FOMC (Federal Open Market Committee) will meet again this Wednesday, since the Fed has already pledged 0% interest rate, an unlimited government bond (US Treasuries) buying scheme and other emergency measures, the FOMC is not expected to make an adjustments to interest rates. The main focus will be on the FOMC’s sentiment concerning the sustainability of the stock market recovery (an increase of over 50%) since the low in March. Analyst worry that the strong recovery made by US Equities especially Nasdaq are unlikely to last looking at recent US initial unemployment claims increased to 1.41 million from 1.31 million in the previous month. Analysts at T.Rowe Price project that non farm payroll will climb by 1.1 million, falling significantly short of the 4.8 million addition last month. 

References: 

Montgomery, E,L 2020, Market Week – Gold hits record high, Fidelity International, viewed 29 July 2020, <https://www.fidelity.co.uk/markets-insights/markets/markets/market-week/#517426>

T.Rowe Price 2020, Global Market Weekly Update, T.Rowe Price, viewed 29 July 2020, <https://www.troweprice.com/personal-investing/planning-and-research/t-rowe-price-insights/markets/global-markets-weekly-update.html>

JP Morgan Asset Management, The Weekly Brief, JP Morgan Asset Management, viewed 22 July 2020, <https://am.jpmorgan.com/blob-gim/1383518158013/83456/MI%20-%20Weekly%20Brief.pdf>


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