Global Markets Update Monday, 13 July 2020

Posted on 13 Jul 2020

Investors shifted into haven assets as global COVID-19 cases continued to rise sharply in southern and western US states, as well as Latin America. Tokyo also saw a surge in new infections, whilst Hong Kong shut schools to control a fresh outbreak.

 

UK

The FTSE 100 fell 1.0% over the week.

The IHS Markit/Cips purchasing managers’ index (PMI) for construction rose to 55.3 in June, the highest reading since mid-2018 and up from 28.9 the previous month. The UK’s composite PMI (which includes the manufacturing and services readings that were published during the previous week) rose to 48.3 in June, up from 29.9 in May.

Chancellor Rishi Sunak outlined new support measures for Arts and targeted job support measures for the 16-24 age bracket. In total, the Chancellor’s support measures are expected to take public borrowing to £350bn this financial year. However, retailers John Lewis and Boots announced more than 5,000 job losses.

US

The S&P 500rose 1.2% over the week.

New jobless claims rose 1.31 million, the lowest rise since mid-March and the 14th consecutive decline since the record 6.9 million seen in late-March.

Europe

The FTSEurofirst 300 gained 0.4% over the week.

The US threatened to impose 25% tariffs on $1.3bn worth of French goods, including handbags, soap and cosmetics, if France presses ahead with a digital services tax.

The European Commission revised down its forecast for GDP growth this year, predicting that the EU economy would shrink 8.3% in 2020, compared to a previous estimate of -7.4%. The EC also lowered its forecast for a potential economic rebound in 2021, estimating growth of 5.8%, compared to its previous forecast of 6.1%. The commission said its calculations had worsened as the lifting of containment measures had been more “gradual” than expected at the start of the pandemic.

Eurozone retail sales surged by a record 17.8% in May but fell 5% on a year-on-year basis.

German exports rose 9% in May, although they remained 30% lower than May 2019.

German factory orders rose by a record 10.4% in May. Domestic orders increased by more than 12%, while orders from the rest of the eurozone rose almost 21%, but much slower demand was seen from the rest of the world, with orders up just 2%. 

Turnover in Germany’s car industry increased again markedly in May 2020 but was still nearly 47% lower than in February 2020.

Spanish industrial production rose 14.7% in May but remains almost 25% below the levels of a year ago.

Japan

The Nikkei 225 slid 0.1% over the week.

Pacific Basin

Chinese equities rallied strongly, taking the rise in the Shanghai Composite to around 13% since the start of July. The rally took the stock market to a five-year high, although it remains lower than its previous peak in June 2015, and was driven by recent comments in the state-run media, encouraging retail investors to buy stocks.

Bonds

US Treasury bond yields touched two-month lows as surging new COVID-19 infections in the UK caused some states to roll back re-opening measures. The yield on the 10-year bond fell to 0.56%, before closing the week at 0.61%, while the yield on the five-year note hit a record low of 0.26%.

The yield on the 10-year German Bund ended the week at -0.70%.

UK gilt yields moved lower, with the entire yield curve below seven years trading on negative yields. Despite a surge in new issuance to fund the emerging COVID-19 measures, demand has outweighed supply due to the UK government’s bond-buying programme. Five-year UK government bond yields fell to -0.09%, while two-year yields slipped to - 0.13%.

Commodities

Gold rose further above $1,800 an ounce, hitting the highest levels since September 2011.

Please email us if you would like to receive our weekly newsletter direct to your inbox.