Global Markets Update Monday, 22 June 2020

Posted on 22 Jun 2020

Global stock markets rebounded over the week, putting them on course for the best quarterly returns in a decade. This comes despite news of Germany and China suffering new COVID-19 outbreaks and a rise in US daily infections. Brazil and India also continued to see sharply rising COVID-19 infections.

A cheap steroid, dexamethasone, was found to cut the death rate of the most seriously ill COVID-19 patients on ventilators by one-third, and by one-fifth in patients receiving oxygen. This is the first proven treatment for severe COVID-19 cases.

Global Market Update

UK
The FTSE 100 bounced 3.1% over the week.
The UK government downgraded its COVID-alert level to 3, giving it further room to ease social distancing measures.
The Bank of England announced a £100bn extension to its bond-buying programme, as expected, but indicated slowed the pace of its asset purchases.
Retail sales jumped by a better-than-expected 12.0% in May. This follows the record 18.0% contraction in April.
As UK public debt exceeded the nation’s GDP for the first time since 1963, speculation rose that the Chancellor was considering removing the triple-lock on pensions.
UK inflation dropped to a four-year low of 0.5% in May.

US
The S&P 500 rose 2.8% over the week. The market is now 21% higher than the start of the quarter, marking the strongest quarter in more than 20 years, with “new technology” stocks once again driving the rally.
The number of new daily COVID-19 cases started to tick up again, due to a record number of new cases in California, Florida, Arizona and South Carolina. 
The US administration plans a $1 trillion infrastructure spending package on roads and bridges over 10-years to help stimulate economic growth.
The Federal Reserve said it would begin purchasing a “broad and diversified portfolio” of individual corporate bonds, having previously bought exchange traded funds that track corporate debt. The Fed created an index that abides by its eligibility criteria, instead of companies self-certifying that they were eligible.
Fed chair Jay Powell  warned of “significant uncertainty” surrounding the “timing and strength” of the US economic recovery, but said the central bank remained “committed to using our full range of tools to support the economy in this challenging time”.
Apple said it will reclose some US stores in states where local cases of the virus are increasing.
The number of Americans applying for first-time unemployment benefits edged lower again to 1.51 million last week compared to 1.57 million the week before. 
US retail sales surged by a record 17.7% in May.
US industrial production rose 1.4% in May, the first rise in three months.
 
Europe 
The FTSEurofirst 300 rallied 3.1% over the week.
The EU vowed to pursue plans for digital taxes after the US administration pulled out of global negotiations and threatened to impose tariffs in retaliation against national levies.
Germany suffered an outbreak of more than 100 COVID-19 infections linked to a meat processing plant. 
The Zew survey of German economic sentiment surged to 63.4 in June, its highest level since 2006 and compared to 12.4 in May, boosted by news of the German government’s €130 billion stimulus packaged.
German payments company Wirecard revealed that €1.9bn cash was missing from its accounts.

Japan 
The Nikkei 225 gained 0.8% over the week.
The Bank of Japan boosted its lending programme from yen 75 trillion to yen 110 trillion. The programme provides zero-interest loans to banks if they increase lending to companies. The central bank also signalled that it would not raise interest rates for the foreseeable future.
Japanese exports decline 28.3% year on year in May 2020. The fall was steeper than expected and indicated that exports were declining at sharpest pace in more than 10 years.

Pacific Basin
Beijing’s city government raised its Covid-19 emergency response level and announced that schools would be shut from Wednesday. The authorities have been grappling with a spate of new Covid-19 cases, many of which are linked to a seafood and vegetable wholesale market.
Chinese industrial production rose 4.4% year on year in May, higher than the month earlier but still below some analysts’ expectations. Retail sales fell 2.8% year on year in May, the smallest decrease in retail sales so far this year.
 
Bonds
The yield on the 10-year US Treasury bond closed the week at 0.71%, while the 10-year German Bund ended the week on a yield of -0.45%.
The yield on the 5-year US Treasury Inflation-Protected Securities hit a record low of -0.733%.
The surge in US investment-grade bond issuance means the total amount of debt issued so far in 2020 is approaching the total for the entirety of 2019.

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