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Weekly market update [VIDEO]

In complex times like these, it is important to not be overwhelmed by the abundance of information and to select and interpret the news we consume.

The global response to the coronavirus pandemic has seen governments inject, in many cases, unprecedented stimulus packages into their economies. The result has been potentially disorientating fluctuations in valuations for investors to get their heads around.

To help with this, we are providing weekly video updates to our audience with the key takeaways from the market news. This is an initiative that combines the daily work of our consultants with our market insights to cut through the often chaotic news cycle and understand what actually impacts our investors.

Friday 10 July

Today’s key takeaways:

  • California, Texas and Florida saw record virus deaths weeks after new infections across the Sun Belt began to surge. New cases nationwide in the U.S. topped 60,000 for the first time. Israel doubled the size of its stimulus plan to cope with a second wave. Italy banned entry to those who traveled recently to 14 nations including Brazil and Bahrain. Australia will tighten inbound travel and review quarantine procedures.
  • Chinese megacap shares plunged after two state-backed funds trimmed their holdings in a sign Beijing aims to slow a rally that added about $1 trillion to equity values this week alone. In one case, the national pension fund will sell a 2% stake in People’s Insurance Company of China. PICC fell as much as 7.5%, and the SSE 50 Index extended losses. Margin debt has risen at the fastest pace since 2015 as turnover soared amid a rally spurred by the economic restart.
  • The U.S. is planning more action against France in the long-running battle over taxes on tech giants. The government will announce as soon as today tariffs worth $500 million to $700 million on goods that may include French wine, cheeses and handbags. Implementation of the duties may be delayed until France starts collecting its tax later this year.
  • Large internet platforms should report acquisitions to the EU, including tiny deals that normally escape merger reviews, an advisory group to the bloc said. The idea isn’t to conduct traditional merger reviews. The intent is for officials to better monitor killer acquisitions designed to preempt future competition. The advice will guide authorities as they craft new laws this year.
  • Factory activity in France and Italy roared back in May after economies began reopeningFrance’s industrial production rose 20% on month, reversing from a 20.1% drop in the prior month, while Italy’s output jumped 22% versus a 19.1% contraction in April, Bloomberg Economics said. Consensus sees gains of 15.4% and 24%, respectively. Norway’s headline inflation rate probably accelerated to 1.5% in June after energy prices recovered, BE said.
Yesterday performance
  • U.S. equities slumped on concern that a resurgence in coronavirus cases will derail the comeback for the world’s biggest economy. Oil dipped below $40 a barrel and Treasuries jumped.
  • Financial companies were among the worst performers on the S&P 500 Index as Wells Fargo & Co. prepared to cut thousands of jobs because of the pandemic. The Dow Jones Industrial Average’s loss exceeded 1.3% as Boeing Co. dropped. The Nasdaq gauges advanced as big tech stocks rose.
  • Long-term government bonds rallied following an auction for 30-year securities that showed strong demand.
  • Elsewhere, European shares joined the decline. Gold traded near $1,800 an ounce. West Texas oil slumped after swelling U.S. crude stockpiles raised fresh concerns about oversupply and a key Libyan field resumed production.
  • Chinese equities outperformed as the Shanghai Composite notched an eighth day of gains, helped by signals of official support and strong demand from retail traders.

Friday 3 July

Today’s key takeaways:

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  • Germany lawmakers ended a legal standoff over the ECB’s QE operations by voting to accept the explanation the central bank provided for its public sector purchase program. The measure meets the German Constitutional Court’s demand that the Bundestag review whether it’s ‘proportionate’.
  • The US labour market made greater progress than expected last month digging out of a deep hole, yet optimism over the rebound was tempered by stubbornly high layoffs and a resurgent coronavirus outbreak across the country. President Donald Trump still said the report shows the economy is “roaring back.” Massive monetary and fiscal policy stimulus helped lower borrowing costs and keep the financial system liquid in a time of stress — while propelling the stock market higher.
  • Boris Johnson will urge Britons today to act responsibly as pubs prepare to reopen, warning he’ll act to shutter parts of the economy again if the virus gets out of control. Restaurants, hotels, cinemas and hairdressers will also be allowed to open their doors tomorrow. In addition, visitors from countries including Germany, France, Spain and Italy will no longer have to observe a two-week quarantine from July 10.
  • In a reversal, Texas Governor Gregg Abbott ordered residents to wear face coverings in public. A GOP ally of Trump, Abbott defied medical advice and pleas from local authorities for months in refusing to require masks, politicizing the issue. New infections in Texas accelerated to a 4.7% pace as hospital ICU rooms exceeded capacity. The CDC forecast as many as 160,000 U.S. deaths by July 25, up from 128,000 currently.
  • Deutsche Bank may acquire all or part of Wirecard’s bank, potentially throwing a lifeline to the disgraced business. The lender is in touch with regulator BaFin, Wirecard Bank’s management board and administrators on possible further steps. Deutsche Bank held informal tie-up talks with the fintech last spring, but discussions collapsed. Wirecard hired Moelis & Co. to manage the sale of its U.S. unit, the FT reported.
  • The U.S. Senate passed a law putting sanctions on Chinese officials — and their banks — involved in cracking down on dissent in Hong Kong, where the local government said the slogan “liberate Hong Kong” violates a new security law. The bill now awaits Trump’s signature. In geopolitics, the U.S. said Chinese military drills near the Paracel Islands may “further destabilize the situation in the South China Sea.” Hanoi also protested the exercises, which run through Sunday.
Yesterday Performance
  • US stocks pared gains on speculation that a second wave of coronavirus cases could jeopardize an economic rebound from the sharpest contraction on record.
  • The S&P 500 came off session highs amid a slump in trading volume ahead of a holiday on news that U.S. virus cases had the biggest increase since May 9.

Friday 26 June

Yesterday’s key takeaways:

  • Seven U.S. states saw record jumps in virus infections, as the nationwide one-day tally exceeded 38,000 and the rate of increase rose to 1.6% versus the 1.3% average of the preceding week. The news raised doubts about efforts to end lockdowns. In Texas, where cases soared 4.6%, Governor Greg Abbott decried a “massive outbreak” racing across the state. The death toll will reach 180,000 by October, according to the University of Washington.
  • The International Monetary Fund downgraded its outlook for the world economy, projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
  • Emmanuel Macron outlined a new virus furlough program that may see the state covering a large share of lost incomes in France for as long as two years. The measure starting July 1 would aim for a compromise between blanket support and more targeted aid by getting unions and businesses to strike deals on a case-by-case basis. Separately, WHO expert Michael Ryan said Covid-19 is under control in Western Europe.
  • The ECB will give documents to the German central bank to address objections related to its QE program that were raised last month by the country’s Constitutional Court. Bundesbank President Jens Weidmann can then present them to the German parliament and government, as last month’s ruling sought. The documents were previously given to the European Court of Justice when it reviewed and approved the ECB’s asset-purchase plans.
  • Lufthansa’s biggest shareholder, billionaire Heinz Hermann Thiele, told FAZ he will back a 9 billion-euro government bailout, giving the measure a shot of momentum on the eve of a crunch vote. He had earlier criticized the steep discount being granted to the German government on a 20% stake, creating a potential hurdle since he held the votes to single-handedly stop the sale.

Friday 19 June

Today’s key takeaways:

  • Beijing will step up purchases of American farm goods to comply with the phase one trade deal after talks in Hawaii. Mike Pompeo had said a top Chinese official pledged to honor the commitments. China has bought only 13% of the goal in the first four months.
  • Today marks a quadruple witching in the U.S., with options and futures on indexes and equities set to expire. The quarterly event often spurs trading volume and volatility. There may be more jostling than usual this time. About $1.8 trillion of S&P 500 options will expire, making it the third-largest non-December expiration ever, Goldman said. Rebalancing may force $48 billion of trades, up from $30 billion six months ago, S&P Dow Jones estimated.
  • Britain’s government debt jumped above 100% of GDP for the first time since 1963 amid unprecedented stimulus. Borrowing stood at 55.2 billion pounds in May, the highest single month for borrowing on record. The deficit is expected to swell further this year.
  • Austria’s central bank sees 3.8% of the nation’s firms going insolvent due to the pandemic, but the figure would have been 6.1% without countermeasures. That’s something for U.S. officials to ponder as the Sun Belt continues to get belted. New cases in Arizona surged 6.1%, Florida saw a 3.9% rise, and cases in Texas spiked by 3.6%, filling hospitals. California mandated masks after cases rose 2.6%.
  • The Fed remains extremely cautious about the prospects for recovery. “I definitely don’t think we are out of the woods,” St. Louis chief James Bullard said, adding he’s “hopeful April was the very worst month.” Cleveland’s Loretta Mester, who votes this year, said the economy has experienced “such a deep deep shock” that ultra-easy monetary policy will be needed for “quite a while.”
  • Bad cop, good cop. Donald Trump tweeted the U.S. could pursue a “complete decoupling from China” in response to unspecified conditions, his most forceful statement yet on ties. Trade Representative Robert Lighthizer had said earlier that a full severing was not “a reasonable policy option.” Those comments came on the heels of Secretary of State Mike Pompeo saying Beijing has recommitted to the phase one trade pact.
Yesterday performance
  • The benchmark S&P 500 rose 0.06%, led by gains in energy, consumer staple and technology shares. Equities had opened lower in the wake of a report that weekly U.S. jobless claims stayed above one million.
  • Volume in S&P 500 stocks was 25% lighter than the average during the last 30 days, the first time this year where trading fell at least 15% two sessions in a row.
  • Elsewhere, the Stoxx Europe 600 declined. The pound held onto losses and gilt yields rose after the Bank of England expanded its quantitative easing program.

Friday 12 June

Today’s key takeaways:

  • Gloomy news related to the virus highlighted fears of a second wave. The city of Houston isn’t convinced by Steve Mnuchin’s vow to keep economies open come what may. It may reimpose stay-home orders and open an unused Covid-19 hospital as cases in Texas surge. California also saw a faster pace of new infections. Donald Trump’s campaign is so worried it will ask those attending his campaign rally in Oklahoma to waive liability if they contract the illness.
  • Britain will introduce a temporary light-touch customs regime at its border with the EU next year in an attempt to avoid piling burdens on businesses already struggling with the pandemic. Cabinet Office Minister Michael Gove will detail the plan today when he formally rules out the idea of extending the Brexit transition period, a person familiar said. The policy came after negotiators agreed to pick up the pace of discussions.
  • Brace for impact: Britain’s economy shrank by 17% in April, Bloomberg Economics said. Consensus now sees an 18.7% contraction. Either way, the result will likely make the record 5.8% drop in March seem mild. With the lockdown easing a bit in May and further rollbacks underway, output should start to recover in the second half of the quarter. Euro-area industrial output shrank 18% in April after an 11.3% month-on-month drop in March. The IMF’s new forecasts due June 24 will “very likely” include estimates for a global contraction deeper than the 3% plunge predicted in April, Chief Economist Gita Gopinath said.
  • European banks are close to getting relief on capital requirements after the EU agreed this week to sign off on legislation that would offset the “considerable negative impact” stemming from losses on government bonds, according to a document that summarizes the deal. A so-called prudential filter would temporarily free banks from taking a hit. The package is on course for final agreement within days.

Friday 5 June 

Today’s key takeaways:

  • OPEC+ breakthrough. Saudi Arabia and Russia reached a tentative deal with holdout member Iraq.. The duo pushed Baghdad to stop shirking its share of cuts and even to compensate for failure to comply with reductions in the past. The cartel could meet as soon as this weekend to sign off on the extension for record production cuts.
  • British and EU negotiators have made little progress this week as negotiations over the future trade deal remain stuck. The two sides remain far apart on crucial issues such as measures to ensure a level competing field and U.K. fishing water. The final negotiating round is due to conclude formally today. Boris Johnson and European Commission President Ursula von der Leyen may have to intervene directly to break the deadlock when they hold talks later this month.
  • Europe’s monetary and fiscal titans are finally moving in lockstep as Germany’s stimulus buttresses additional central-bank easing. Policy maker Pablo Hernandez de Cos said fears of deflation justified the ECB’s decision to ramp up its emergency bond-buying program. “It does raise the prospect of a better, and a better-balanced, policy framework in the European Union once it’s recovered,” said Credit Suisse economist Neville Hill. Also, a former Boris Johnson adviser called for the BOE’s inflation target to be abandoned.
  • The White House envisions as much as $1 trillion for the next stimulus bill, people familiar said, though a measure is unlikely until next month at the earliest. President Trump met with economic advisers Larry Kudlow and Kevin Hassett late Wednesday to discuss the package.
  • Investors poured a record $15.6 billion into U.S. credit funds in the week ended June 3. Investment-grade funds took in $9.91 billion, an all-time peak, according to data from Refinitiv Lipper. High-yield bond funds added $5.75 billion and leveraged loan funds lost $42 million. The credit rush comes amid the Fed’s unprecedented support for the market.
  • U.S. airlines objected to Beijing’s plan to ease its ban and allow foreign carriers once-a-week flights starting Monday. The U.S. Transportation Department said it’s reviewing if it needs further action. Reuters reported the agency will issue a revised order in “coming days” that will allow some Chinese passenger flights to continue.
Yesterday Performance 
  • Stocks slumped in the U.S. and Europe as concern the recent rally had gone too far overshadowed new stimulus measures and encouraging economic data.
  • The S&P 500 Index fell less than half a percentage pointTreasury yields rose as weekly jobless claims fell. The Stoxx 600 stayed lower even as the European Central Bank moved to add 600 billion euros to its pandemic purchase program, more than expected.
  • Elsewhere, gold gained along with silver. West Texas oil slumped from a three-month high as OPEC+ unity was threatened by a long-running feud over compliance with production cutbacks.
  • The euro rose 0.9% to $1.1336. The British pound rose 0.2% to $1.2602.

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