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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 23 October

  • Donald Trump and Joe Biden were relatively civil in their final pre-election debate. With about 48 million Americans having already voted, the president had little chance to change the dynamic. Biden addressed Trump’s bid to portray him as corrupt head-on, saying he never took a foreign payment. Trump defended his Covid response and accused his rival of backing more shutdowns. About 53% of debate watchers felt Biden won the debate, a CNN snap poll showed
  • “Just about there.” Nancy Pelosi said she and Steven Mnuchin are close to clinching a stimulus deal, though significant differences remain. They are near a pact on money for testing and tracing to safely reopen schools and the economy, but haven’t settled three sticking points: Democrats’ demands for state and local government aid, school funding and GOP insistence on a liability shield for employers. No signs yet that Senate Republicans will support the roughly $2 trillion package.
  • The FDA approved Gilead’s remdesivir, making it the first Covid drug to obtain formal clearance. It was used to treat Trump this month, though the WHO said last week the medicine failed to reduce fatalities in a trial. France expands its curfew beyond large cities starting tonight, a day after daily infections posted another record.
  • Russia is ready to keep OPEC+ curbs on oil output longer than planned if needed. “We don’t rule out that we may keep the current restrictions on output, that we don’t lift them as soon as we have planned earlier,” Vladimir Putin said. “If necessary, we can take a decision on further cuts. But so far we simply see no such need.” Putin’s remarks are the latest sign Russia and Saudi Arabia are united in being prepared to restrain supply for longer. Oil steadied in Asia after rising in New York.
  • Intel got pounded postmarket, falling 9.4% as a tepid forecast outweighed sales that matched estimates and the company’s data center chip business suffered a 10% decline in revenue. Profit, excluding some items, was $1.11 a share and sales came in at $18.3 billion, down 4% from a year earlier. Revenue in the current period will be about $17.4 billion, a 14% drop. Renault’s revenue of 10.37 billion euros beat estimates, partly fueled by demand for its popular electric model Zoe. Daimler improved its full-year profit forecast after earnings bounced back last quarter. Barclays posted better-than-expected earnings with lower provisions. L’Oreal’s same-store sales unexpectedly rose 1.6%, beating consensus of -2.4%, thanks to pent-up demand for makeup.
  • The euro area’s headline PMI probably slipped again in October as the services sector was hit by fresh social-distancing rules. Consensus sees the composite gauge dipping to 49.2 from 50.4. It’s a similar story in the U.K., where the flash PMI probably fell to 54 from 56.5. The recovery in Britain’s retail sales may have slowed to 0.2% on month in September from 0.8% in August. In central banks, a sliding ruble is likely to keep the Bank of Russia on hold.
Market Performance
  • U.S. stocks rose as banks rallied on a jump in Treasury yields jumped, while lawmakers in Washington continue to haggle over a spending bill.
  • The S&P 500 pared its weekly decline as financial firms rallied almost 2%. The 10-year Treasury yield popped to 0.84%, its highest since June. Energy producers also surged, rebounding with oil from a prior-day selloff. Small caps rose 1.5%.
  • In Europe, the Stoxx Europe 600 Index was lower. Luxury handbags and scarves house Hermes International rose after surpassing analysts’ sales estimates on a rebound in demand from Asia. The MSCI Asia Pacific Index slid. Gold declined, and copper slipped after topping $7,000 a ton for the first time in more than two years.

Friday 16 October

  • Angela Merkel offered Boris Johnson an olive branch as she left the EU summit around midnight, saying the bloc’s request that Britain stay open to compromise “of course includes that we need to be ready to compromise. Each side has its red lines.” EU chief negotiator Michel Barnier said he’s ready to speed up talks, but there was little sign of progress, with France sticking to its tough line on fisheries despite internal pressure to budge. Johnson decides this evening whether to keep pursuing an accord.
  • Dueling town halls by Donald Trump and Joe Biden gave viewers two realities to choose from. Trump embraced controversial conspiracy theories and sparred with the moderator, while Biden offered long-winded policy-focused answers and avoided anything that might jeopardize his lead in the polls. Trump denounced White supremacy and touted his “amazing job” fighting the pandemic. Biden slammed Trump’s leadership on outbreak and pandemic.
  • Trump will personally lobby to get reluctant GOP senators behind any stimulus deal, Steven Mnuchin told Nancy Pelosi. This was after Mitch McConnell earlier rejected Trump’s talk of topping up the administration’s $1.8 trillion proposal, saying the party won’t go along. Mnuchin will accept the Democrats’ language for a national testing plan with “minor edits” and will share that language with Pelosi today, her spokesman said.
  • From midnight millions of London residents won’t be able to socialize with other households behind closed doors, including in pubs and restaurants. The virus continued to surge through the U.S. Midwest, spilling into several electoral battleground states. In drugs, the shot under development by a unit of Sinopharm Group was safe and effective, according to results published in Lancet. Remdesivir has no definite effect on a hospitalized patient’s chances of survival, the WHO said.
  • Libya’s daily oil production is now around 500,000 barrels, with its largest field Sharara pumping about 110,000 barrels, people familiar said. The country’s observed crude and condensate exports rose in the first half of October to an average of 385,000 barrels a day. Though it’s an OPEC+ member, Libya is exempt from supply curbs the cartel initiated in May. It was pumping 1.2 million barrels daily until civil war erupted in January.
Market performance
  • Stocks pared losses as traders awaited news on negotiations over a fresh round of stimulus amid a resurgence in coronavirus cases around the globe. The dollar climbed.
  • The S&P 500 came off session lows as banks rebounded from a two-day selloff and energy shares rallied. House Speaker Nancy Pelosi told Democrats that a Covid-19 relief package won’t wait until January as she was scheduled to have another call with Treasury Secretary Steven Mnuchin, while President Donald Trump said he’d go over $1.8 trillion in stimulus. Equities slumped earlier in the day as Europe’s biggest cities clamped down to curb the virus, adding to concern that further restrictions could cause more damage to the global economy.

Friday 9 October

This week’s market update takes a look at fiscal stimulus policy in the US as part of the Covid-19 recovery process, as well as decisions being made regarding the potentially anti-competitive state of US tech.

  • Donald Trump is planning a rally tomorrow — 10 days since his diagnosis — after his doctor said he can resume public events. The president is considering a Florida event and one in Pennsylvania the day after, he told Fox. His campaign pushed back on the debate commission’s decision to make the Oct. 15 event virtual, but the group’s chairman told AP it would not rescind its decision. This leaves the second debate in doubt since Trump refuses to participate in a virtual face-off.
  • The Trump administration continued to shift its stance on stimulus, saying it’s now open to a comprehensive plan. Treasury Secretary Steven Mnuchin told Nancy Pelosi this was so after the House Speaker pushed back on the idea of implementing individual steps for parts of the economy hit by the pandemic, such as airlines. A White House spokeswoman reiterated opposition to the $2.2 trillion plan put forth by Pelosi but signalled flexibility.
  • Spanish PM Pedro Sanchez aims to call an extraordinary meeting today to decree a 15-day state of emergency in Madrid, El Pais reported. France issued a maximum virus alert for Lyon, Lille and Grenoble. In the U.S., Trump wants an emergency use authorization signed “immediately” for the Covid-19 treatment he received, which would usually cost more than $100,000, the NYT reported. China joined a WHO-backed Covax program to give lower-income countries access to vaccines.
  • The U.K.’s economy expanded 2.1% in August, widely missing the 4.6% consensus. Industrial output rose 0.3% on month, lower than the 2.5% estimate. Norway’s core inflation rate will remain well above target before moderating toward year-end as a previous bout of currency weakening wears off, with the September gauge ticking up to 1.8% from 1.7% in August, Bloomberg Economics said.
Market performance
  • U.S. stocks rose to almost five-week highs as traders speculated that lawmakers will eventually provide more stimulus and corporate deal activity increased. Treasury bond yields dropped and the dollar weakened.
  • The S&P 500 finished up 0.8% after conflicting comments from President Donald Trump and House Speaker Nancy Pelosi whipsawed equity markets earlier in the day. Energy, utilities and financials were the biggest gainers in the benchmark index, with crude oil rallying as Hurricane Delta approached the already battered Louisiana coast.
  • Elsewhere in markets, airlines led European shares higher, helped by optimism over a Covid-19 treatment.
  • Oil futures rose 3.1% after Gulf of Mexico producers shut in 1.7 million barrels a day of crude production ahead of the storm that’s expected to slam into the Louisiana coast on Friday. Gold increased for a second day.

Friday 2 October

This week’s market update focuses on Donald Trump testing positive for Covid-19 and more commentary on Eurozone monetary policy.

  • Donald and Melania Trump tested positive for Covid-19. The 74-year-old president said in a tweet that they will begin “our quarantine and recovery process immediately.” Hope Hicks, one of his closest aides, had earlier tested positive and accompanied Trump on Air Force One to the presidential debate and a campaign rally this week. S&P 500 futures sank, dropping more than 1.4%.
  • EU leaders agreed to impose sanctions on senior officials in Belarus over the Aug. 9 presidential election. The measures are due to take the form of asset freezes and travel bans against around 40 implicated in alleged fraud in the vote and in a post-ballot crackdown on peaceful protesters. The sanctions will be implemented at once. Cyprus lifted its veto on the move after bloc leaders kept alive the threat of more sanctions against Turkey should it fail to de-escalate tensions with Nicosia.
  • U.S. and European equity futures slid after Trump’s positive test. The dollar and Treasuries gained. Asian stock markets turned lower, with Japan’s Topix erasing early gains. Australian stocks fell more than 1.2%. Markets in China, Hong Kong, Taiwan, India and South Korea are shut Friday for holidays.
  • Virus: Two former hot spots that managed to flatten the curve over the summer are hot again: New York and Italy recorded the most new cases since May and April, respectively. On the corporate side, Amazon said it knows of almost 20,000 employees who tested positive so far. Pfizer CEO Albert Bourla vowed to resist political pressure surrounding vaccines, saying the firm “is moving at the speed of science” in developing its inoculation.
  • The House passed a $2.2 trillion Democrat-only fiscal stimulus package after the most concerted talks between the top negotiators since early August failed to yield a bipartisan deal. Nancy Pelosi earlier insisted the vote wouldn’t slam the door on talks with the White House as she and Steven Mnuchin continued to haggle. Republicans put forth a package that includes $400 in weekly additional jobless insurance. Democrats want $600 a week.
  • OPEC’s crude output held steady last month, with total supply rising by 40,000 barrels a day to average 24.43 million, according to a Bloomberg survey. The UAE curbed production sharply, slashing by 310,000 barrels a day, or roughly 10%. The sheikhdom drew a rare public rebuke from Riyadh for a surge over the summer that violated its quota. It’s now pumping 2.68 million barrels a day, about 90,000 above its mandated ceiling, and exports are the lowest in 23 months.
  • Euro-area inflation probably recovered a tad in September. The headline gauge may improve to -0.1% while the core reading will probably accelerate to 0.5%, according to Bloomberg Economics. Consensus is for no change in either. Recent super-low readings are mostly due to the temporary cut in Germany’s VAT rate as well as depressed prices for travel-related services over the summer.
  • The EU’s chief Brexit negotiator, Michel Barnier, meets today with counterpart David Frost to discuss whether they’re in a position to enter a final intensive stage of talks that would signal a deal is within reach. EU officials indicated negotiations may continue in coming days.
  •  The last U.S. jobs report before November’s election is projected to show a sharp deceleration in labor-market gains, suggesting the winner will inherit an increasingly shaky economic rebound. Employers probably added 875,000 workers in September following 1.37 million in August, according to consensus. The whisper number is a more robust 1 million. The unemployment rate likely fell slightly to 8.2%.
  •  Chart of the Day: The global cull of banking jobs continues with a growing list of lenders resuming cuts paused during the pandemic. European banks account for the largest share of about 68,000 announced reductions this year, driven largely by HSBC, which said in February it would reduce its workforce by 35,000. Before the outbreak, European banks lagged their U.S. counterparts in bouncing back from the 2008 financial crisis.

Friday 25 September

This week our Chief Investment Officer, Richard Flax, discusses the new coronavirus restrictions in the UK, the slow road to recovery in the US and the continued support of central banks in both countries.

In the markets:

  • Another pandemic wave appears to be crashing across Europe. The U.K. and France reported record daily infections. Yet, as testing capacity has expanded significantly in both countries, scientists are also looking at deaths and hospitalizations to better track trends. Daily fatalities in the U.K. and France have stayed moderate, but hospitals in Spain are filling up again. The number of ICU beds in Madrid hospitals with seriously ill coronavirus patients jumped to 39% from 25% a week ago.
  • Some British MPs fear new restraints as much as new waves. Conservative Party rebels are seeking parliamentary power to block new COVID rules. Parliament is due to review in coming days legislation that gave ministers sweeping powers to roll out emergency measures to combat the pandemic. Some 40 Tory MPs want Parliament to have a chance to debate and vote upon new steps “as far as is reasonably practicable” henceforth.
  • EU officials won’t let their opposition to Boris Johnson’s plan to break international law distract them from trying to secure a deal over the bloc’s post-Brexit relationship with the U.K. Officials close to the discussions say the two sides have taken the heat out of the situation. Johnson will come under pressure to withdraw the most controversial parts of his bill rewriting the divorce agreement when the outlines of a wider trade deal emerge.
  • Richard Shelby threw cold water on hopes the U.S. Congress will be able to pass a fresh stimulus bill. The Senate Appropriations Committee chairman said it’s “hard to pass piecemeal” legislation. “There’s always a chance around here as you know but it is slim,” he said. The Democrats are drafting a stimulus plan worth roughly $2.4 trillion, people familiar said. JPMorgan cut its fourth-quarter GDP forecast to 2.5% annualized growth from 3.5% due to doubts about economic aid.
  • Fed officials emphasized the need to fix inequalities hindering U.S. economic growth. “Structural inequality stifles growth,” New York President John Williams said. Banks need to improve services to Black Americans, many of whom have avoided financial institutions because of a history of racism, Atlanta chief Raphael Bostic added. Chicago chief Charles Evans urged fiscal help for low-income families under particular strain due to the weak labour market.
  • Good and bad news for China’s bond market. The nation’s sovereign bonds won inclusion into FTSE Russell’s benchmark index a year after they were rejected — as of October 2021. Morgan Stanley said it would probably attract as much as $90 billion. On the flip side, indebted Evergrande warned it faces a potential default unless regulators approve its long-delayed China stock listing. It’s talking about a doomsday scenario of cross defaults triggering systematic risks.
Market performance
  • The S&P 500 pared most of its earlier rally after optimism faded that Congress would reach a spending deal with the White House. Stocks surged midday on news that Treasury Secretary Steven Mnuchin and the Democratic House leader were open to fresh talks. But a report that Speaker Nancy Pelosi’s fresh overture deviated only slightly from previous offers sparked concern that the two sides would remain far apart.

Friday 18 September

This week’s market update looks at recent commentary from the US Federal Reserve and the Bank of England, along with the potential for a second lockdown as COVID-19 cases spike across Europe.

In the markets:

  • More shots at Big Tech. The Committee on Foreign Investment in the U.S. sent letters to firms including Epic and Riot to inquire about their security protocols in handling Americans’ personal data. China’s Tencent owns Riot and has a 40% stake in Epic, maker of Fortnite. Meantime, the EU is worried about fair trade. It may require Apple to give peers access to payments technology inside its iPhones. A report on the issue is due next week.
  • As part of its negotiations on a deal for TikTok’s U.S. operations, ByteDance has agreed to list the new company, TikTok Global, in the U.S. in about a year. ByteDance is getting more confident its envisioned alliance with Oracle will pass muster with China’s regulators, people familiar said. Donald Trump has yet to weigh in.
  • Ursula von der Leyen is “still convinced” an EU-U.K. trade deal is possible, and Britain sounded a note of optimism as well. The European Commission president told the FT that “time was short” and criticized Boris Johnson’s plan to override part of the agreement. The U.K. government called a round of informal EU trade talks this week “useful” but said big gaps remain on fishing and subsidies.
  • Virus latest: Goldman Sachs became the latest bank to send some traders back home after at least one employee tested positive in its Manhattan headquarters, people familiar said. AstraZeneca contradicted a CNN report a volunteer in its U.K. vaccine trial developed a rare nerve disease that might have signalled severe safety problems. France had its most new cases since its lockdowns ended in May, as global cases surpassed 30 million and fatalities approached 1 million.
  • Back at the Fed: The central bank is considering extending unprecedented constraints on dividend payments and share buybacks it imposed on the biggest U.S. banks. Officials will decide in the next two weeks whether to prolong the limits, which are scheduled to lapse at the end of the third quarter. The announcement came as the Fed started its second round of stress tests to determine the industry’s ability to cope with two coronavirus-related recession scenarios.
  • Banks are unloading their hotel loans, with the value of commercial-property debt coming to market in August as much as 10 times the typical monthly rate on one auction platform. Bidders competing to put cash to work are supporting prices to a certain extent, DebtX CEO Kingsley Greenland said. Still, banks are accepting lower offers, because they fear property prices are going to fall more, Greenland added.
  • U.K. retail sales growth slowed to 0.8% in August from a revised 3.7% in July. In central banks, the Bank of Russia sees room for further easing, but it’s unlikely to act today, as optimism about the pace of recovery lessens the urgency for another rate cut, BE said.
Market performance
  • U.S. stocks fell and Treasuries gained as investors mulled whether the levels of stimulus being provided is enough amid a gradual economic recovery.
  • The benchmark S&P 500 dropped for a second day, though it found some support after bouncing off its 50-day moving average. Technology shares were the biggest decliners, with Apple Inc., Facebook Inc. and Microsoft Corp. weighing on the Nasdaq Composite.
  • Investors snapped up long-term Treasuries, capturing a brief spike higher in yields following the Federal Reserve’s policy decision Wednesday. Although Fed Chair Jerome Powell said the central bank will remain accommodative after relaxing its inflation policy, he didn’t provide clarity as to just how high it can go and for how long. That, along with the lack of fresh details on the Fed’s plans for its bond-buying program, sparked long-end demand.
  • Elsewhere, crude oil climbed above $40 a barrel. Natural gas prices tumbled the most in almost two years after a bigger-than-expected increase in stockpiles revived concerns that the glut of the fuel will increase. Gold declined.

Friday 11 September

This week’s video update focuses on the tech sector sell-off in the US, coming after months of strong performance, and what the future might hold in one of this year’s more resilient industries. We also consider the ongoing and, unfortunately, complicated Brexit negotiations and how the upcoming risk can be best managed.
In the markets:
  • In case there was any doubt, Britain won’t be withdrawing its Internal Market Bill. That’s what Michael Gove told European Commission VP Maros Sefcovic. Sefcovic listened and understood. “Of course he regretted it,” Gove said. EU chief negotiator Michel Barnier warned of “significant differences” and accused Boris Johnson’s team of not negotiating in a “reciprocal” manner. Sterling steadied in Asia after overnight losses.
  • ECB chief economist Philip Lane warned that the euro’s appreciation has dampened the inflation outlook and signalled that more monetary stimulus might be needed. Inflation will remain negative for the rest of the year and upward revisions in core price growth because of the economic rebound have been “significantly muted” by the stronger exchange rate.
  • Donald Trump won’t extend the Sept. 15 deadline for ByteDance to arrange a sale of TikTok’s U.S. operations to an American buyer. “We’ll either close up TikTok in this country for security reasons, or it will be sold,” the president said. Advisers earlier had mulled whether it made sense to give the Chinese company more time. ByteDance will invest several billion dollars over the next three years to bulk up in Singapore, people familiar said.
  • Seven southern EU leaders floated an ultimatum to Turkey: Agree to talks or face potential sanctions over energy exploration in the eastern Mediterranean. The group, including France, Italy and Spain, said the EU is ready to develop a list of restrictive measures for discussion at a Sept. 24-25 summit.
  • Britain’s economy grew by 6.6% on month in July. Consensus was for 6.7%. Spain’s industrial production probably rebounded 3.5% in July, consensus says, slowing from 14% in June. Italy’s unemployment rate is seen easing to 8.5% in the second quarter from 8.9%.
Market performance
  • A fresh selloff in megacap technology shares sent stocks to the fourth loss in five days as investors remain worried that valuations got stretched too far in a five-month rally. Treasuries rose with the dollar.
  • The S&P 500 dropped as much as 2.1%. Volatility has been even more prevalent in the Nasdaq 100, where close-to-close runs have been at least 1% for seven sessions. Energy companies, a small cohort in major averages, plunged as crude dropped back toward $37 a barrel in New York. Treasuries reversed losses as the equity decline picked up speed. Gold turned lower, while copper tumbled. The dollar strengthened versus major peers.

Friday 4 September

  • Global stocks slid after the S&P 500 wiped out this week’s gains on concern the lofty valuations of technology stocks can’t be sustained. U.S. futures signaled the retreat could extend for a second day ahead of a holiday weekend. Treasuries and the dollar were steady. Oil fell and gold climbed.
  • Painful lesson in options-market leverage. Call options on Apple, Tesla and Zoom Video plunged as stocks dropped. Volumes have been exploding in recent weeks, much of it in tiny lot sizes, denoting retail traders. “It’s probably the first feeling of pain for a lot of these neophyte investors,” said Alon Rosin at Oppenheimer. “When were they going to get burned? You’re seeing that today.” The plunge is vindication for bearish strategists.
  • The Fed’s demand for more government stimulus is growing louder, even as Congress shows little willingness to compromise on an aid package. Charles Evans echoed several of his colleagues in warning that an economic recovery will “critically depend on receiving substantial additional support from fiscal policy.” The Chicago branch chief slammed partisan politics for hindering additional relief: “A lack of action or an inadequate one presents a very significant downside risk to the economy.”
  • Another factor in any sustained recovery is the creation of a vaccine. The top scientific adviser to Operation Warp Speed threw cold water on hopes for a vaccine by November, calling that scenario “extremely unlikely but not impossible.” Moncef Slaoui said there will likely be up to 20 million vaccine doses ready by the end of the year and enough to immunize the U.S. population by the middle of 2021.
  • France may extend the furlough program it created to protect jobs during the pandemic, Finance Minister Bruno Le Maire said, indicating the government is ready to spend more than the 100 billion euros in the stimulus plan announced yesterday. He also said he expects the economy to do a little better than the 11% GDP contraction that the government currently forecasts for this year.
  • The ECB’s emergency stimulus threatens the region’s climate-change objectives by “feeding a natural gas frenzy.” That’s according to Reclaim Finance, which slammed the central bank for buying bonds from fossil-fuel project developers including Shell, Total and Engie. “Stop contributing to climate chaos,” the environmental group said. Christine Lagarde has called climate change an urgent challenge.
  • The recovery in Germany’s manufacturing sector lost steam in July, as factory orders rose 2.8% on month, weaker than the consensus estimate of 5%. Capital goods orders fell 0.4%, while those for consumer goods increased 0.2%. Later, data may show inflation in Russia ticked higher in August, but that won’t ring alarm bells at the central bank, Bloomberg Economics said. The headline CPI is forecast at 3.5%, versus 3.4% in July. It may overshoot the 4% target early next year, BE said.
  • Growth in U.S. non-farm payrolls probably slowed in August to a gain of 1.35 million from 1.76 million in July, with unemployment dipping to 9.8%. In July, net hiring slowed significantly, even as the economy continued to reopen. Seasonal factors augmented the July print, but in August the adjustment reverses and will start to subtract from the raw data, Bloomberg Economics said. Local government hiring ordinarily troughs in July, but starts picking up in August.
  • The U.S. Justice Department is poised to bring an antitrust case against Google as soon as this month, the NYT said. Attorney General William Barr overruled lawyers who said they needed more time to build a solid case against parent Alphabet.

Friday 28 August

  • Japan’s Shinzo Abe will resign due to health reasons, ending his run as the country’s longest serving premier. His successor will be picked by an election within the party, lawmaker Hiroshige Seko said. The PM had visited a hospital twice this month. A flare-up of a chronic digestive condition previously forced him to resign after an abbreviated first term in 2007.
  • Francois Villeroy de Galhau said Jerome Powell’s speech was important for long-term strategy as the ECB is also in the midst of a review that could change the way it defines its inflation mandate. The review will focus on pursuing a credible and symmetrical goal for price growth, the Governing Council member said. Reigniting inflation could be even more difficult going forward as the euro-area economy feels its way out of its deepest economic shock in decades.
  • Fear is back. The VIX gained more than 5%, the first time in two decades, as the S&P 500 and Nasdaq reached new heights. History suggests stocks tend to decline a median 1.2% in the following month when that happens, said Sundial Capital. And the dollar’s decline has only just started. “We are still in the early innings of dollar depreciation,” said Stephen Chang at Pimco. An important milestone will be the passage of a new U.S. stimulus package.
  • President Trump accepted the Republican presidential nomination with an argument that Joe Biden cannot be trusted to navigate the pandemic or heal racial divisions. He vowed to cut taxes, create 10 million jobs in 10 months and end the U.S. reliance on China. Several speakers through the last night of the convention repeated claims that the U.S. wouldn’t be safe under Biden.
  • China’s economy picked up speed in August, becoming the first economy globally to emerge from the Covid-19 slump. Early indicators showed a strong industrial sector and stock market, and better business confidence and home and car sales. The final result in July was also more robust than initially seen, given better PMIs in the latter part of the month.
  • TikTok’s U.S. sale is going down to the wire. Microsoft — joined by Walmart — and Oracle submitted bids, people familiar said. The competing offers augur the closing process of a deal, although it will take longer for final details to be worked out, a person said. While parent ByteDance is asking for about $30 billion, bidders have not been willing to offer that amount, the WSJ reported. Oracle’s bid is worth about $20 billion in cash and stock, the Wrap reported.
Market performance
  • U.S. stocks’ record-breaking rally continued and bond yields surged after Jerome Powell reiterated that the Federal Reserve will remain accommodative. The dollar climbed from a two-year low.
  • The S&P 500 reached an all-time high for a fifth day. The Nasdaq Composite also set a record before closing in the red. The yield premium demanded by investors on long-maturity U.S. debt compared to short-term notes increased to the most in two months after Powell said the Fed will seek inflation that averages 2% over time, a step that implies allowing for periods of overshoots. The financial and real estate sectors were the biggest gainers in the S&P, with banks seen benefiting from the higher yields. The benchmark index has surged about 56% from its March lows.
  • Crude oil declined as Hurricane Laura weakened while crossing over land in the refinery and LNG-rich Gulf of Mexico region. Gold retreated for the fourth time in five trading sessions.

Friday 21 August

This week’s video update features lessons from the US central banks meeting and some news on Europe’s economic recovery.

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Friday 14 August

We’re back after a couple of weeks off. This week, we examine the release of both UK GDP figures and US inflation figures, along with some better-than-expected corporate earnings reports.

Today’s key takeaways:

  • Apple jumped on the big tech borrowing bandwagon, tapping the investment-grade market for $5.5 billion. The longest-maturity bond, 40 years, will yield 118 bps above Treasuries, a person familiar said. It also plans to bundle access to CBS All Access and Showtime content at a discounted price for subscribers to its TV+ video service. Dubbed Apple One, it’s a bid to achieve the same loyalty Amazon has with Prime.
  • England resumes easing its lockdown tomorrow, with theatres, casinos and beauty parlors allowed to reopen. But Boris Johnson warned of stiffer penalties for breaking social-distancing restrictions. Fines for not wearing a mask will double with each repeated offense to a maximum of 3,200 pounds. Also, people arriving in Britain from France, the Netherlands, Monaco and Malta now have to quarantine for 14 days.
  • Twenty-four European countries lodged a complaint with the U.S. State Department this week over Trump’s expansive use of sanctions to help influence American foreign policy goals, a person familiar said. The letter was prompted in part by a July 17 statement by the EU’s top foreign policy official condemning U.S. intimidation tactics, specifically sanctions aimed at halting construction of the Nord Stream 2 gas pipeline.
  • The WeWork saga continues. SoftBank is injecting $1.1 billion into the office-sharing firm to help it weather the pandemic, according to a memo from CFO Kimberly Ross. WeWork’s revenue fell in the second quarter from the first, and its membership base dropped 12% year on year. Ross said the company made progress on reducing its burn; it now has $4.1 billion of cash and cash commitments.
  • China’s economy is still recovering, but anemic domestic demand could halt the rebound. Industrial output rose 4.8% in July from a year earlier, missing consensus for a 5.2% uptick. Overall retail sales fell 1.1%, confounding expectations for a 0.1% increase. “Clearly the hope for a fast recovery has faded — the consumption still lags behind and the job market is still under pressure,” said Commerzbank senior economist Zhou Hao.
  • Palestinian pushback against the Israel-UAE agreement to work on normalizing relations was swift. The Palestinian Authority called the UAE decision a “betrayal of Jerusalem, Al-Aqsa and the Palestinian cause,” and it withdrew its ambassador from the UAE. In the White House, Jared Kushner dismissed the response as predictable, and Donald Trump said there is “a lot more to come” in terms of diplomatic efforts across the region.

Friday 24 July

Today’s key takeaways:

  • China told the U.S. to close its consulate in Chengdu. The retaliatory move came after the forced closure of the Chinese mission in Houston. Mike Pompeo called Xi Jinping a “true believer in a bankrupt totalitarian ideology” and cast competition with China as an existential struggle between right and wrong. Donald Trump said the trade deal “means less” to him because of what he called China’s role in spreading the coronavirus.
  • The Republicans’ pandemic relief package won’t be rolled out until Monday as internal party differences linger. Top Democrats rejected the idea of piecemeal legislation and said there can be no negotiations without a fleshed-out GOP proposal. The plan is expected to expand eligibility for stimulus payments to all family dependents, people familiar said. It will also continue the PPP and include an extension of student loan forgiveness until individuals have an income.
  • Chancellor Rishi Sunak directed an extra 3.7 billion pounds of coronavirus-relief funding to Scotland, Northern Ireland and Wales. The money brings the amount of extra cash the devolved administrations will get this tax year to 12.7 billion pounds, about 25% more than announced in the budget in March. The fresh stimulus comes as recent polls showed Scots would support independence if put to a vote.
  • Britain will vaccinate more than 30 million people for the flu in the coming winter, the most ever and almost twice last season’s total, as it prepares the NHS for a possible second pandemic wave. Trump canceled next month’s GOP convention in Florida as deaths in the state broke another record. California also reported record fatalities as well as a faster pace of new cases. Trump reiterated that all U.S. schools should plan to reopen in the fall.
  • The Bank of Russia is expected to cut interest rates but has left some suspense about the size of the move. Bloomberg Economics sees another 50 bps of easing to 4%, as the economy is in dire straits and price pressures are low. A big rate reduction would probably signal an end to easing for now. The bank may lower its outlook for inflation while narrowing the GDP contraction forecast.,
  • The euro-area economic rebound may be on track. Consensus sees today’s composite PMI for July showing expansion for the first time since February, with both the manufacturing and services gauges moving above 50. High frequency data from mobility to electricity consumption have picked up a clear and continued recovery, Bloomberg Economics said.
Yesterday performance
  • U.S. stocks tumbled to the lowest in a week after an unexpected rise in jobless claims rekindled concern the economic recovery has stalled. The dollar weakened and Treasuries rose.
  • The S&P 500 Index slipped from a four-month high, led by losses in technology firms and companies that make non-essential consumer goods. The Nasdaq 100 Index dropped to a two-week low and turned lower for the week, erasing Monday’s rally that was the biggest since April. Twitter Inc. jumped after daily-user growth surged, but Alphabet Inc., Inc and Apple Inceach lost more than 3%. Microsoft Corp. slumped after cloud growth slowed. Tesla Inc. slid even after results beat estimates.
  • In Europe, the Stoxx 600 Index increased on gains in carmakers and consumer products, led by Unilever NV’s jump after sales fell less than expected.
  • The yield on Italy’s benchmark bonds fell below 1% for the first time since March amid euphoria over the Europe Union’s pandemic recovery package.

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:

  • 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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