Kristal Weekly Feed | 13 July 2020

These are tough times and it can get difficult to understand and analyze major events around the globe and how they affect your investments. In our weekly market update, we help you slice and dice the latest news updates to make informed investment decisions.

Headlines this week:

• The Dow and the S&P 500 rose around 1-2% and the NASDAQ jumped by 4%
• The nonmanufacturing Purchasing Managers’ Index, a measure of business conditions, posted its biggest monthly gain and moved back into expansion, adding to the string of positive economic surprises
• Expectations are low for the upcoming earning season. The S&P 500 companies are expected to drop 44% compared with last year’s second quarter – the biggest decline since the fourth quarter of 2008
• Coronavirus: new COVID-19 cases are starting to rise and several states are starting to slow down or roll back their reopening measures

Tracking COVID-19

Covid-19 totaled 12,873,553 confirmed cases around the globe and the death toll is at 568,321.
Some positive news snippets:

• As Scotland emerges from a three-month lockdown, it is moving more carefully than neighboring England, a divergence that owes a lot to Ms. Sturgeon’s caution and conviction that England, under Boris Johnson, is taking too many risks in a headlong rush to resume public life. New cases have dwindled to a handful a day and deaths to a trickle. By contrast, England is still reporting hundreds of new cases and dozens of deaths every day.
• Singapore held the generation election during this global pandemic. Face-masked citizens lined up to vote in Singapore on Friday, with plenty of space separating them from each other. Their temperatures had been checked. Before receiving their ballots, they spritzed their hands with sanitizer, and many put on disposable gloves. Which raised plenty of praises globally.

Market Update

1. United States

NASDAQ has surged nearly 59% since the low in March 23, mainly from the larger weightage in the big technology stocks that presented strong results.
The 30-year Treasury yield fell slightly back to 1.28%, narrowing the spread between the 10-year and 30-year yield, while the U.S. dollar, gold, and crude oil prices traded higher.

The boosters
U.S. Treasury Secretary Steven Mnuchin noted that they are pending approval for another coronavirus-related stimulus initiative late this month. They are considering another round of payments to Americans with enhanced unemployment benefits which are due to expire soon.
Longer-term Treasury yields decreased through most of the week on growing coronavirus concerns and briefly slid to levels last seen in late April.

The dampeners

Investors appeared to be particularly concerned that the impact of the resurgence in the virus seemed to be showing up in economic data. Atlanta Federal Reserve Bank President Raphael Bostic told a reporter that high-frequency data “suggest that the trajectory of this recovery is going to be a bit bumpier than it might otherwise.”

Europe

European shares fell due to renewed concerns about a resurgence of coronavirus cases. Although the pan-European STOXX Europe 600 Index was flat, major European market indexes were mixed. Germany’s DAX Index rose 0.22%, but France’s CAC 40 Index eased 1.38%, while Italy’s FTSE MIB Index declined 1.12%, and the UK’s FTSE 100 Index fell 1.19%.

The boosters
UK Finance Minister Rishi Sunak pledged an additional GBP 30 billion to support employment, on top of the GBP 133 billion in coronavirus measures he has already unveiled. Still, business leaders warned that the measures were not enough to save jobs at risk in retail and manufacturing.

The dampeners
Europe is facing a deeper-than-expected recession in 2020 and a weaker economic recovery. The EU’s GDP is forecasted to shrink by 8.3% in 2020 and then to rebound 5.8% in 2021. The Eurozone is forecasted to contract by 8.7% in 2020 and growth accelerating to 6.1% in 2021. Both forecast are worse than those unveiled in May.

Asia Pacific

A bullish editorial in the China Securities Journal on Monday set in motion a risk-on rally for the rest of the week that sent the benchmark Shanghai Composite Index to a two-year high. By Friday, the large-cap CSI 300 Index and Shanghai Composite Index rallied 7.5% and 7.3%, respectively. The yield on China’s 10-year bond rose 20 basis points to the end of the week at 3.13% amid growing optimism about the economy and strong momentum in stocks. Which caused a rising concern as this rally draws close parallels with the China stock market bubble in 2015.
Japan relaxed its coronavirus-related restrictions on holding major events, as planned. Economic Revitalization Minister Yasutoshi Nishimura announced that the number of people allowed at major events would be increased to 5,000 from 1,000 currently, allowing for the 50%-of-capacity restriction that is still in force.