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Weekly Feed5 Mins Read

Kristal Weekly Feed | 20 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:

  • Travel is bouncing back from the COVID shock, but tourists stick close to home
  • U.S. initial jobless claims signal slowing the labour-market rebound
  • U.S: Consumer spending and homebuilder confidence point to US recovery
  • Coronavirus: U.S. sees second-highest number of coronavirus cases

 


Tracking COVID-19

Covid-19 totalled 14,47,824 confirmed cases around the globe and the current death toll stands at 605,377.

  • Florida Gov. Ron DeSantis revealed that the state was witnessing an increase in new coronavirus cases, especially among younger people, recording 10,327 new cases alone on Saturday, and bringing the state’s total number of cases to more than 337,000. Arizona also reported new highs for coronavirus-related deaths amidst a broader struggle to contain the virus across other states. There was a decline in median age of people testing positive for COVID-19 and Mr. DeSantis attributed this to erosion of social-distancing practices.
  • Despite ongoing concerns of a potential resurgence in infections across several parts of the world, travel and tourism have started showing signs of a small rebound. In some parts of the world, travellers are beginning to appear, but are staying closer to home. This has driven a much-welcomed rebound in tourism as travellers release their pent-up demand for vacation. Still, the global travel and tourism industry is projected to decline this year by about 40% in its baseline scenario, according to the World Travel & Tourism Council.

Market Update

1. United States

Last week saw an overall improvement in U.S.’s major stock indices despite unemployment filings pointing towards a slowing labour-market rebound. The tech-centric NASDAQ Composite Index rose by 1.08%, while the S&P 500 Index and Dow Jones Industrial Index catching up with 2.23% and 2.27% respectively. Despite the consecutive weeks of gains, the S&P 500 Index still remains marginally down for the year.
As for U.S. Treasuries, front-end yields were little changed with long end cheaper, indicating a steepening of the 2Y-10Y spread and 5Y-30Y spread by 1 basis point respectively.

The boosters
U.S. businesses were reopening and had been recalling workers in May and June, aiding the U.S. economy in recovering 7.5 million jobs in those months. Economists expect growth to continue through July albeit at a slower pace due to rising concerns of a resurgence in infections.

Data coming out from U.S. consumer spending and homebuilders’ confidence finally returned to levels last seen before the pandemic struck – a much-needed respite even though the postponement of reopening plans in some states have threatened to decelerate the nation’s recovery. According to the U.S. Census Bureau last Thursday, June retail sales climbed 7.5% compared to the month before, exceeding expectations for 5% as workers and retailers emerged from the shutdowns. The National Association of Home Builds’ Housing Market Index improved to a level of 72 in July, up from 58 in the previous month and exceeding estimates by 12 points.

The dampeners

The U.S. labour market recovery appears to be losing much of the initial momentum – with job openings in July down from the prior month and Google searches for “file for unemployment” creeping up, according to Wall Street Journal. Congress is also debating whether to extend the $600-per-week federal unemployment benefits that is currently supporting close to 25 million workers through the end of July.

Europe

European shares closed higher as investors looked forward to talks between European Union leaders regarding the bloc’s recovery fund. The pan-European STOXX Europe 600 Index made a weekly gain of 0.60%, with most major European indices gaining ground this week. Germany’s DAX Index climbed 0.93%, France’s CAC 40 Index managed a 0.38% rise, Italy’s FTSE MIB Index soared by 2.08%, and the UK’s FTSE 100 Index rose by 1.85%.

The boosters
U.K. Prime Minister Boris Johnson has declared an end to the government’s “work from home” guidance, which would take effect from 1 August, in an attempt to boost the nation’s economy. Workers will then be allowed to return to work at the “discretion” of their employers. The motivation behind this relaxation in policy came as Boris Johnson lays out his hope for a more significant “return to normality” before Christmas. The PM has also suggested that the one-meter social distancing rule could be dropped if Covid-19 are showing signs of retreat.

The dampeners
Even as economies across Europe are recovering, company hiring has lagged, giving rise to the risk of a potential job-poor recovery. Companies retain an uncertain outlook with regards to spending commitment and may not even reinstate all furloughed workers when governments end their handouts and supplementary payroll programs. In the past weeks, Airbus SE, Commerzbank AG and Sanofi were some of the major companies to have signaled staff cuts. According to a Bloomberg survey, unemployment in the euro area could hit almost 10% by year-end.

Asia Pacific

Major Asia Pacific indices swung up and down but mostly closed off with a weekly loss. China’s Shanghai Shenzhen CSI 300 Index ended its prior streak with a weekly reversal of -6.35% as investors assess moves by policy makers to tame signs of exuberance in a bid to avoid overheating – a concern that has been gaining traction as the rally is starting to appear like a repeat of the Chinese stock market bubble back in 2015. Hong Kong’s Hang Seng Index ended the week down 2.65%, Japan’s Nikkei 225 Index declined by 0.39%, while South Korea’s KOSPI Index managed an improvement of 0.69% despite the broader drawdown.
Following last week’s announcement of Japan relaxing its coronavirus-related restriction, a recent poll revealed that approximately 60% of respondents were not pleased with actions affected by Prime Minister Shino Abe’s administration to combat the outbreak. The number of daily infections in Tokyo hit records for two consecutive days, bringing the total confirmed infections to 9,411 people according to Bloomberg. About 67% of people polled stated that preventing infections should take priority over economic activities; 64% shared that the government should declare a localized state of emergency.


Disclaimer

The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.

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