Weekly Market Insight

Latest Economic & Market Update 11th May 2020

11th May 2020

Latest Economic & Market Update: Markets decoupled from economy | Record unemployment levels in the US | ECJ consider legal action against Germany

Good afternoon, it is 11th May 2020 and here is your economic and market update from BlackBee.

Today we are going to focus on:

> Markets remain decoupled from the economy.
> Record unemployment levels in the US.
> ECJ consider legal action against Germany.
 
It is clear that the market has been decoupled from the real economy in recent weeks. On Friday, despite figures of record-breaking unemployment levels being released, US stocks rallied and Treasury yields rose. Investors would have anticipated the record readings for unemployment and are betting that this is the low point of the crisis as they focus on government action and economies reopening. The same hopes were reflected in the Oil market, which recorded its first weekly back-to-back gain since February based on cuts in production and hopes of increased demand.
 
Figures released on Friday showed that US unemployment has risen to the highest level since the second world war, at 14.7% for April. The effects of Covid-19 has seen 20.5 million Americans lose their jobs. In February, the unemployment rate was at a five-decade low of 3.5% and had been continuously decreasing since December 2009. In the space of two months, the crisis has wiped out a greater number of jobs than what was created in the decade since the financial crisis. The number of job losses, only eclipsed by the Great Depression, raises question marks over the potential of a relatively quick rebound. These record-breaking numbers of unemployment, which are expected to grow further, will slow recovery. The US Treasury Secretary Mr Mnuchin on Friday said that the unemployment rate could reach Great Depression levels at 25%. Another potential worry for economies worldwide is that there have been new outbreaks in China, Germany and South Korea, all of which eased restrictions.
 
Following on from Germany’s Constitutional Court ruling last week, where they gave a three-month deadline to the ECB to justify its bond purchasing programme, the European Court of Justice (ECJ) is now considering legal action against Germany. The ECJ are concerned as countries will be able to judge themselves and diverge from ECJ rulings leaving the legal order in Europe in jeopardy. Countries that already have legal cases ongoing with the ECJ could now use the German Courts ruling as precedent. The ECB’s ability to execute monetary policy is in doubt if Germany’s case is successful because member states will be able to challenge monetary policy decisions.

Best & Worst Performers of Large Cap Stocks on Friday

Latest Economic & Market Update: Markets decoupled from economy | Record unemployment levels in the US | ECJ consider legal action against Germany

General Market Update