Weekly Market Insight

Latest Economic & Market Update 12th August 2020

12th August 2020

Good afternoon, it is August 12th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • Stocks reverse gains on back of news that there has been no stimulus talks since Friday
  • Survey shows a sharp increase in investor confidence on the future outlook for Germany.
  • UK suffers its worst GDP contraction on record in Q2.

As US stocks were lining up for another day of gains, the final hour of trading saw stocks fall into negative territory for the day. Mitch McConnell, the Republican leader in the Senate, stated that there had been no talks regarding a new stimulus package since Friday, which caused the reversal in US stocks and raised concern among investors who had hoped a deal with be agreed shortly to support the economy. The Dow Jones closed -0.38% lower, the S&P500 closed -0.8% lower and the Nasdaq closed -1.69% lower. Gold fell below the $2,000 barrier declining 5.7% on Tuesday. In Europe, the DAX climbed 2.04% as research from the Zew Institute showed positive economic data for Germany. The Dow Jones travel and tourism index has climbed 2.86% in the last two days.

According to a survey by the ZEW – Leibniz Centre for European Economic Research, released on Tuesday, investor sentiment regarding the current situation and impact of the coronavirus is still negative however investor confidence of the future outlook of Germany has sharply increased. In the findings, August recorded the highest level of optimism regarding future outlook since 2004, showing a climb of 12.2 points to 71.5. The survey consists of outlooks from financial market experts. Germany’s GDP has contracted less than other major European economies and its economy has shown signs of a rebound with factory orders jumping by 27.9% in June from the previous month.

Data released on Wednesday showed that the UK suffered one of the biggest declines in GDP in Europe during Q2. GDP contracted by 20.4% QoQ. It is the biggest fall in GDP on record for the UK. Despite the severe drop in GDP, investors focused on June where the UK recorded an increase of 8.7% month on month, indicating an initial rebound. There will be an expectation that July’s figure will show a further rebound in activity. The FTSE100 was outperforming other major European indices in early trading on Wednesday as a result of investors focusing on June’s uptick in activity. Although there was a pickup in GDP in June, due to the severe contraction in the months prior, focus will be on the UK government to extend the furlough scheme to provide further support for the economy.  

Best & Worst Performers of Large Cap US Stocks on Tuesday
Click the image to enlarge

Global Market Update
(as at close of markets 11/08/2020)