Weekly Market Insight

Latest Economic & Market Update 13th July 2020

13th July 2020

Good afternoon, it is July 13th 2020 and here is your economic and market update from BlackBee. Today’s focus:

  • Positive trial data for Covid-19 drug pushes market higher on Friday.
  • OPEC could increase supply of oil.
  • US announces 25% tariff on $1.3 billion of French goods.

Overcoming concerns about the growing number of coronavirus cases, US stocks climbed higher on Friday as Gilead Sciences released positive trial data for a drug to help coronavirus patients. Data showed that Gilead Sciences drug Remdesivir was found to reduce mortality risk by 62%. The Dow Jones closed 1.44% higher and the S&P500 rose 1.05%. The Euro Stoxx 600 also climbed 0.88% higher. Prior to the announcement, there was an inflow of funds into safe havens such as treasuries. Following the announcement from Gilead Sciences, the 30-year US treasury yield hit a five-year low falling to 0.2563% and treasuries reversed some of its gains.

On Wednesday, OPEC will have a meeting regarding the current curbs on output. They are considered to be leaning towards easing the production restrictions by around 2 million barrels a day (bpd). Currently, the curb stands at 9.6 million bpd but this could be reduced to 7.7 million bdp. Since the original supply cuts came into effect two months ago, the price of oil has since doubled. Now as demand increases with economies reopening, they are leaning towards increasing the supply once again. However, OPEC must be cautious when increasing supply as the threat of a second lockdown lingers. The combination of an increase in supply and another lockdown could see the prices crash again.

A digital services tax that France has been planning to implement has been a source of tension between the US and France. This 3% tax on technology companies’ total sales in France is unfair to US technology companies, according to the United States. The US has stated that if France implements the digital services tax, the US will impose 25% tariffs on $1.3 billion worth of French goods. To allow time for a multilateral solution through the Paris based OECD, the tariffs will not be implemented for 180 days. Following an investigation into the tax last December, the US said it would implement tariffs of up to 100% on items such as wine and cheese. In January France paused collection of the digital tax and the US suspended tariffs on French goods as the two sides agreed to wait for a multilateral taxation framework overseen by the OECD to go its course.

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

Global Market Update
(as at close of markets 10/07/2020)