Good afternoon, it is July 14th 2020 and here is your economic and market update from BlackBee. Today’s focus:
- US stocks move lower as earnings season kicks off.
- UK two-year yield falls below Japans for first time on record.
- Countdown to pay check stimulus programme end.
This week marks the start of earnings season which is expected to deliver the worst results since 2008. In trading yesterday, Telsa had a volatile day from being up over 16% early in the trading session and becoming the 10th most valuable US publicly listed stock, to ending the trading session down 3% for the day. US stocks reversed early gains and closed lower for the day with the S&P500 down -0.94% and the Nasdaq down -2.13%. Crude oil fell -1.2% as investors look ahead to Wednesday when OPEC are expected to increase supply.
For the first time on record, the UK’s two-year bonds offer a lower yield than Japans two-year bonds. A record low was reached with the yield on the UK’s two-year bonds falling to -0.126%. The yield has been driven down as investors move into safe havens due to concerns about the future of the UK economy. This has added to concerns of investors that debt markets in Europe will experience Japanification, a scenario of low yields, little inflation and very low levels of volatility.
There has been a debate in the US to whether the $600 pandemic unemployment pay should be extended. Republicans argue that it acts as a disincentive to work whereas the Democrats are looking to extend the programme. The unemployment payment is set to expire at the end of the month. The main issue is that some workers are earning more by receiving this payment than they were while working, and some businesses have stated some of their employees don’t want to return as a result. However, if the payment expires at the end of the month and households suddenly have no income it poses a huge problem for an economy that has already indicated signs of slowing down again thanks to businesses reversing reopening plans due to a rise in Covid-19 cases. The sudden stop in payments would have a knock-on effect throughout the economy because households will have to choose carefully what they spend their limited savings on.
Best & Worst Performers of Large Cap US Stocks on Monday
Click the image to enlarge
Global Market Update
(as at close of markets 13/07/2020)