Weekly Market Insight

Latest Economic & Market Update 16th July 2020

16th July 2020

Good afternoon, it is July 16th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • Investors are hoping for forward guidance in earnings reports.
  • Deflationary pressure not yet behind the UK.  
  • EU judges quash tax case against Apple.

Rumours of a positive Covid-19 vaccine trial from Oxford helped push global stocks higher on Wednesday. The S&P500 was up 0.91%, the Dow Jones moved 0.85% higher and the Eurostoxx 600 closed 1.76% higher. Brent crude rose 2.07% to $43.79 a barrel. A surge in bond trading saw Goldman Sachs earnings reach nearly double the consensus forecast and the stock rose 1.4%. Having already considered the damage that the coronavirus has caused, investors are watching out for what forward guidance companies provide during earnings season as uncertainty still remains a big issue.

Inflation in the UK rose in June to an annual rate of 0.6%, up from 0.5% in May. Since March, the inflation rate has plunged from 1.5% and is now well below the Bank of England’s 2% target. With its economy only gradually opening, it is important to note that accurate inflation figures were difficult to gather as many businesses remained closed. Core inflation rose to 1.4% in June up from 1.2% in May, though core inflation omits volatile items such as food and energy. The rise in prices in June could ease concerns about the pace of disappearing inflationary pressure, however, it would be argued that deflationary pressure is not yet behind the UK because the economy has been hit hard and has a long way to go to recover with a rise in unemployment still expected in the UK.

An order from the European Commission for Apple to pay back €14.3 billion in taxes to Ireland has been quashed by EU judges. Brussels was considered not to have shown “the requisite legal standard” that Apple had been gaining an illegal economic advantage. The competitive commissioner Margrethe Vestager had previously ruled in 2016 that Apple had been giving a “sweetheart” deal” from Ireland for over 10 years. The ruling reduces the likelihood that other low tax agreements within the EU will be opened up and it also delivers a blow to the competitive commissioner’s efforts on cracking down on low tax regimes. This is a second time the European Commission has lost a case of this type, with the main problem being able to meet the burden of proof, after their case against Starbucks which was also overturned last year.

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

Global Market Update
(as at close of markets 15/07/2020)