Weekly Market Insight

Latest Economic & Market Update 18th June 2020

18th June 2020

Good afternoon, it is 18th June 2020 and here is your economic and market update from BlackBee. 

Today we focus on:

  • A rise in new coronavirus cases renews uncertainty about the path of economic recovery.
  • Figures released show Consumer Price Inflation in the UK fell to 0.5% yoy in May.
  • FED Chair warns of risk of removing emergency unemployment payment too soon.

Trading on Wednesday reflected the uncertainty among investors about the path of economic recovery. Following recent announcements of positive economic data and further stimulus – which led US stocks to its third straight day of gains on Tuesday – investors had hoped that recovery was underway. However, alongside this positive news, six states in the US hit record highs for new coronavirus cases during the week increasing the uncertainty about recovery. Tech stocks closed in positive territory for the day, the Dow Jones closed -0.65% lower and the S&P500 closed -0.36% lower.

Inflation has continued to drop in the UK following the lockdown. Inflation fell to 0.8% yoy in April and new figures released have shown another fall as inflation dropped to 0.5% in May. Prior to the crisis, the inflation rate stood at 1.5%, below the Bank of England’s target rate of 2%. It is now at its lowest level since June 2016. The fall in inflation comes as businesses reduce prices to attract a cautious customer base, as the number of people unemployed is increasing at the fastest rate in the UK’s history. Low levels of inflation will harm recovery and will require further stimulus from the Bank of England to prevent it from falling further.  

There has been debate in the US on removing the $600 a week emergency unemployment, initiated by the Republicans whose belief that the economic recovery is well underway. Republicans believe that it is a disincentive for people to go back to work. In comparison, Democrats want to extend the payment until January. In the second day of his testimony to Congress, Jerome Powell warned of the impact of removing the emergency unemployment too soon. The removal of the payment will significantly slow economic recovery as a significant number of Americans remain unemployed.

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

Global Market Update
(as at close of markets 17/06/2020)