Weekly Market Insight

Latest Economic & Market Update 1st September 2020

01st September 2020

Good afternoon, it is September 1st 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • US indices post best August returns since the 1980s.
  • Warren Buffet buys stake in five major Japanese trading houses.
  • Lending in Ireland falls and deposits rise in July. 

US stocks closed mixed yesterday, as the Dow Jones and S&P500 fell -0.78% and -0.22% respectively. The Nasdaq climbed 0.68%, led by Apple and Tesla with their stock splits coming into effect. Apple closed 3.4% higher and Tesla jumped 12.6%. The three main US indices posted their fifth consecutive monthly gains since March. The Dow Jones rose 7.6% in August, its best performance in the month of August since 1984. The Nasdaq climbed 9.6% and the S&P500 increased 7%, its best August performance since 1986. The dollar continued its decline with the Bloomberg Dollar Spot Index falling -0.25%. In Europe, the Stoxx Europe fell -0.62%.
 
Japan’s five major trading houses are focused on cyclical commodities and resource-related operations and in the past few years have moved towards private equity and venture capital. The trading houses have been heavily affected by the fall in commodity prices as a result of the pandemic. Warren Buffet has now bought a $6 billion stake in these trading houses which are considered undervalued as a result of the pandemic, fitting in with Buffett’s strategy of buying companies that are undervalued but have a good business model. The decline in the value of the dollar will have also helped the decision as it could act as a hedge against the risk that the dollar falls further. It has been long speculated that Buffett wants to move into the Japanese market. Buffett has indicated that the investment is for the long term and could be increasing the stake in any of the five trading houses.
 
In a report released by the Central Bank of Ireland, figures showed that net lending to Irish households declined by €204 million in July, the lowest level of net lending on an annual rate since 2017. Mortgages, in net terms, declined by €88 million. Net loans for businesses also declined in July, falling €510 million. In annual terms, household lodgements were €11.8 billion higher than withdrawals, the highest increase recorded. Deposits for businesses saw a net increase of €1.9 billion. The decline in loans and increase in deposits show that currently in the Irish economy, households and businesses have a focus on saving money and paying off existing debt while some uncertainty still remains around economic recovery.

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

Global Market Update
(as at close of markets 31/08/2020)