Weekly Market Insight

Latest Economic & Market Update 20th August 2020

20th August 2020

Good afternoon, it is August 20th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • US stocks fall on the back of the release of Fed minutes.
  • Fed minutes show guidance on interest rates might not come in September’s meeting.
  • Inflation in the UK rises 1% Year on Year.

US stocks declined following the release of minutes from the Federal Reserve’s meeting in July. The day after breaking February highs of $3,386.15, the S&P500 fell -0.44% closing at $3,374.85. The Nasdaq and Dow Jones fell -0.57% and -0.31%. The dollar climbed 0.67% and Treasury yields rose with the 10-year US treasury yield now standing at 0.68%. Gold fell -3.1% to $1,939.70. In Europe, the Stoxx Europe 600 climbed 0.65%.

Prior to July’s Federal Reserve Meeting, the Fed was keen to provide guidance on the future of interest rates following calls from investors. Minutes released yesterday from the Fed’s meeting that was held on 28th-29th July showed that they had toned down the urgency to provide guidance as they were concerned about the significant economic impact the crisis will have. Jerome Powell stressed the high uncertainty the path that economic recovery will take as the virus has not yet been controlled. Members had agreed that economic activity, employment and inflation would be heavily affected in the near term as a result. The Fed still discussed economic measures such as employment and inflation, to which they could link interest rate changes, however, there was no sign that investors would receive this guidance in September’s meeting. Following the meeting in July, interest rates had remained unchanged near zero.

Figures reported by the Office for National Statistics on Wednesday showed that inflation in the UK hit 1% YoY in July. In June inflation stood at 0.6% YoY. The drivers behind this include the recovery in the price of petrol and clothing. In comparison to the same period last year, the price of packaged holidays rose 5.6%. Following lockdowns, and with economies now reopening, there is upward pressure on the price of holidays. Core inflation rose 1.8% YoY. The rise in inflation in comparison to June shows an initial rebound although questions still remain over the sustainability as government support has been crucial so far and the threat of a wave of unemployment in the coming months still remains as the UK government support is beginning to phase out.

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

Global Market Update
(as at close of markets 19/08/2020)