Weekly Market Insight

Latest Economic & Market Update 22nd July 2020

22nd July 2020

Good afternoon, it is July 22nd 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • Global stocks fall on Trumps Covid-19 tone and China tensions
  • Breakthrough for EU debt ratings says S&P
  • HIQA report shows potential for alternative nursing home models to curb infection rates

An escalation in friction between the US and China has caused global stocks to stumble, however, US stocks seem unaffected. The S&P 500 gained 3%, the Nasdaq rose 3%, while the US tech index has gained 20% this year. The Stoxx Europe 600 index shed 1% meaning they are on course to end a three-season winning streak. After the US asked Beijing to shut their Houston office, the Dollar pushed above 7 against Chinese Renminbi. Those gains were later trimmed when the Renminbi fell back below 7 to a Dollar. None of this has put an end to the rally in US corporate bonds with the Yield on higher-rated investment-grade bonds sinking to 1.99% on Tuesday, marking the first time the index has fallen below 2% as debt markets remain supported by the federal reserve which is helping borrowing costs to decline.

The creditworthiness of EU member states has increased thanks to the coronavirus recovery fund. It is likely to improve the credit ratings of member states with joint responses to the crisis and a massive increase in debt issuance by the EU. Investors believe the coming explosion in debt issuance by Brussels could help create a new pricing benchmark across the region while bolstering the Euro’s role as a reserve currency. According to Philip Brown, Head of Public Sector Debt at Citi Bank, investors will have a shared safe asset that is large enough to find its way into government bond indices and bond portfolios. The move is seen as the eurozone’s first real attempt at mutualising debt and its biggest step yet towards fiscal integration.
Source: Financial times.

HIQA (Health Information and Quality Authority) has released it’s latest report (published on Monday 21st July) on the impact of Covid-19 on nursing homes in Ireland. The report highlights the fact that Covid -19 outbreak brings into sharp focus the current models of care for older people and indeed all forms of residential care in Ireland. The continued use of multi-occupancy rooms and outmoded premises in some nursing homes has created a situation where the spread of infection is difficult to contain. HIQA has previously called for reform of the regulatory framework to allow other forms of care to flourish. The current system predominately directs people into a single model of residential care when other options may be more suitable.

Many of the flaws highlighted by the crisis were risks that the BlackBee Healthcare strategy is seeking to mitigate against. The BlackBee Healthcare Strategy targets best in class care in this sector prior to Covid-19. The continued ambition is to build single occupancy homes to the highest standards. The criteria for acquired homes is to minimize double rooms and ensure overall building quality is of a high standard. The BlackBee Healthcare Fund strategy is to position its nursing home operating company Aperee as a leading consolidator in the sector through acquisition of superior standard homes and development of new best in class stock, whilst providing the highest quality of care for its residents.

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

Global Market Update
(as at close of markets 21/07/2020)