Weekly Market Insight

Latest Economic & Market Update 22nd June 2020

22nd June 2020

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

Today we focus on:

  • Investors fret over an increasing number of infections.
  • Spain reopens borders to the UK in an attempt to save the tourism industry.
  • European Commission faces pressure over method of allocating funds. 
  • Protected Income Bond 19 returns 10% for investors

Investors fret over an increasing number of infections

Futures pointed to a strong day of gains on Friday, responding to news that China was planning to increase purchases of US farm goods to meet the agreement of Phase 1 of the trade deal and the news that negotiations were opening regarding the European Union’s €750 billion plan to support economies.

However, fears over the increase in coronavirus cases resulted in the S&P500 closing -0.56% lower and with the Dow Jones closing -0.8% lower for the day. The US saw its biggest daily increase in cases since 8th May as just under 27,000 people tested positive.

The news left investors worrying about the reopening of the economy. In response to the uptick in cases, Apple announced that it plans to close stores again despite recently reopening. 

Spain reopens borders to the UK in an attempt to save the tourism industry

The tourism industry in Spain accounts for nearly 12% of GDP. In an attempt to save the industry, Spain has now opened its borders to the UK and removed the quarantine requirement effective from Sunday 21st June. This comes despite the UK being one of the worst-hit countries for coronavirus cases.

Following behind France, Spain is the second-largest destination for tourists according to the World Tourism Organisation. The tourism industry has been one of the worst-hit industries from the pandemic globally.

In the US, the sudden stop in travel left airlines needing a bailout. The pandemic arrived at a time when tourist numbers start to pick up for Spain and it is now coming into peak tourist season, a period that many small businesses in Spain rely on to survive the winter when tourist numbers drop off. 

European Commission faces pressure over method of allocating funds

At a video conference on Friday, the European Commission president faced demands to change the method of how the recovery fund would be allocated.

The original method of allocating funds was based on each country’s gross GDP, GDP per capita and the average unemployment rate between 2015-2019. The complaints about allocation argue that the allocation uses an outdated method and does not sufficiently support the economies who have been hit the hardest by the pandemic.

Ireland was one of the countries who argued for the change. In response to the demands, European Commission President Ursula von der Leyen argued that they had also used more recent economic data and allocation to each country would have remained similar. Topics such as the size of the fund and portion of grants to loans were discussed.

The need for countries to reach an agreement highlights the hurdles the EU faces in responding to the crisis with a collective measure in comparison to the US.

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

Recent BlackBee investment product maturities

Global Market Update
(as at close of markets 19/06/2020)