Weekly Market Insight

Latest Economic & Market Update 24th August 2020

24th August 2020

Good afternoon, it is August 24th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • S&P500 marks its fourth straight week of gains.
  • UK debt levels surpasses £2 trillion.
  • ECB expects unemployment levels to rise.

The S&P500 climbed 0.34% on Friday closing at $3,397.16, marking its fourth week of gains. The Nasdaq rose 0.416% and the Dow Jones climbed 0.69%. In Europe, the Stoxx Europe 600 closed -0.15% lower. The 10-year US treasury fell to 0.63% and the spot price of gold fell -0.34% to $1,940.48.

Throughout the crisis there has been growing concerns over the level of debt governments are taking on to support economies. Italy is forecast to hit a debt to GDP ratio of over 150% in 2021. Sustainability is the big issue and the ECB has helped maintain low interest rates. Former ECB President Mario Draghi warned last week that the sustainability of debt comes down to how the debt is used. In the UK, the level of borrowing has now hit an all-time high, standing at over £2 trillion, the highest peacetime level ever and surpassing 100% of GDP. The UK government’s net cash requirement was down to £25.5 billion from £33.6 billion in the same period last year due to the extra spending required as a result of the pandemic. Since the financial year began in April the UK’s cash requirement has hit a level higher than the full year of 2009/2010.

Minutes released regarding the European Central Banks meeting on 15th-16th July showed that an ECB survey had been revised to show a delayed impact of the pandemic on unemployment. With support schemes across Europe currently muting the effects of the pandemic on employment, the survey now shows that unemployment is expected to peak in 2021. Philip Lane, the ECB Chief Economist, stated that the labour market lagged the economy and consumer spending was affected by an increase in household savings, current unemployment levels and an expected increase in unemployment. Concern was raised for when government support for employment ends and the outlook for businesses. Europe has seen a rise in cases again and further lockdowns posing a threat to employment levels and the economy. Despite these concerns, some members highlighted that the EU recovery fund will enhance economic recovery and that if households start spending their savings it will be a further boost to the economy.

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

Global Market Update
(as at close of markets 21/08/2020)