Good afternoon, it is 25th June 2020 and here is your economic and market update from BlackBee.
Today we focus on:
- Travel, tourism and energy stocks lead declines as investors worry about the reopening of the economy.
- IMF downgrades its global GDP forecast for 2020.
- Trump administration discussing $3.1bn of tariffs on European goods.
Trading on Wednesday had a risk-off mood as stocks sank and treasuries rose on the back of news that the US is considering new tariffs on European goods and the rise in coronavirus cases. The S&P500 closed -2.59% lower, with the Dow Jones Industrial Average down -2.72% for the day. The risk-off mood was also felt in European stocks with the EuroStoxx 50 closing -3.11% lower. Travel, tourism and energy stocks fared the worst as investors worried about the rate at which the economy is reopening considering the rise in new cases. The Dow Jones US Travel & Tourism index closed -4.72% lower.
In April, the IMF had forecast global GDP to shrink by -3%. This figure has been downgraded and a contraction of -4.9% is now forecasted with the IMF warning that the global impact will be worse than initially expected. As a result of stimulus measures, global public debt is projected to reach a record 101% of GDP this year, up 19% yoy. The IMF said that developed economies will be hit worse than emerging economies as their GDP is set to contract by -8%. The huge rise in public debt will be a medium-term issue that countries need to resolve and the role of central banks keeping borrowing rates low will be vital in ensuring that the cost of debt does not become unsustainable.
In the midst of a crisis where companies are suffering, the Trump administration is now considering $3.1 billion of tariffs on a range of European goods. It is a result of an unsolved 16-year dispute between the US and European Union over aircraft subsidies. The move has been criticised as it would damage companies on both sides of the Atlantic. The tariffs could potentially be as high as 100% which would double the cost of importing the products and may result in these European products no longer entering the US. At a time where revenue in companies has taken a massive hit with the same companies experiencing additional costs to fix supply chain issues, and economic recovery expected to be slow and gradual, the new tariffs are an unwelcome situation for companies in both Europe and the US.
Best & Worst Performers of Large Cap Stocks on Wednesday
Click the image to enlarge
Global Market Update
(as at close of markets 24/06/2020)