Weekly Market Insight

Latest Economic & Market Update 26th May 2020

26th May 2020

Good afternoon, it is 26th May 2020 and here is your economic and market update from BlackBee.

Today we are going to focus on:

  • The European Banking Authority states the majority of European Banks will be able to absorb losses.
  • Sharp increase in household savings seen across Europe.
  • FED changes tune on providing guidance for monetary policy.

Weak profitability in Eurozone banks has been a concern for investors as they lag their US counterparts. More concerns were added over the difference between the amount US banks set aside for non-performing loans in comparison to Eurozone banks, despite the vast sum set aside by European Banks. The European Banking Authority has stated that European Banks are expected to suffer a hit of up to €380 billion but the majority of banks should be able to absorb the losses. A sensitivity analysis was carried out to examine the effect of an increase in non-performing loans using the stress test results from 2018.

Data published from the European Central Bank has shown that there has been a sharp increase in savings among households in March. In France, €20 billion was saved in comparison to the long-run monthly average change of €3.8 billion. This has added to concerns that a recovery will not be consumer-driven, and how long the high level of savings might continue. Despite these concerns, it must be noted that during the lockdown of economies, consumer spending was mainly restricted to online activity. When economies reopen, data gathered by the European Central Bank will show a clearer picture of how consumers are behaving and if there is as high a savings rate.

Last week, the minutes of the Federal Open Market Committee meeting in April was released which showed the debate between the central bankers on how to provide measures and guidance for monetary policy. However, despite this being a hot topic, officials in recent days have indicated that the FED is in no rush and no guidance will be provided in June’s meeting. The reasoning behind the change of tone is that the FED wants to gather more data before they start to release guidance as they cannot fully measure the impact of the crisis or shape of recovery yet.

There is no best & worst performing stocks for yesterday as US markets were shut.

Global Market Update
(as at close of markets 25/05/2020)