Weekly Market Insight

Latest Economic & Market Update 27th August 2020

27th August 2020

Good afternoon, it is August 27th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • Global stock index at an all-time high.
  • Home construction sector booming in the US.
  • Structural change needed in European Banks.

Global stocks climbed to an all-time high as the MSCI All World Index increased 0.89% yesterday. US stocks continued their rally with the S&P500 climbing 1.02%, the Nasdaq up 1.73% and the Dow Jones increasing 0.3% for the day. The Stoxx Europe 600 climbed 0.91%. The price of oil is at its highest level since February with WTI climbing 0.09% to $43.39 a barrel. The price of gold rose to $1,954.46, up 1.3% following three consecutive days of declines.

The Dow Jones Home Construction Index measures the performance of US companies in the home construction sector. The index is currently up 28.1% year to date as low interest rates make it attractive to buy new homes. The index has surpassed levels seen in 2006 during the housing boom and the number of home sales also surpassed levels seen in 2006, with 901,000 units sold in July. Low interest rates have given a boost to the home construction sector making it one of the best performing sectors this year.

Prior to the crisis, European banks were struggling with profitability in comparison to their US counterparts. The struggle for profitability had led to calls for the consolidation of banks in Europe. In a speech yesterday, Isabel Schnabel, an executive board member of the ECB, stated it cannot be taken for granted that the negative effect that sub-zero interest rates have on banks’ profit margins can be compensated by lower loan loss provisions. She stated that without a forceful policy response there will be substantial pressure on banks’ profitability due to the rising loan loss provisions and defaults caused by the pandemic. Her argument was that the profitability of banks in Europe has been an ongoing problem and that structural changes are needed as the solution is beyond monetary policy.

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

Global Market Update
(as at close of markets 26/08/2020)