Weekly Market Insight

Latest Economic & Market Update 28th July 2020

28th July 2020

Good afternoon, it is July 28th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • The price of gold reaches an all-time high.
  • European tourism sector recovery hopes suffers a fresh blow.
  • Democrats criticise Republican’s stimulus proposal.

During the market turmoil investors seeking a safe haven flooded into USD. Since then, the dollar has slumped by nearly 9% since March highs and is expected to continue this period of weakness as investor confidence is impacted by the surge in coronavirus cases. This surge is casting a shadow of doubt over economic recovery. The weakness in the dollar has been a contributing factor in the rally in the price of gold, which hit an all-time high yesterday at $1,942.24. Gold now has the $2,000 mark in sight. Other contributing factors are geopolitical tensions, and that the real yield on US treasuries is in negative territory. The expectation of the FED to keep a dovish tone in Wednesday’s meeting pushed US stocks higher, led by technology shares. The S&P 500 closed 0.74% higher and the Nasdaq rose 1.67%.

The Stoxx Europe 600 Travel & Leisure Sector Index fell by 3.35% yesterday as hopes of a recovery in the European tourism sector took another hit. Over the weekend, a 14 day quarantine period for travellers returning from Spain was imposed by the UK government. The new requirement was a result of an increase in coronavirus cases in certain regions in Spain prompting fears of a second lockdown. The 14 day quarantine period will hamper tourism companies as many people will not have the ability to holiday and then quarantine for two weeks on their return. The rise of cases will also affect consumer confidence as many will no longer be willing to travel to these areas. The depth of the troubles experienced in the tourism industry as a result of the pandemic was highlighted in Ryanair’s Q1 earnings report as passenger numbers fell from 42m in the same period last year to 500,000 this year.

Republicans in the US revealed their new $1 trillion stimulus proposal on Monday which includes a cut of unemployment benefits by two thirds. The proposal will see the emergency unemployment payment amount to only $200 a week in September. In October, the payment will be 70% of previous wages. Most adults in America will also receive a direct payment of $1,200. The proposal has been heavily criticised by Democrats as the $200 a week unemployment payment is not enough to support Americans out of work. The previous $600 a week payment was considered a lifeline and also contributed to the positive economic data, such as retail sales, which many considered to show the start of an economic recovery. However, there has been conflict between Republicans and Democrats over the new stimulus package as Republicans argue that to continue the $600 a week payment would be a deterrent for people to return to work. Concerns are growing rapidly over the delay in reaching a deal as the delay poses a significant threat to the pace of the recovery.  

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

Global Market Update
(as at close of markets 27/07/2020)