Weekly Market Insight

Latest Economic & Market Update 2nd July 2020

02nd July 2020

Good afternoon, it is 2nd July 2020 and here is your economic and market update from BlackBee. 

Today we focus on:

  • US stocks rise on positive data
  • Manufacturing in the US expanded in June
  • US Department of Treasury receives a stake of nearly 30% in trucking company YRC
  • The BlackBee Healthcare Bond 3 has been extended to July 31 due to demand. Click here for more details.

US stocks rose yesterday on the back of a combination of positive news regarding payroll data, economic data and a potential vaccine. The S&P500 closed 0.5% higher for the day. The Dow Jones finished in negative territory (-0.3%) with Boeing weighing the index down due to a watchdog report that showed only limited information was used on flight control software which was implicated in two fatal crashes. Pushing stocks higher was data from ADP Research Institute showing an increase of 2.37 million in private business payrolls in June. The ISM index showed that manufacturing is expanding in the US and positive trial results from Pfizer and BioNTech gave hope of a potential vaccine.
The Institute for Supply Management PMI index rose to its highest level since April 2019. The index reached 52.6 in June, indicating a month of expansion for manufacturing in the US. The jump (9.5 points) is the highest increase since August 1980. During lockdown, the contraction in April was the lowest reading since April 2009. Although there was an expansion in June, the level of manufacturing activity is far below pre-crisis levels and will likely remain below the levels for some time considering the high levels of unemployment. By comparison, the Eurozone PMI rose to 47.4 in June, up from 39.4 in May signalling that manufacturing is still in contraction although the pace of the downturn has slowed.
A struggling trucking company valued at $70 million with $900 million in long term debt has received a bailout from the US government worth $700 million. In exchange, the US Department of Treasury is receiving a 29.6% stake in the company. The funds came from a pot for fiscal stimulus aimed at supporting companies deemed vital to national security. The company employs 30,000 people with Steve Mnuchin stating that it will maintain “significant employment while providing appropriate compensation to taxpayers”. After the announcement, the stock price rose by over 74% on Wednesday. In the last 5 years, the price of the stock has dropped nearly 88%. Only 2 years ago the Justice Department had sued the company for overcharging the pentagon millions for shipping over several years. The bailout essentially represents a nationalisation of YRC as the company issue shares to the Treasury Department.

Best & Worst Performers of Large Cap Stocks on Wedesday
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Global Market Update
(as at close of markets 01/07/2020)