Weekly Market Insight

Latest Economic & Market Update 30th July 2020

30th July 2020

Good afternoon, it is July 30th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • US stocks rise on Fed support.
  • Aviation industry faces many obstacles in recovery.
  • Fed policy unchanged.

Following the Fed announcement that it is not changing its monetary policy and will continue to support the market, US stocks rose. The S&P closed 1.24% higher, the Dow Jones 0.64% higher and the Nasdaq 1.35% higher. Gold sustained its rally up 0.6% to $1,970.79 while the slide in the dollar continued as the Bloomberg Dollar Spot Index fell -0.32%. European stocks remained relatively unchanged with the Stoxx Europe 600 closing -0.06% lower.

Chief Executive of Boeing has warned that the aviation market will not recover for three years as Boeing plans to make further production rate and employment level cuts. Job cuts of 12,000 were initially announced in May but this has been revised up to 19,000 and Boeing plans to access it further. Although there has been a slight pickup in passenger numbers, it remains well below 2019 levels. Boeing posted a net loss of $2.4 billion in Q2. In the UK, following on from the two-week quarantine requirement imposed by the UK government, 47 airlines, airports and tour operators signed a plea letter showing their dissatisfaction stating it could leave a permanent scar on the sector. The blanket rule has not been received well as they argue it severely hampers their chances of economic recovery. The aviation industry has been one of the most affected areas from the pandemic and has slow recovery projections. Mass job cuts will also impact the pace of wider economic recovery by increasing the unemployment rate.

Referring to “non-standard high frequency data” regarding credit card spending, consumer surveys, hotel occupancy and restaurant bookings, Fed Chair Jerome Powell raised concern that the rise in cases had begun to slow the pace of economic recovery but they do not know how sustained it will be. Mr Powell stated that the economic fallout from the pandemic is far from over and has extended emergency swap lines with other central banks until Q1 2021. The extension aims to avoid further dollar shortages that occurred early in the pandemic if fresh trouble in international markets arises again. Powell stressed that the path of economic recovery is dependent on the course the virus takes and the actions they take to keep it in check. The Fed kept interest rates near zero and promised to take necessary action to support the economy. So far central bank stimulus has been vital in calming markets and with further fallout from the pandemic expected additional stimulus will be important to help the economic recovery.

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

Global Market Update
(as at close of markets 29/07/2020)