Weekly Market Insight

Latest Economic & Market Update 4th August 2020

04th August 2020

Good afternoon, it is August 4th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • Positive economic data pushes stocks higher.
  • Euro-Area records first manufacturing expansion since January 2019.
  • Congress continue negotiations over unemployment payment.

Positive manufacturing data in both the Euro-Area and US pushed stocks higher on Monday. The Stoxx Europe 600 recorded its biggest daily increase since the 16th June closing 2.05% higher. The S&P500 closed 0.72% higher and the Dow Jones rose 0.89%. Continuing the theme of investing in stocks that will benefit from a stay-at-home economy, the Nasdaq outperformed the two other major US indices again, rising 1.47%.

Manufacturing in the Euro-Area recorded its first expansion in July since January 2019. The IHS Markit manufacturing PMI recorded a level of 51.8. June’s reading was 47.4. There was a decline in the backlog of work in the sector, however, job cuts were also reported. It marks the 15th consecutive month where there have been job cuts. The expansion in activity is positive news although it remains to be seen if this will be sustained. While job cuts have been occurring continuously for the past 15 months, there will be extra concern around employment figures under the present circumstances because the condition of the labour market is vital regarding the pace of the economic recovery. In the US, figures showed the fastest expansion in manufacturing since March 2019. July recorded a level of 54.2 up from 52.6 in June. Despite expansion in the last two months, many challenges lay ahead with the unemployment rate remaining high and increasing coronavirus cases.

The US is running the risk of its economy shrinking more than currently forecast as Democrats and Republicans remain far apart in negotiations regarding the extension of unemployment benefits. Negotiations have continued this week. Following the expiration of unemployment benefits, over 25 million people have now been left with no income. Democrats have been arguing to extend the $600 unemployment payment until early 2021 however Republicans are still opposed to that idea and have proposed a $200 a week payment. Without any unemployment payment, the economy will be hurt even further as consumer spending drops off, which would lead to even further job losses. The lack of income will also affect households’ ability to pay rent. The lack of a deal is causing the Fed to worry as it will weigh on the economic recovery.

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

Global Market Update
(as at close of markets 03/08/2020)