Weekly Market Insight

Latest Economic & Market Update 4th June 2020

04th June 2020

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

Today we are going to focus on:

  • European stocks see a sharp rise in expectation of an increase in ECB stimulus.
  • PMI readings for the UK still hover near record lows for May.
  • Germany aims for consumers to drive recovery.

The risk on tone among investors continued on Wednesday as stocks climbed and yields on long term treasuries fell. European stocks recorded bigger gains than US stocks, as Stoxx 600 closed 2.54% higher and the UK FTSE 100 closed 2.46% higher. The expectation that the ECB will increase its stimulus programme on Thursday influenced the sharp rise in European stocks.

The Purchasing Managers Index for the UK published by IHS Markit showed that business activity during May was still contracting due to the lockdown measures, however, it contracted at a slower rate than had been seen in April. April’s reading showed a record contraction with the index measuring 13.4. May’s figure measured 29. A figure under 50 indicates a contraction in business activity. Despite a slowdown in the decline of business activity, the reading suggests that GDP will continue to contract. The easing of lockdown measures in the UK is providing a boost to heavily hit car showrooms across the UK with sales soaring this week. Vertu, the UK’s 5th largest motor retailer sold 826 cars this Monday and Tuesday. The huge rise in sales, the majority made up of used cars, gives an insight into life after lockdown as consumers look to avoid public transport.

In an attempt to ease economic damage from the coronavirus, the German government has announced a €130 billion fiscal stimulus. The stimulus measures regarding VAT will amount to €20 billion as the government will reduce VAT from 19% to 16% and cut the lower band from 7% to 5%. There is also a plan to provide a one-off €300 children’s bonus for every child in the country. The package is built with the aim of increasing consumer demand to drive the economy back to normal post lockdown. Germany’s response, combined with liquidity measures and loan guarantees, total over 30% of economic output and is a much larger response than any Eurozone counterparts. The ability to spend such large amounts is influenced by Germany running a budget surplus in recent years combined with a low debt to output ratio of 60% in comparison to Eurozone

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

Global Market Update
(as at close of markets 03/06/2020)