Weekly Market Insight

Latest Economic & Market Update 5th August 2020

05th August 2020

Good afternoon, it is August 5th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • Investors weigh up the potential of new stimulus.
  • Treasury market and stock market tell two different stories.
  • Will BoE provide fresh stimulus?

Throughout trading yesterday, US stocks swayed between small gains and losses as investors weighed the potential of a new agreed stimulus package in Washington. US stocks eventually closed the trading session slightly higher, with the S&P500 climbing 0.36% and the Dow Jones climbing 0.62%. With investors torn over the potential of a new deal, which could potentially threaten the rally in US stocks if no deal is reached, they moved into safe havens. Gold rose to $2,019.21/ounce and treasury yields fell. The yield on the 10-year Treasury fell to 0.51%. Stocks in Europe remained relatively unchanged as weak earnings from large companies weighed on sentiment. The Stoxx Europe 600 fell -0.07%.

The yield on the 10-year US Treasury note dropped to a new low of 0.51% on Tuesday. This is the lowest level seen since 9th March 2020. Although a part of the rally can be explained by the Fed stepping in to support financial markets, the rally in US Treasuries also highlights the nervousness among investors about economic recovery and the delay in Congress agreeing new stimulus. The rally in the Treasury market paints a different picture to the rally in US stocks as the S&P500 has recovered to pre-crisis highs. The stock market has a much more optimistic outlook. The number of new unemployment claims in the US has climbed for two weeks in a row and without further government stimulus, economic recovery could stall.

With a growing number of coronavirus cases in the UK and plans to end support programmes for workers and employers, eyes will be on the Bank of England to see if they announce fresh stimulus on Thursday. An update will be provided on growth and inflation projections and also their view of the shape of recovery. The increase in cases is raising questions over economic recovery in the UK as the government have been forced to implement localised lockdowns in some areas.

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

Global Market Update
(as at close of markets 04/08/2020)