Weekly Market Insight

Latest Economic & Market Update 6th July 2020

06th July 2020

Good afternoon, it is 6th July 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • European stocks fall amid concerns about the weighting of ECB’s emergency bond purchasing programme.
  • Oil & Gas industry an outlier in jobs report.
  • Eurozone faces two years of disinflationary pressure.

Following a report from Bloomberg News on the continuing rift regarding the allocation of funds being weighted towards weaker countries in the ECB’s emergency bond purchasing programme, the Euro Stoxx 600 fell and closed -0.78% lower for the day. US markets were closed on Friday for Independence Day.

With unemployment in the US declining to 11.1% and US employers adding 4.8 million jobs in June, the majority of industries have added jobs in the past month. However, one industry stands as an outlier. The number of people employed in the oil and gas industry continued to fall during this period. Oil & Gas extraction and other related businesses lost over 10,000 jobs in June with further cuts still expected. This sector is still in contraction despite many other industries expanding since restrictions began to be eased. The main driver behind this is that oil prices are still below profitable levels for oil businesses, hovering at around $40 a barrel. At the start of the year, the price of oil stood at nearly $59 dollars a barrel. Many producers were forced to cut production following the crash in the price of oil during the lockdown and are now only beginning to restore wells as demand slowly picks up.

In a webinar on Saturday, President of the ECB Christine Lagarde stated that for the next two years the Eurozone faces downward pressure on prices. Following this, Lagarde expects an inflationary period as the pandemic will accelerate the movement towards digitisation, automation and shorter supply chains. The ECB forecasts that supply chains will shrink by approximately 35% with the use of robotics increasing by up to 75%. The pandemic will lead to a transformation of the economy with the improvement of productivity as a main goal. Lagarde also stated that there will be a need to create new financial instruments to provide funding to accommodate the economic transformation and that monetary policy will be needed to be kept extremely loose.

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

The chart refers to last Thursday’s trading as US exchanges were closed on Friday.

Global Market Update
(as at close of markets 03/07/2020)