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Weekly World Markets Review (06-10/07/2020)

Fear to the people means fear to the world markets
posted onJuly 11, 2020

World stocks swung between gains and losses this week as doubts of economic recovery resurfaced. Much attention was focused on the the pandemic hysteria and geopolitical themes. Markets found support from improving economic data, but some investors remain skeptical. 

The major indices ended higher for the week but trading was choppy. Markets continued to find support from upbeat economic data. The Institute for Supply Management's non-manufacturing PMI rose to 57.1 in June, while weekly initial jobless claims fell by 99K to 1.31 million and job openings
were up to 5.4 million in May. However, sentiment seemed a bit uneasy. Atlanta Federal Reserve Bank President Raphael Bostic said “the trajectory of this recovery is going to be a bit bumpier than it might otherwise.” His counterpart Loretta Mester struck a similar saying it was likely “to take quite a long time to get back to where activity and employment was pre-pandemic.” However, St. Louis Federal Reserve Bank President James Bullard told CNBC that “I think we’re tracking very well right now.” 


A choppy week for the region but Chinese investors went on a wild stoc kmarket ride. Japanese stocks posted weekly declines. Government figures showed Japan's trade deficit grew to $2.65 billion in May. Exports during the month fell 25% to $29.63 billion , while imports decreased 18% to
$32.28 billion, according to the country's Customs Office. Meanwhile, household spending dropped by 16.2% in May from a year earlier. The worse than expected fall was the fastest rate of decline since comparable data began in 2001. Meanwhile, real wages fell by 2.1% in May from a year earlier, the steepest pace of decline since June 2015.

In China, mainland stock markets surged as state media encouraged inventors to put their money into equities. Another catalyst to the strong weekly gains seen were recent data suggesting recovering economic activity. By Friday, the large-cap CSI 300 Index rallied 7.5%. The Shanghai Composite Index made its largest one-day advance since 2015 this week. A plethora of stimulus measures helped as well. Meanwhile, official data released on Friday by the Ministry of Commerce showed, 51.9 billion yuan ($7.4 billion) entered the 12 pilot free trade zones in China through non-financial FDIs in the first five months of 2020, an increase of 18.4% y-o-y.

In Australia, news of a 6-week Melbourne lockdown wiped out ASX gains on Tuesday with Qantas and NAB leading the losses. Meanwhile, Australia's centralbank kept its key interest rate at a record low and the target yield on three-year government bonds unchanged. The outcome of the meeting
came in line with expectations. The Australian share market continued to trade lower on Wednesday as retailers shut Melbourne stores ahead of the city's lockdowns. ASX-listed tech stocks soared on Thursday with Afterpay surging 11.4% after Morgan Stanley more than doubled the price target on the stock. Goldminers also advanced. ASX ended the week in the red. Lower commodity prices dragged down resources stocks. 


Major European market indices were mixed but there was some encouraging economic data to bolster recently increased optimism of reopening progress.  Eurozone's retail trade volume grew by 17.8% in May while Sentix investor confidence improved in July in the 19-EU member bloc. In Germany, industrial output climbed 7.8% MoM in May, marking the largest monthly growth since 2007. New factory orders in Europe's largest economy rose by 10.4% in May compared to the previous month. However, some 83% of German firms with foreign exposure complain of collapsing revenues, a survey for the German Chambers of Commerce showed. And iFo Institute  sees a wave of insolvencies in the coming months in service sector.

In the UK,  Finance Minister Rishi Sunak  unveiled another £30 billion stimulus package to save jobs and inject confidence into the economy. In a bid to reinvigorate the housing market, Sunak also announced a  £3.8 billion tax break. UK will suspend purchase taxes for homes costing up to 500,000 pounds until the end of March next year. The tax break will apply to homes in England and Northern Ireland. Speaking of real estate, UK house prices fell for the fourth month in a row in June for the first time since 2010, according to Halifax data.On the positive side, UK construction sector activity hit 2-year high in June, according to an IHS/CIPS Markit report.

Europe is facing a deeper-than-expected recession in 2020 and a weaker-than-expected economic recovery, according to an updated economic forecast released by the European Commission. The EU's GDP is forecast to shrink 8.3% in 2020, before growing by 5.8% in 2021. For the 19 countries that comprise the Eurozone, a downturn of 8.7% is expected in 2020, with growth accelerating to 6.1% next year. Some economies are expected to fare better than others

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The content of this review is for informational purposes only and should not be interpreted as specific investment advice.