Market Monitor – 03 July 2020
Insights

Market Monitor – 03 July 2020

Stock markets around the world have made gains this week on the back of improving economic news from China, Europe and the United States, as well as fresh hopes of that an effective coronavirus vaccine could be on the horizon. Share prices remain highly volatile, however, and there are still significant concerns among investors over the potential impact of second waves of Covid-19 – with infections continuing to rise in numerous US states, and one UK city now subject to its own local lockdown following a new outbreak. Markets were given a boost on Tuesday after China published better than expected PMI data1, showing that its manufacturing sector is on the way to recovery – and raising hopes that European economies could follow in its wake.

The US

Perhaps the most significant economic news of the week came from the US, where Thursday’s employment report substantially exceeded expectations: 4.8 million jobs were created in June, the biggest ever single month increase in America2. While there is still some considerable way to go to offset the job losses experienced in April, investors welcomed the news as a sign that the US economy could be getting back on track.

On Wall Street, the Dow Jones Industrial Average finished a shortened week – markets are closed on Friday for the Independence Day holiday – up 3.3%, while the S&P 500 closed Thursday 4% higher for the week. Alongside the jobs figures, investors were buoyed by news from pharma firms Pfizer and BioNTech that a new Covid-19 vaccine had proved effective in early-stage trials.

However, the US economy faces new danger from spikes in infection levels across southern states, with a number of governors taking steps this week to reverse measures designed to help businesses get back to normal.

Europe

In Europe, markets closed on Thursday generally ahead for the week thanks in part to the positive news from China and the US. But around the continent, the picture was somewhat mixed.

In London, the FTSE 100 finished Thursday’s session up 1.3%, with gains for the week limited by concerns about new domestic coronavirus outbreaks: a sharp rise in infections in Leicester has led the government to extend the city’s lockdown as much of the rest of the UK eases restrictions.

The prime minister’s announcement of a new £5 billion infrastructure spending package3 did little to capture the imagination of investors, while negative news from Shell and housebuilder Redrow helped to drag the index down. UK economic data, meanwhile, confirmed that the British economy shrank by 2.2% in the first quarter of 2020, its steepest decline for over 40 years4.

In Europe, the DAX index in Frankfurt had surged 4.3% by the end of trading on Thursday, with new economic data suggesting that among major western nations, Germany is set to return to normality the quickest. While May’s retail sales figures were expected to be significantly higher when compared to March and April, it was notable that year-on-year performance was also positive. In France, the CAC 40 was up 2.9% for the week at close on Thursday. On Wednesday, Paris-listed aircraft maker Airbus announced plans to cut as many as 15,000 jobs worldwide and said that the pandemic had caused the most serious crisis in its history.

26/6/2020
02/7/2020
Change (%)
FTSE 100
6159.3
6240.36
1.32
FTSE All-share
3406.45
3451.45
1.32
S&P 500
3009.05
3130.01
4.02
Dow Jones
25015.55
25827.36
3.25
DAX
12089.39
12608.46
4.29
CAC-40
4909.64
5049.38
2.85
ACWI
515.81
532.14
3.17

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 02/7/2020.

3 July 2020
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Market Monitor – 03 July 2020

1 China’s services sector grows at fastest pace in over a decade in June, Reuters, 3/7/2020.
2 US firms create record 4.8 million jobs in June, BBC, 2/7/2020
3 ‘Build build build’ GDP quarterly national accounts, UK: Jan to March 2020, Office for National Statistics, 30/6/2020.
4 GDP quarterly national accounts, UK: Jan to March 2020, Office for National Statistics, 30/6/2020

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