Market Monitor – 24 July 2020
Insights

Market Monitor – 24 July 2020

Global stock markets have enjoyed a relatively calm week: a balanced mixture of both positive and negative news has had the effect of limiting gains as well as losses on most indices. On the plus side this week, there has been a new round of encouraging early-stage coronavirus vaccine news: on Monday, medical journal The Lancet published an initial review of the Oxford vaccine trials1, which suggested the treatment was proving effective enough to move forward to the next step in the research process. Pharmaceutical firms Pfizer and Synairgen both reported hopeful progress. Another factor driving prices higher – on this side of the Atlantic in particular – was the news that European leaders had finally managed to agree a €750 billion stimulus deal to support economies in their recovery from the Covid-19 pandemic. Crucially, this package will allow European Union members to borrow collectively – a measure that had been strongly opposed by several of the more financially disciplined EU states such as the Netherlands and Austria. And with earnings season in full swing following the end of the first six months of the year, there were a number of positive reports from businesses that had managed to survive and even thrive during the pandemic to date. On the downside, however, investors still have serious concerns about the spread of coronavirus in the United States as well as the potential consequences of second waves of infections in Europe. In addition, tensions between Washington and Beijing are only increasing in the wake of China’s decision to impose a strict new security law in Hong Kong. This situation is likely to damage trade not just between the two countries, but also on a global scale.

The us

On Wall Street, the Dow Jones Industrial Average ended Thursday’s session 0.1% down for the week while the S&P 500 was up 0.3% at the same point. There are signs that policymakers in the US are starting to get a grip on the recent resurgence in Covid-19 infections with new lockdowns and hygiene policies.
The latest American unemployment figures were again worse than expected – and markets remain nervous as they wait to see how far the Fed is willing to go with its next round of stimulus measures, due to be announced next week. But there has been some good company news this week: shares in social media platform Twitter rose after it reported a surge in new users, while electric carmaker Tesla continues to outperform expectations, and could soon qualify to join the S&P 500.

Tke UK and Europe

In the UK, the FTSE 100 had lost 1.3% of its value by the close of trading on Thursday, dragged slightly lower by concerns over international trade as well as news that Brexit negotiations seem to have reached their latest impasse. There were some bright spots this week, however. Employers’ organisation the CBI said British manufacturers had become more positive about the immediate outlook2 , while there were solid earnings reports from Kingfisher – owner of the B&Q DIY chain – and Unilever, both of which said they had benefited from changes in consumer buying behaviour during the UK lockdown period. In Europe, Frankfurt’s DAX continued to be the Continent’s star performer, up 1.4% for the week by close on Thursday and buoyed by the news of the EU pandemic support deal. Having broken through the 13,000-point barrier this week, the index is now higher than it was at the end of 2019 – a measure of how Germany has managed to respond to the crisis.

17/7/2020
23/7/2020
Change (%)
FTSE 100
6290.3
6211.4
-1.3
FTSE All-share
3472.7
3441.6
-0.9
S&P 500
3224.7
3235.7
0.3
Dow Jones
26672.0
26652.3
-0.1
DAX
12919.6
13103.4
1.4
CAC-40
5069.4
5033.8
-0.7
ACWI
548.1
552.5
0.8
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 23/7/2020.
20 July 2020
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Market Monitor – 24 July 2020

1 Safety and immunogenicity of the ChAdOx1 nCoV-19 vaccine against SARS-CoV-2: a preliminary report of a phase 1/2, single-blind, randomised controlled trial, thelancet.com, 20/7/2020.
2 Manufacturing activity declines sharply again but expectations point to gradual recovery, CBI.org.uk, 23/7/2020.

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