Market Monitor – 5 June 2020
Insights

Market Monitor – 5 June 2020

Global stock markets extended their recent gains this week with investors focusing on positive news as economies in Europe and North America begin to emerge from their Covid-19 lockdowns.

While concerns have been growing in recent weeks over a potential intensification of the trade dispute between China and the United States, markets were encouraged on Monday by news that the Trump administration had decided to maintain the current deal between the two nations – for the time being at least.

The US

In the four trading sessions up to the close of business on Thursday, the Dow Jones Industrial Average had gained just over 3.5%. As well as the easing of international trade tensions early in the week, US shares benefited from employment market data for May which showed that job losses had at last started to slow. The S&P 500 was 2.2% ahead for the week at Thursday’s close.

Another issue on the horizon for American investors is this year’s presidential election which is now just five months away: President Trump’s tax and business policies have largely had a positive impact on corporates, although his somewhat protectionist – not to mention erratic – approach to international trade is a major cause for concern in some quarters.

Over the coming weeks, we can expect investors to look more closely at the policies put forward by Trump’s Democratic rival Joe Biden. For the time being, however, their focus remains firmly on the US economy’s ability to emerge from the coronavirus crisis in decent shape.

Europe and the UK

In Europe, the extension of some of the fiscal and monetary support policies initially introduced to protect businesses and consumers in March gave investors additional encouragement.

The likely return of short-haul flights in Europe helped push airline shares higher, with both EasyJet and IAG – the owner of British Airways – gaining this week as popular tourist destinations such as Greece and Spain reaffirmed their commitment to open for business in July and August.

The big eurozone news this week was the European Central Bank’s decision to significantly expand its bond-buying programme, injecting a further €600 billion (£540 billion) in emergency support. This was received as further confirmation that the bank would do “whatever it takes” to prop up struggling eurozone economies.

By close of business on Thursday, the CAC 40 index in Paris was 6.7% ahead for the week: as well as the ECB action, French shares were boosted by slight improvements in economic indicators in the eurozone.

The same was the case in Germany, where Frankfurt’s DAX ended Thursday up 7.3% for the week. The DAX’s recent surge reflects not just the easing of lockdown restrictions across the European Union, but also that Germany appears to have been the major western nation that has dealt most effectively with the coronavirus pandemic to date.

The UK

In the UK, the FTSE 100 had gained 4.4% by Thursday’s close after it was confirmed that households would be able to extend their mortgage repayment holidays for an additional three months until October.

This followed the recent announcement by Chancellor Rishi Sunak that the government would continue to pay businesses to furlough workers over the summer period. Both policies are seen as playing a crucial role in reducing the economic impact of Covid-19 and helping demand recover as the UK emerges from lockdown.

29/5/2020
4/6/2020
Change (%)
FTSE 100
6076.6
6341.44
4.36
FTSE All-share
3363.67
3509.99
4.35
S&P 500
3044.31
3112.35
2.23
Dow Jones
25383.11
26281.82
3.54
DAX
11586.85
12430.56
7.28
CAC-40
4695.44
5011.98
6.74
ACWI
509.47
528
3.64

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 4/6/2020.

5 June 2020
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Market Monitor – 5 June 2020

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