The World In A Week - Simmering Tensions
Markets broadly remained in positive territory last week on the back of encouraging reports from vaccine trials. Data for the second quarter of this year demonstrated that the global contraction has been less severe than first feared. China, who was the first to reopen its economy, recovered faster than expected in June compared to the same period last year, with exports rising by 0.5% and imports by 2.7%.
This positive news was offset by political tensions between the US and China and the UK and China. Trade wars between the US and China continue to simmer in the background and the UK’s decision to ban all Huawei equipment from the UK’s 5G networks has also caused a backlash, with the media citing pressure from the US as the reason for the UK’s proposed ban.
Away from trade tensions, global virus deaths continue to climb with the US topping the list with 140,000 deaths. Some 30 States in the US have experienced an increase in cases in the last week, which has led to regional governors rethinking lockdown plans and, in some cases, backtracking on plans to ease restrictions.
The European Central Bank (ECB) met last week and left rates unchanged. European leaders’ marathon discussion, now in its fourth day, over the €750bn European Recovery Fund, remains in deadlock. There is a clear divide between the more frugal countries and those that are likely to be the biggest recipient of emergency funds. Discussions continue today.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 20th July 2020.
The World In A Week – Interim Update
We have had a series of data releases this week ranging from inflation, growth, industrial production, unemployment and retail sales. There was very little new news to be gleaned from the numbers; the consensus range was extremely wide, meaning there were no shocks to report.
The month certainly feels like a dead rubber, as the markets look towards the data releases in August, which will give us the numbers for the whole of the second quarter. Perhaps this will give us an indication of how effective the loosening in lockdown restrictions has been. It is expected that retails sales in the US will continue to grow, as the savings acquired in lockdown are treated like a windfall to consumers.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 16th July 2020.
The World In A Week - VAT’s The Way Forward
Last week, the Chancellor, Rishi Sunak unveiled his latest plan to support the economic recovery. As the job-retention scheme begins to unwind, Sunak has pledged to protect the jobs of furloughed workers by offering a £1,000 bonus to companies who retain these workers on their books. He has also promised to fund the wages of new younger employees for the next six months. The combination of these measures taken will hopefully support the estimated 700,000 graduates and school leavers that are entering the uncertain job market this summer.
Aside from the job protection measures, Sunak has introduced methods of stimulating spending in the economy by proposing an “Eat out to help out” scheme which rewards people with a 50% discount for dining in restaurants and cafes. Furthermore, the cut to VAT in the hospitality and tourism sector is a measure aimed to boost the short-term consumption in the economy by taking advantage of the lower prices on offer. The stamp duty measures raise the threshold to £500,000 which will hopefully stimulate a resurgence in the housing market.
On the outset, the package of up to £30 billion appears significant in nature with policies clearly designed to reduce the rapid rise in unemployment. The deployment of this package remains devoted towards seeing out the interim and subsequently dealing with the financing of this additional expenditure at a later stage.
Meanwhile, cases of the coronavirus continue to increase with the World Health Organisation reporting a daily increase of 230,370 cases on Saturday and with the US reporting their highest daily increase to date. However, the recent spike in the number of US coronavirus cases seems detached from market sentiment as the S&P 500 continues to climb, returning +3.91% year to date in GBP terms.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th July 2020.
The World In A Week – Interim Update
Rather than the symbolic red briefcase, our Chancellor, Rishi Sunak, appeared to don a red outfit and played the part of Santa Claus in his summer statement yesterday. His £30 billion giveaway was firmly aimed at sustaining youth employment and helping low-income workers. We will give more details on his economic stimulus package in Monday’s ‘The World In A Week’.
The Great Firewall of China, which has extended its boundaries to encompass Hong Kong, is continuing to put pressure on the already stretched relationship between the US and China. The new law means China has control over Hong Kong’s internet, including censorship and potential arrests for managers of tech companies who refuse to hand over data on their users. This poses a dilemma for some of the largest US tech firms who may have to abandon their operations in Hong Kong.
Trump’s reprisal was confirmation that a ban on the video app ‘TikTok’ is being considered, which would be devastating to the youth in the US, but also gives rise to the fact that specific companies are now being targeted in this increasingly tense political environment. Media reports that the US is considering undermining the Hong Kong dollar’s peg to the US dollar, makes the US-Sino cold war that little bit chillier and adds more credence to the theory that Trump will be using his tough stance on China in his election campaign.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 9th July 2020.
The World In A Week - Getting Back to Business
Markets finished last week in an ebullient mode overall which saw MSCI ACWI rising +2.1% in Sterling terms. This was aided in particular by a strong rise in Chinese Equities which jumped +3.9% for the week as investors became more cheerful about a swift economic recovery from the Coronavirus pandemic. Investment grade Fixed Income was flat, while High Yield Bonds returned +0.3% and Global Investment Grade Credit continued to outperform Sterling IG Credit. The Pound Sterling also strengthened against the Euro and the Dollar.
Saturday, the 4th July was not only Independence Day in the United States, but also the day on which the inhabitants of the UK began to regain at least some of their liberty as the economy began to reopen. Attention now turns to the Chancellor of the Exchequer, Rishi Sunak, and his economic statement in Parliament on Wednesday. He is expected to outline the Government’s programme for restarting the economy following the lockdown. Among the measures that are allegedly being discussed is the offering of a payment of £1,000 to companies for every trainee provided with a work experience placement. There is also the possible offering of a £500 voucher to all citizens to spend in designated parts of the economy that have been particularly badly hit, as well as a proposal to raise the threshold at which homebuyers start paying stamp duty to £500,000.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 6th July 2020.
The World In A Week – Interim Update
Should I stay or should I go (out)? The Clash here is the interminable quandary between stemming the spread of COVID-19 and resuscitating economies. Decisions have to be made without full clarity of the potential outcomes and are typically counter-productive to each other; what is good for the economy is not necessarily good for controlling COVID-19.
Chairman of the US Federal Reserve, Jerome Powell, has indicated that the central bank will be more explicit in its intentions, in order to help facilitate a better recovery. However, while the reopening of the US economy is underway, a full economic revival would require curbing COVID-19’s current trajectory. This warning was echoed by the World Health Organisation as COVID-19 cases passed 10 million globally. Over a quarter of those were from the US, which was particularly evident this week as California, Texas and Arizona all reported an increase in the number of cases. This has meant several states slowing down their plans for an easing of lockdown measures.
The UK seems to be following the US, with isolated spikes in particular areas requiring a reinstatement of localised lockdowns. The path towards normalisation will be volatile and until a vaccine is found, investors will have to become accustomed to a strategy that is two steps forward and one step back.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 2nd July 2020.
The World In A Week - Are The Cracks Starting To Show?
Possibly. Donald Trump’s opinion poll ratings slid below 40% last week, the first time since 2017 pushing the Democrats into the lead. This weakness makes Trump even more unpredictable than normal and he was quick to look for scapegoats, notably the Democrats and China. Despite Trump’s attack, China continued to keep their end of the bargain by confirming plans to increase purchases of US agricultural products. US weekly jobless claims added further woes to Trump’s growing list, coming in at a disappointing 1.48 million.
It was a more positive picture in Europe, whose indicated PMI (a measure of a country/region’s economic strength) for June shows that activity has accelerated. In France and Germany, data was markedly better than expected at 47.5, up from 31.9 in May and beating expectations of 42.4. At a country level, France led the way, posting 51.3, pushing the country in to expansionary territory, up from 32.1 in May and beating expectations of 46.3. While this is good news, we treat these figures with caution and note that the jump in June was due to restaurants reopening and mobility restrictions being lifted.
Fears of a second coronavirus wave in autumn hit risk appetite last week as new cases increased sharply in the US, Brazil and India. However, there was reassuring news from China, whose new lockdown measures appear to have stopped the spread of the virus in Beijing. Over the weekend, reports of a spike in Leicester may see the UK take a similar approach to China, locking down the city to keep the spread under control.
Despite investor concerns, central banks remain accommodative and economic indicators show signs of improvement, although the Democrat lead in the US election polls could spook markets.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 29 June 2020.
The World In A Week - Interim Update
The easing of lockdown measures in England was announced as expected, paving the way for a potential boost of the hospitality and tourism sectors, with pubs, restaurants and hotels among the facilities able to reopen on Saturday, 4th July. Coupled with the reduction in the social distancing guidelines, the focus has certainly shifted away from overwhelmingly protecting the health service, to injecting a boost for the UK economy.
While the UK starts to reopen, we are seeing the US start to close down again. Lockdown measures in New York, New Jersey and Connecticut have increased, with a two-week quarantine being imposed on visitors from those states that have an elevated infection rate. This action was driven by the US having its largest daily increase in new COVID-19 cases since the pandemic began. Record increases were confirmed by Texas, California and Florida. Apple has closed seven of its stores in Houston and Disney confirmed that plans to reopen its parks on the 17th July could be pushed back.
Global stocks have been selling off amid fears that the rise in the numbers of cases could ruin any potential economic recovery. Fuel was added to the fire with the IMF (International Monetary Fund) revising down its forecast for global growth to -4.9% for 2020. Whilst this is undoubtedly a pessimistic projection, the current environment does not lend itself to any degree of certainty.
As we wrote last week, markets will overreact to both good news and bad. The markets rose over higher than expected US retail sales data a week ago and have now dropped over the fear of rising infection rates and gloomy predictions. Both are arguably overreactions from a market sensitive to news flow and data points.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 25th June 2020.
The World In A Week - Seasons Of Change
Following on from last week’s opening of some non-essential businesses, it is likely that Boris Johnson will announce a relaxation of the 2-metre social distancing rule tomorrow. This should pave the way for a potential reopening of the hospitality sector from the 4th July.
Whilst the recommencement of the Premier League has been met with mixed reviews, the lack of atmosphere may be more palatable while enjoying the spectacle with a cold beverage of your choice, in the reasonably close proximity of your friends.
The attraction of socialising once again may not be enough to help the beleaguered sector, that is why Chancellor Rishi Sunak is contemplating a move to potentially reduce VAT for the hospitality and tourism sectors, which would include pubs, restaurants and hotels, from as early as July.
However, in order to balance the books, it is likely that the summer of stimulus may give way to an autumn that contains deferred tax increases and spending cuts in order to stabilise public debt.
The World In A Week - Interim Update
President Trump has finally confirmed that things will get worse before they get better, when he delivered an update on the coronavirus in the US. This is not new news, but it may stoke the fire of fear and, in turn, that could mean a negative economic response. That is why there was a meeting between the House of Representatives’ Speaker and the Treasury Secretary, to discuss the next fiscal stimulus plan.
This will be the fifth in the series of economic stimulus packages and it comes with a smidgen of urgency behind it. The additional unemployment benefit payments in the US are due to expire at the end of July. The fear is that the economy would not react well to a cessation of these important payments.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 23 July 2020.