Markets closed higher last week in a rebound following the sharp fall the week before. Tech stocks once again led the market, briefly getting close to their all-time highs. Energy stocks also rebounded on hopes of increased economic activity whilst the Federal Reserve announce late Monday evening that they would begin to purchase individual corporate debt securities.
US Retail Sales kicked off the week strongly, rising 17.7% over the one month to May. The increase was larger than any of the submitted forecasts. However, factory data and weekly jobs claims disappointed as US Industrial Production rose 1.3%, versus a forecast of 3.0%. The unemployment data also remained stubbornly high. Chinese data also produced mixed messages with Industrial Production up 4.4% (year-on-year) whilst Retail Sales were down 2.8% over the same period.
From a policy perspective the Bank of England expanded its asset purchase target by £100bn but the hawkish tone in some of the remarks failed to enthuse the market. The EU began formal negotiations on the $750bn stimulus package. Representatives from all 27 member states joined the call with initial sticking points including how to fund the package and perhaps more interestingly how it should be distributed. The so called ‘Frugal Four’ of Austria, Denmark, Sweden and The Netherlands have voiced opposition to adding to a spiralling debt burden within the currency bloc.
In respect to the virus itself, the WHO announced yesterday that Saturday saw the highest amount of new cases recorded in 24 hours, with more than 183,000 documented. The infection rate is also increasing in some US states, with Florida seeing the biggest daily increase since the start of the pandemic. Overall, markets have been relatively sanguine in response to the news, somewhat taking the view that there is a ‘playbook’ in place now in dealing with outbreaks. Research in relation to developing a vaccine continues. CLICK HERE