Global equities fell last week as the daily increase in new COVID-19 cases continued to rise. The U.S. saw a record daily increase of cases last Wednesday which led to a number of states rolling back on their plans to ease restrictions. The general consensus is that the rise is larger than can be explained by increased testing alone and is higher in southern U.S. states.
Growth stocks outperformed value with the tech heavy NASDAQ index holding up better than broader markets. Bank stocks were hit particularly hard on Friday on the back of the reports that the Federal Reserve would attempt to restrict dividends and share buybacks, both key tools for returning capital to shareholders.
Economic data for the week was broadly positive with the U.S. housing market remaining resilient with new home sales up 17% in May and new mortgage applications up 18% (year-on-year). Factory orders and some auto data was also positive as the rebound in U.S. economic activity continued. Data from Europe was also encouraging as manufacturing PMIs moved from 39.4 to 46.9 with services PMIs stronger as they moved from 30.5 to 47.3. However, as with all PMI data, it is worth noting that a figure below 50 still represents a contraction in activity. U.K. PMIs also rebounded as the Bank of England stated that it may look to cut back on its bond purchasing programmes as the Treasury plans a potential cut in VAT. The deadline to request a formal extension to the Brexit negotiations also arrives at midnight tomorrow. CLICK HERE