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Weekly Market Report

01 Jun 2020

01 June 2020


The Market Last Week

Global equities ended firmer last week, amid hopes of smooth recovery in the global economic growth as several countries lift lockdown restrictions.

UK Markets ended the week in positive territory, as UK Prime Minister, Boris Johnson, announced plans to ease coronavirus-induced lockdown restrictions.

UK’s CBI distributive trade survey's retail sales balance rebounded in May.

European Markets ended the week on a positive footing, after the European Commission announced a stimulus plan worth €750 billion to support the European nations to recover from the coronavirus pandemic.

Eurozone’s final consumer confidence index rebounded in May.

In the Eurozone, the business climate indicator eased in May, hitting its lowest level since September 2009.

Eurozone’s economic sentiment indicator advanced less than market forecast in May.

In the Eurozone, the industrial confidence index rose less-than-expected in May.

Eurozone’s services sentiment indicator unexpectedly fell in May.

In the Eurozone, consumer price inflation slowed in May, marking its lowest level since June 2016.

In Germany, the consumer price index (CPI) dropped in May, marking its lowest level since 2016.

Germany’s GfK consumer confidence index improved in June.

In Germany, gross domestic product (GDP) dropped in 1Q20, recording its biggest fall since the first quarter of 2009.

Germany’s Ifo current assessment index unexpectedly fell in May.

In Germany, the Ifo business expectations index rose more-than-expected in May.

Germany’s Ifo business climate index advanced more than market forecast in May.

In Germany, retail sales dropped in April, registering its biggest fall since January 2007.

European Central Bank (ECB) President, Christine Lagarde, in her speech, warned that Eurozone’s economy is likely to contract as previously outlined in the bank’s medium to severe scenarios. She added that output in the region was set to shrink between 8% and 12% and the central bank’s mild scenario which estimated a negative growth of 5% was “already outdated”. However, Lagarde expressed confidence that higher public spending would not result in a new debt crisis in the euro area.

US Markets ended the week in green, amid expectations about a potential coronavirus vaccine and optimism over gradual reopening of the US economy.

The second estimate of annualised US GDP contracted at a faster than estimated pace in 1Q20.

US pending home sales plummeted more-than-anticipated on a monthly basis in April, recording its largest monthly decline since May 2010.

In the US, initial jobless claims dropped less than market consensus on a weekly basis in the week ended 22 May 2020.

Durable goods orders dropped less-than-expected on a monthly basis in April.

The Kansas City Fed manufacturing activity index advanced in May.

The US Richmond Fed manufacturing index rebounded more-than-expected in May.

The MBA mortgage applications advanced on a weekly basis in the week ended 22 May 2020.

New home sales unexpectedly climbed on a monthly basis in April.

The CB consumer confidence index rebounded in May.

The Dallas Fed manufacturing business index rose in May.

US housing price index advanced less-than-anticipated in March.

The Chicago Fed National Activity Index dropped in April, recording its lowest level since the series started in 1967.

US personal income unexpectedly advanced on a monthly basis in April.

The final Michigan consumer sentiment index slightly improved in May.

The Chicago Purchasing Managers’ Index (PMI) unexpectedly dropped in May, hitting its lowest level since March 1982.

US personal spending fell more than market consensus in April.

Goods trade deficit widened in April.

In a webinar hosted by the Princeton University, Federal Reserve (Fed) Chairman, Jerome Powell, stated that the coronavirus pandemic is affecting low-wage workers and women the most and accelerating inequality in America. Also, he warned that the second wave of coronavirus infections would undermine public confidence and might lead to a significantly longer and weaker recovery. Moreover, Powell reiterated his pledge to keep monetary policy loose and suggested the Fed would stay the course for now.

Asian Markets ended the week in green, amid expectations about a potential coronavirus vaccine and optimism over gradual reopening of the US economy.

Australia’s private sector credit demand remained flat in April.

In Australia, the AiG performance of manufacturing index advanced in May.

Australia’s Commonwealth Bank manufacturing PMI dropped less than market expectations in May.

In China, the non-manufacturing PMI advanced in May.

China’s Caixin manufacturing PMI advanced more-than-expected in May.

In China, the NBS manufacturing PMI unexpectedly fell in May.

In Japan, flash industrial production slid more-than-anticipated in April.

Japan’s unemployment rate rose less than market forecast in April.

In Japan, the final coincident index dropped in March.

Japan’s final leading economic index eased in March.

In Japan, the corporate service price index advanced less-than-anticipated in April.

Japan’s consumer confidence index unexpectedly rose in May.

In Japan, construction orders dropped in April.

Japan’s housing starts declined more than market consensus in April.

In Japan, the Jibun Bank manufacturing PMI declined in May.

Reserve Bank of Australia’s (RBA) Governor, Philip Lowe, stated that the mid-March stimulus package to combat the impact of coronavirus was working “as expected”. Further, he suggested that Australia’s economic downturn would likely not be as severe as thought earlier. Moreover, he indicated that the Federal Government's JobKeeper scheme may need to be extended beyond its initial six-month period to support recovery.


Currency Update

The EUR ended firmer against the USD last week, after the European Union’s executive unveiled a €750 billion rescue plan to support economies affected by the coronavirus pandemic.
The British Pound ended stronger against the greenback last week, after British Prime Minister, Boris Johnson announced plans to reopen high street shops, department stores and shopping centres this month.
The US Dollar ended weaker against its major counterparts last week, as optimism over a potential coronavirus vaccine and as rising hopes about the easing of coronavirus lockdowns restrictions reduced demand for the safe-haven asset.


Fed’s Beige Book: US economic activity “sharply” declined

The US Fed, in its latest Beige Book report, revealed that economic activity “sharply” declined across all 12 Fed districts, reflecting disruptions associated with the COVID-19. Moreover, the US economy witnessed steep job losses with sectors such as leisure and hospitality being hit the hardest due to social distancing guidelines. Moreover, the report indicated that the outlook remained highly uncertain and most businesses were pessimistic about the potential pace of recovery.


The Week Ahead

Going ahead this week, investors will keep a tab on the US ISM manufacturing PMI, the Markit manufacturing PMI, the Markit services PMI, ADP employment change, the ISM manufacturing PMI, factory orders, trade balance, initial jobless claims, nonfarm payrolls, average hourly earnings and unemployment rate for further direction. Additionally, Eurozone’s unemployment rate, retail sales, the ECB interest rate decision and monetary policy statement along with Germany’s unemployment rate and factory orders will keep investors on their toes. Also, UK’s Markit services PMI and the GfK consumer confidence index would garner significant amount of investor attention.


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