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Weekly Market Report

11 Aug 2020

11 August 2020


The Market Last Week

Global equities ended firmer last week, amid encouraging US economic data and optimism surrounding new coronavirus-relief package.

UK Markets ended the week in positive territory, as upbeat manufacturing PMIs around the world revived hopes for economic recovery.

UK’s final Markit manufacturing PMI advanced in July, recording its highest level since March 2019.

In the UK, services sector activity grew at its fastest pace in five years in July.

UK’s construction PMI advanced at its fastest pace since October 2015 in July.

In the UK, the Halifax house price index advanced on a monthly basis in July.

The Bank of England (BoE), in its latest monetary policy decision, kept its benchmark interest rate unchanged at 0.10% and warned of a slower economic recovery. Moreover, the committee agreed unanimously to hold the target for its asset-buying program at £745 billion ($977 billion). Further, the central bank indicated that Britain’s gross domestic product (GDP) will shrink by 9.5% this year, an improvement on the 14% previously predicted.

European Markets ended the week on a positive footing, on stimulus hopes and as businesses in the Eurozone witnessed stronger growth than initially reported.

Eurozone’s manufacturing activity expanded for the first time since early 2019 in July.

In the Eurozone, the producer price index (PPI) advanced for the first time in five months in June.

Eurozone’s final Markit services PMI climbed in July.

In the Eurozone, retail sales grew less than market anticipations in June.

Germany’s final Markit manufacturing PMI climbed in July.

In Germany, the final Markit services PMI advanced in July.

Germany’s factory orders jumped more than expected in June.

In Germany, trade surplus widened in June.

Germany’s industrial production climbed more-than-expected in June.

US Markets ended the week in green, amid upbeat quarterly corporate earnings reports, robust economic data and optimism surrounding a new coronavirus-relief package.

US final Markit manufacturing PMI rose in July.

The ISM manufacturing activity index advanced in July, recording its highest level in 15 months.

US factory orders rose in June.

In the US, durable goods orders climbed in June.

The ISM non-manufacturing PMI unexpectedly climbed in July.

US final Markit services PMI edged up in July.

US non-farm payrolls advanced more than market forecast in July.

The number of initial jobless claims dropped in the week ended 31 July 2020, hitting its lowest level of the pandemic period.

Average hourly earnings rose on a monthly basis in July.

US unemployment rate dropped more than market expectations in July.

US private sector employment rose less-than-anticipated in July.

US trade deficit narrowed less than market consensus in June.

The MBA mortgage applications dropped on a weekly basis in the week ended 31 July 2020.

Construction spending dropped more than market forecast on a monthly basis in June.

Asian Markets ended mostly higher last week, tracking gains in their global counterparts.

In Australia, seasonally adjusted retail sales rose more-than-expected in June.

Australia’s AiG performance of construction index advanced in July.

In Australia, the AiG performance of services index rose in July.

Australia’s trade surplus widened less than market expectations in June.

In Australia, the Commonwealth Bank services PMI unexpectedly fell in July.

In China, trade surplus unexpectedly widened in July.

China’s Caixin services PMI dropped more than market forecast in July.

Japan’s Jibun Bank services PMI climbed in July.

In Japan, overall household spending dropped less than market forecast on an annual basis in June.

The Reserve Bank of Australia (RBA), in its latest monetary policy decision, kept its interest rate unchanged at 0.25%, as widely expected. Further, RBA Governor Philip Lowe stated that the downturn was not as severe as the bank originally feared but it was still going to be “uneven and bumpy”, with the coronavirus outbreak in Victoria having a major impact. Moreover, the central bank reiterated that the outlook remained “highly uncertain”.

The RBA, in its latest monetary policy statement, reiterated that it will not increase the cash rate target until progress is being made towards full employment, inflation target. Further, RBA indicated that the forecast of -6.0% contraction by end 2020 has not changed, however the central bank cut its 2021 growth forecast slightly to +5%. Further, the central bank warned that the jobs market will take longer to recover from the coronavirus recession than expected and expects the pace of Australia's economic recovery to be slower than previously forecasted.


Currency Update

The EUR ended firmer against the USD last week, as manufacturing activity grew in the Eurozone reviving hopes for economic recovery.
The British Pound ended weaker against the greenback last week, after the BoE forecasted a slower-than-expected rebound from the COVID-19 driven downturn.
The US Dollar ended mostly lower against its major counterparts last week, amid ongoing uncertainty about new coronavirus-relief package and rise in Covid-19 cases.


Andrew Bailey warns unemployment rate likely to double

BoE Governor, Andrew Bailey, stated that the UK economy is picking up as coronavirus restrictions are lifted, however, the pick-up is “very unevenly distributed”. Also, he warned that “some parts of the economy” will not be “viable” after the coronavirus pandemic. Moreover, he stated that central bank sees no immediate case to cut interest rates below zero and unemployment is likely to almost double by the end of this year. On the outlook front, he warned that the economy would take longer to recover from the pandemic previously forecasts.


The Week Ahead

Going ahead this week, investors will keep a tab on the US consumer price index (CPI), initial jobless claims, retail sales, industrial production and the Michigan consumer sentiment index for further direction. Additionally, Eurozone’s ZEW economic sentiment index, industrial production, trade balance and GDP along with Germany’s CPI will keep investors on their toes. Also, UK’s manufacturing production, industrial production, GDP and the NIESR GDP estimate would garner significant amount of investor attention.


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