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Weekly Market Report

15 Jun 2020

15 June 2020


The Market Last Week

Global equities ended sharply lower last week, amid renewed fears about a second wave of coronavirus infections and a grim economic outlook by the US Federal Reserve (Fed). Adding to the negative senitment, both, the World Bank and the Organisation for Economic Co-operation and Development (OECD) warned that the global economy will face the deepest recession in 2020.

UK Markets ended the week in negative territory, after the OECD forecasted that Britain’s economy is likely to witness the worst economic downturn in 2020, with a 11.5% GDP contraction.

UK’s RICS house price balance declined to a 10-year low in May.

The BRC retail sales advanced on an annual basis in May.

Britain’s economy contracted at its fastest pace since the series began in 1997 in April.

In the UK, manufacturing production plunged more than market forecast in April.

Industrial production declined more-than-expected in April.

The NIESR GDP estimate dropped in May.

UK’s consumer inflation expectations slowed in May.

Total trade balance reported a surplus in April.

European Markets ended the week on a negative footing, after Eurozone’s gross domestic product (GDP) registered its biggest decline since 1995 and amid worries of a second wave of COVID-19 cases.

Eurozone’s GDP contracted on a quarterly basis in 1Q20.

In the Eurozone, the Sentix investor confidence index rose less-than-anticipated in June.

Eurozone’s industrial production declined less than market forecast on a monthly basis in April.

Germany’s non-seasonally adjusted current account surplus narrowed in April.

In Germany, seasonally adjusted trade surplus narrowed in April, marking its lowest level since December 2000.

Germany’s industrial production declined at its fastest rate since the series began in 1991 in April.

European Central Bank (ECB) President, Christine Lagarde, in her speech, stated that the measures taken to contain the spread of coronavirus were “temporary, targeted and proportionate”. Moreover, financial conditions are still tighter than at the outset of the COVID-19 pandemic. Looking ahead, Lagarde stated that the current crisis “can be an opportunity to modernize our economies to make them fit for the future.”

US Markets ended the week in red, after the Fed forecasted that the US economy will contract by 6.5% in 2020.

US producer price index (PPI) rebounded on a monthly basis in May.

The number of initial jobless claims dropped for the tenth straight week in the week ended 05 June 2020.

The consumer price index (CPI) declined for a third consecutive month in May.

US MBA mortgage applications advanced on a weekly basis in the week ended 05 June 2020.

Budget deficit narrowed more than market anticipations in May.

The JOLTs job openings dropped in April, recording its lowest level since 2014.

The NFIB small business optimism index unexpectedly climbed in May.

US Michigan consumer sentiment improved in June.

Asian Markets ended weaker last week, amid growing worries about a resurgence in Covid-19 infections.

In Australia, consumer inflation expectations advanced less than market expectations in June.

Australia’s Westpac consumer confidence index rebounded for a second consecutive month in June.

In Australia, the NAB business confidence index rebounded in May.

Australia’s NAB business conditions index advanced less-than-expected in May.

China’s PPI dropped more-than-anticipated in May.

In China, consumer price inflation slowed in May.

China’s house price index advanced on an annual basis in May.

In China, industrial production rose less than market forecast in May.

China’s retail sales dropped more than market consensus in May.

In Japan, industrial production eased on a monthly basis in April.

Japan’s PPI dropped more than market forecast on an annual basis in May.


Currency Update

The EUR ended lower against the USD last week, after Eurozone’s gross domestic product (GDP) declined in the first quarter of 2020, recording its biggest fall since 1995.

The British Pound ended weaker against the greenback last week, after the OECD projected a grim outlook for UK and after Britain’s economy posted its biggest monthly fall in the history in April.

The US Dollar ended mostly stronger against its major counterparts last week, as worries over resurgence in coronavirus infections and gloomy outlook by the US Fed increased demand for the safe haven currency.


Fed says no rate hike through 2022, economy to contract by 6.5%

The Fed, in its latest monetary policy decision, kept its key interest rate unchanged at 0.25%, as widely expected. Moreover, the Fed reiterated that it expects to maintain this target range until it is confident that the economy has survived recent events and is on track to achieve its maximum employment and price stability goals. Additionally, the Fed signalled that it does not expect to lift its benchmark interest rate until 2023. Meanwhile, officials projected a 6.5% decline in GDP this year and a 9.3% unemployment rate at year's end.


The Week Ahead

Going ahead this week, investors will keep a tab on the US retail sales, industrial production, Federal Reserve Chair Jerome Powell’s testimony, building permits, housing starts, initial jobless claims, the Philadelphia Fed manufacturing index, existing home sales and the Chicago Fed National Activity Index for further direction. Additionally, Eurozone’s ZEW economic sentiment indicator, construction output, the CPI along with Germany’s CPI, the ZEW survey indicess, the PPI and the GfK consumer confidence index will keep investors on their toes. Also, UK’s ILO employment rate, the CPI, the PPI, the retail price index, the Bank of England’s (BoE) interest rate decision, retail sales and public sector net borrowings would garner significant amount of investor attention.


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