Global Markets Update Monday 29 June 2020

Posted on 29 Jun 2020

Global stocks slid on news of a sudden spike in COVID-19 cases in southern and western US states. Renewed trade friction between the US and Europe also knocked investor sentiment. 

Global Market Update

The FTSE 100 lost 2.1% over the week.
The flash reading of June’s IHS Markit/Cips UK purchasing managers’ index (PMI) for services sector activity rose to 47.0 compared to 29.0 in May. The manufacturing PMI jumped to 50.1 in June from 40.7 in May. Both indices came in well above expectations.

The S&P 500 fell 2.0% over the week. Despite the setback, the quarter to June is set to be the best quarter for the S&P 500 in more than 45 years.
The numbers of new daily coronavirus cases hit records in several US states as the national total reached 2.5m. Florida, Texas, Arizona and California were among the southern and western states that saw cases surge, causing many to reverse re-opening plans. Apple closed some of its stores in affected states, while New York, New Jersey and Connecticut imposed a two-week quarantine on visitors from states with elevated infection rates.
The Federal Reserve said it would cap US banks’ share repurchases and dividend payments until at least October, saying it required firms to keep money on hand to guard against the it warned that they could be hit by losses of up to $700bn in a severe downturn due to the COVID-19 pandemic. However, the week also saw the easing of post-2008 crisis rules that will make it easier for banks to invest in venture capital funds and free up capital set aside for derivatives.
US jobless claims rose 1.48 million, down from an increase of 1.54 million the previous week. However, the numbers are not falling as quickly as many analysts had expected.

The FTSEurofirst 300 dropped 1.9% over the week.
The flash estimate of the IHS Markit eurozone composite purchasing managers’ index rose to 47.5 in June, up from 31.9 in May. Manufacturing activity rose to 46.9 in June, up from 39.4 in May, while the index for services climbed to 47.3 compared to 30.5 in May. 
The eurozone’s two largest economies reported better than expected improvements in sentiment. Germany’s composite PMI rose to 45.8 in June: while the index remained in contraction territory, it was the highest level since the coronavirus pandemic began. France’s composite PMI indicated a return to growth in activity at 51.3.
Germany suffered an outbreak of COVID-19 infections at an abattoir which briefly pushed the country’s coronavirus reproduction number to almost 3.
German payments company Wirecard collapsed into receivership. At its peak, the company had been valued at €24 billion.
The Nikkei 225 gained 0.2% over the week.

Pacific Basin
Chinese officials appeared to be controlling a recent COVID-19 outbreak in Beijing.

Emerging Markets
South Africa’s finance minister has warned that the country is on the verge of a sovereign debt crisis if it does not control its debts. The South African economy is likely to contract more than 7% per cent this year, while its budget deficit projection for 2020/21 has more than doubled to about 15% of GDP.
Index provider MSCI warned that Turkey may be demoted to the status of “frontier” market, after a series of measures by local authorities made it harder for foreign investors to buy and sell assets.

The yield on the 10-year US Treasury bond closed the week at 0.71%, while the 10-year German Bund yield ended at -0.45%.
Gold hovered near an eight-year high at $1,763 an ounce, having gained more than 20% since March.

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