D-PIMS Weekly Market Update - Week of 1st to 7th June 2020
Today’s Monday Update:
Over the last week, most news was either Coronavirus or economic related:
• On Monday it was reported that two heads of Italian hospitals in Milan and Genoa stated that the Coronavirus was losing its potency and had therefore become much less lethal. They said it does not have the same strength today as it did two months ago. The swab tests that were performed over the previous 10 days showed a viral load terms that was infinitesimal compared to the ones carried out a month or two months ago. It was not clear why this had happened or whether other countries would have the same experience.
• World markets got another shot of energy on Thursday as the European Central Bank (ECB) ramped up its Pandemic Emergency Purchase Programme (PEPP) to 1.35 trillion euros. This was beyond what most analysts had predicted and hot on the heels of a huge domestic support package from Germany on Wednesday.
The ECB has always made clear it will do its part and Thursday’s move should reassure both governments and investors that it will not tolerate a rise in Government Bond yields that might foster doubts about the viability of European debt. The ECB also kept its main interest rate unchanged at 0% and its deposit rate, now its de facto benchmark, at minus 0.5%.
Spain’s lower house voted on Thursday to begin drafting a 3% tax on revenues of internet giants. The tax would apply to revenues generated locally by tech firms such as Facebook, Alphabet Inc’s Google, Apple and Amazon and would generate about 1 billion euros in annual revenues for the state. Spain’s tax would take effect only if the Organization for Cooperation and Development (OECD) member states reach agreement to launch a joint digital levy - an effort to take better account of the rise of big tech companies that often generate profits in low-tax countries.
• On Friday, the owner of British Airways (AIG) is considering launching a legal challenge against the UK’s looming quarantine plan, its chief executive said, warning that the new rules would stop its return to flying in July.
The European Union said on Friday there had been no significant progress in talks with the United Kingdom about a Brexit free trade agreement and that to reach a deal, talks would have to intensify. “Progress remains limited but our talks have been positive in tone,” Britain’s chief negotiator, David Frost, said. “Negotiations will continue and we remain committed to a successful outcome. We are close to reaching the limits of what we can achieve through the format of remote formal rounds,” Frost said. “If we are to make progress, it is clear that we must intensify and accelerate our work.”
The U.S. unemployment rate unexpectedly fell in May and layoffs reduced, the US Labour Department said on Friday, in a report that showed the latest signs the economic downturn caused by the COVID-19 pandemic was bottoming. The Labour Department’s closely watched monthly employment report showed the jobless rate dropped to 13.3% in May from 14.7% in April. Economists had forecast the jobless rate jumping to 19.8%. The jobs market improved considerably in the second half of May as businesses reopened after shuttering in mid-March to slow the spread of COVID-19. Consumer confidence, manufacturing and services industries are also stabilizing, though at low levels, signs the worst was over.
British scientists halted a large trial on Friday that had been exploring the use of the anti-malaria drug hydroxychloroquine in patients with COVID-19, after initial results showed no evidence of benefit. The anti-malarial drug has been highly controversial since U.S. President Donald Trump said the drug could be a potential “game changer”. Martin Landray, an Oxford University professor who is co-leading the trial said “this is not a treatment for COVID-19. It doesn’t work. This result should change medical practice worldwide,” he added. “We can now stop using a drug that is useless.”
• Over the week, the main Global Stockmarket indices were up especially Europe. All the investment D-PIMS Portfolios had another very positive week, especially the higher risk Portfolios. They were helped by their diversified structure.
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The comments made above represent our interpretation of events and market views and are in no way a guarantee of future investment performance.