D-PIMS Weekly Market Update - Week of 20th to 26th July 2020
Today’s Monday Update:
Over the last week, most news was focused on either the economy or the Coronavirus:
• Property website Rightmove said on Monday that a mini housing market boom was gathering pace after stamp Duty cut announced by the Chancellor, Rishi Sunak.
The number of sales agreed in England — which eased coronavirus restrictions on the market before other countries in the UK — jumped by an annual 35% in the five days after Sunak’s announcement on July 8th, Rightmove said. A recovery had already been under way with agreed sales in England up by 15% in June.
• Data showed on Monday, that the coronavirus vaccine being developed by AstraZeneca and Oxford university was safe and produced an immune response in early-stage clinical trials, keeping alive the hope it could be in use by the end of the year. The vaccine, called AZD1222, has been described by the World Health Organization’s chief scientist as the leading candidate in a global race to halt the pandemic.
The vaccine did not prompt any serious side effects and elicited antibody and T-cell immune responses, according to trial results published in The Lancet medical journal, with the strongest response seen in people who received two doses.
• European Union leaders clinched an “historic” deal on a massive stimulus plan for their coronavirus-hit economies in the early hours of Tuesday, after a fractious summit that lasted almost five days.
The agreement paves the way for the European Commission, the EU’s executive, to raise billions of euros on capital markets on behalf of all 27 states, an unprecedented act of solidarity in almost seven decades of European integration. Many had warned that a failed summit amid the coronavirus pandemic would have put the bloc’s viability in serious doubt after years of economic crisis and Britain’s recent departure. French President Emmanuel Macron, who spearheaded a push for the deal with German Chancellor Angela Merkel, hailed it as “truly historic”.
Leaders hope the 750 billion euro recovery fund and its related 1.1 trillion euro budget will help repair the continent’s deepest recession since World War Two after the coronavirus outbreak shut down economies.
• The UK and the European Union clashed on Thursday over the chances of securing a free trade agreement, but London was holding out hope one could be reached in September. The UK’s Chief Brexit Negotiator David Frost said “considerable gaps” remained but he added: “Despite all the difficulties, on the basis of the work we have done in July, my assessment is that agreement can still be reached in September, and that we should continue to negotiate with this aim in mind.”
“Looking forward, there are large areas of convergence in many of the areas on which we are negotiating and ample precedents and texts on which we can base our work,” said Frost.
Michel Barnier, the EU Chief Negotiator, also noted some progress this week on how to settle any future disputes over a new EU-UK agreement, an element he has regularly mentioned previously as a key stumbling block together with level playing field clauses and the issue of fisheries.
• Figures released on Thursday showed British factory orders fell at the slowest pace since March this month, and firms are more upbeat after the economic impact of COVID-19 caused the biggest collapse in demand since 1980 over the previous quarter. The Confederation of British Industry’s (CBI) monthly order book balance rose to -46 in July from -58 in June. “There are tentative signs of gradual recovery on the horizon, with firms expecting output and orders to begin to pick up in the next three months, but demand still remains deeply depressed,” CBI chief economist Rain Newton-Smith said. The CBI said manufacturers’ expectations for domestic orders over the next three months were the highest since January 2018, though they predicted overseas demand would stay below average.
• British businesses have reported their fastest upturn in five years and shoppers pushed their spending back to near pre-lockdown levels, a survey and data published on Friday showed. An early flash reading of the IHS Markit/CIPS UK Composite Purchasing Managers’ Index (PMI) shot up to 57.1 in July from 47.7 in June, above the 50 threshold for growth for the first time since lockdown began in March. The figure, its highest since June 2015 and above the euro zone’s reading for this month, was better than all forecasts in a Reuters poll of economists.
Sales volumes in June leapt by 13.9% from May, above all forecasts in a Reuters poll of economists. A 70% surge in clothing and footwear sales reversed much of their slump in recent months, though the sector remains one of the worst hit, with spending 35% below pre-pandemic levels. Household goods stores also saw strong sales in June, especially for furniture and DIY materials. Home improvement retailer Kingfisher this week forecast first-half underlying profit ahead of last year after exceptionally strong demand.
The surge suggested Britain’s economy would return to growth in the third quarter after shrinking by more than 25% in March and April, Chris Williamson, chief business economist at PMI compiler IHS Markit, said.
Consumer sentiment is still below its level before the coronavirus struck, but employers have turned positive about hiring and investment for the first time since February, separate surveys showed earlier on Friday.
• Over the week, the main Global Stockmarket indices were well down, apart from China. This was mainly due to worries over the surging number of virus cases in the US and the deteriorating relations between the US and China. The investment D-PIMS Portfolios were mostly slightly down. They were helped by their diverse exposure.
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Past Performance is no guarantee of, or guide to future returns.
The comments made above represent our interpretation of events and market views and are in no way a guarantee of future investment performance.