D-PIMS Weekly Market Update - Week of 22nd to 28th June 2020
Today’s Monday Update:
Over the last week, most news was either Coronavirus or economic related:
• Bank of England (BOE) Governor Andrew Bailey said on Monday that the central bank should start to reverse its quantitative easing (QE) asset purchases before raising interest rates on a sustained basis. This was a reversal of long-standing BOE policy and would point to UK interest rates staying at exceptional low levels for an extended period of time.
IHS Markit’s monthly Household Finance Index rose to 40.7 in June from 37.8 in May, but remained below its pre-COVID average of just under 45. This implied that British households were now less pessimistic than in May and April when sentiment sank to its lowest in more than eight years, driven by the ‘lockdown’ to control Coronavirus.
Also on Monday the number of people in Britain who died after being confirmed to have COVID-19 had risen by 15, making it the lowest daily COVID-19 toll since mid-March.
A Japanese supercomputer built with technology from UK based Arm Ltd, whose chip designs power most of the world’s smartphones, has taken the top spot among the world’s most powerful computer systems, displacing one powered by the US’ International Business Machines Corp (IBM) chips.
After more than 100 days of lockdown, New York City residents on Monday celebrated their progress in curbing the coronavirus pandemic by getting their first haircuts in months, shopping at long-closed stores, and dining at outdoor cafes. Once the epicentre of the global outbreak, New York City was the last region in the state to move into Phase 2 of reopening, with restaurants and bars offering outdoor service and many shops reopening. Barber shops and hair salons welcomed customers for the first time since mid-March.
In contrast a dozen states in the South and Southwest US reported record increases in new coronavirus cases and often recorded increases in hospitalizations as well, a metric not affected by more testing.
• The IHS Markit/CIPS flash composite Purchasing Managers’ Index (PMI) was released on Tuesday. This index measures activity in the services and manufacturing sectors and jumped to 47.6 in June from 30.0 in May. The record rise easily exceeded expectations for an increase to 41, though its sub-50 level still represents a modest fall in output. The figures suggested that Britain’s private sector shrank less than expected this month as more businesses restarted work after the COVID-19 lockdown, putting the economy on course to return to growth from next month.
French drugmaker Sanofi said on Tuesday it expects to get approval for the potential COVID-19 vaccine it is developing with Britain’s GlaxoSmithKline Plc by the first half of next year, faster than previously anticipated. Sanofi, originally said in April the vaccine, if successful, would be available in the second half of 2021. This is still a longer time timetable than that expected for the vaccine being worked on by Oxford University and AstraZeneca, but it is tipped to be potentially more affective.
World stocks and risk currencies rallied on Tuesday on encouraging global economic data and assurances from U.S. President Donald Trump that the U.S./China trade deal remained “fully intact” after confusion over its fate had emerged.
British Prime Minister Boris Johnson unveiled on Tuesday a significant easing of the coronavirus lockdown in England, saying pubs, restaurants, hotels and bars can reopen from 4th July and people can meet more friends and family.
Following are the main measures the prime minister announced:
o Where it is not possible to stay 2 metres apart, people are advised to keep to a social distance of “1 metre plus” with the plus referring to other mitigations, such as installing screens, facing away from each other, putting up hand-washing facilities and wearing masks on public transport.
o The advice for gatherings indoors, which includes visits to pubs, restaurants or holidays in paid accommodation, is that one household can meet one other household at a time, including staying overnight, while observing social distancing. There is no limit on the size of those households and no exclusivity. Different households can mix at different times.
o Outdoors, people can congregate in a park or garden in a group of up to six people drawn from up to six different households while observing social distancing. Two households of any size can also meet outdoors - e.g. for two large families or households there would be no limit on the size of that gathering.
• On Wednesday Iranian President Hassan Rouhani said Iran would be open to talks with the United States if Washington apologises for exiting a 2015 nuclear deal and compensates Tehran, while also cautioning that U.S. calls for discussions were insincere. In a tweet in early June, President Trump repeated Washington’s call for a new deal with Tehran. This was aimed at putting stricter limits on Tehran’s nuclear work, curbing its ballistic missile program and ending its decades of regional proxy wars.
The EU’s chief negotiator Michel Barnier, said on Wednesday that a post-Brexit trade deal with the European Union is still possible, but called on London to give “clear signals” that it is ready to work towards one. He added that he was neither optimistic nor pessimistic, but described himself as determined.
• Coronavirus cases rose across the United States by at least 39,818 on Thursday, the largest one-day increase yet. The governor of Texas temporarily halted the state’s reopening on Thursday as infections and hospitalisations surged. The possibility of a second coronavirus wave and renewed lockdowns has so far had a more limited market impact, because if lockdown measures resume then markets expect this to raise the likelihood of more fiscal support for economies.
• On Friday, the World Health Organization’s chief scientist said Astrazeneca’s COVID-19 vaccine is probably the world’s leading candidate and most advanced in terms of development. Soumya Swaminathan also said that Moderna’s COVID-19 vaccine candidate was also “not far behind” Astrazeneca’s, among more than 200 candidates, 15 of which have entered clinical trials.
Intu, which owns Lakeside in Essex & Manchester’s Trafford Centre, amongst several other centres across Britain and Spain became the latest casualty of the coronavirus crisis on Friday, as it went into administration. This was after failing to secure a debt repayment holiday from its creditors amid falling rents. It had been concerned about its financial prospects even before the coronavirus crisis, but the ensuing lockdown has put a further stress on its finances as rental payments collapsed due to shop closures that lasted for nearly three months. With net debt of around £4.69 billion pounds last year, the debt waiver Intu secured in early-May expired on Friday, triggering a breach. It also announced that all shopping centres would continue to trade.
• Over the week, the main Global Stockmarket indices generally drifted into negative territory, apart from in the Far East. Correspondingly the investment D-PIMS Portfolios were a bit lower, especially the higher risk Portfolios. They were helped by their diverse exposure.
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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.