Macroeconomic/ geopolitical developments
- Global financial markets started to signal a move to more of a “risk on” theme to start July, after the indecisive phase evident from June.
- However, an absence of any significant economic data through the past week has seen some markets revert to the ranges seen in June.
- Markets remain captured by two competing forces; increasingly positive economic data on one side and the ongoing rise in COVID-19 cases on the other.
- The rise in the number of cases, hospitalisations and deaths from the coronavirus in southern and western US states has seen lockdown measures re-imposed, with Florida, Louisiana, North & South Carolina, Texas, Arizona and California all in the spotlight.
- In addition, there continues to be significant local outbreaks globally too; Victoria in Australia, Germany, in Tokyo, Beijing and in the UK in Leicester.
- The UK has seen lockdown measures further relaxed in the past week, whilst new measures were announced to support the economy by Chancellor Rishi Sunak, in a mini budget.
- Riskier assets got a small boost on Friday as Gilead Sciences Inc published positive data regarding the use of the drug remdesivir in treating the novel coronavirus.
Global financial market developments
- Differing asset classes are sending different signals.
- Equities – mixed: The bullish breakout attempts from multi week ranges by global share averages from earlier in July stalled last week, with the absence of any supporting economic data and with mounting concerns regarding the rise in COVID-19 cases. The Chinese stock market, however, has raced higher, alongside the Nasdaq in the US.
- Bond markets – risk off: US Treasury Bonds pressed to higher prices/ lower yields, reflecting a “risk off” bias.
- Forex markets – mixed/ risk on: The US Dollar was initially weaker (risk on) but rebounded towards the latter part of the week (hesitant). The GB Pound has been somewhat buoyed by the UK mini budget.
- Commodity markets – mixed/ risk on: Again, a new multi-month high for Copper (risk on), but Oil remains capped by the peak set in June (hesitant).
Key this week
- The spotlight will stay on new cases and deaths from the COVID-19 coronavirus, with particular concerns about the rises in the southern US states.
- Central Bank Watch: Monday sees Bank of England (BoE) Governor Bailey speak, Wednesday brings both the Bank of Japan (BoJ) and Bank of Canada (BoC) meetings, interest rate decisions and statements, plus the US Fed’s Beige Book and Thursday sees the European Central Bank (ECB) meeting, interest rate decision and statement.
- Earnings season kicks off in the US, with the financial sector starting proceedings.
- Reports of note are; PepsiCo (PEP), JP Morgan (JPM), Citigroup (C), Wells Fargo (WFC), United Health (UNH), Goldman Sachs (GS), J&J (JNJ), Netflix (NFLX), Bank of America (BOA), Morgan Stanley (MS), Abbott Labs (ABT) and Honeywell (HON).
- An extremely busy week on the macroeconomic data front the standouts being; US CPI and Jobless Claims, UK GDP, CPI and the Employment report, the German CPI and ZEW Survey, the Australian Employment report, Chinese trade data, GDP, Industrial Production and Retail Sales, plus Canadian Retail Sales.
|Date||Key Macroeconomic Events|
|13/07/20||BoE Governor Bailey speaks|
|14/07/20||Chinese trade data, UK GDP, German CPI and ZEW survey, US CPI|
|15/07/20||BoJ and BoC meetings, interest rate decisions and statements; UK CPI|
|16/07/20||Australian Employment report, Chinese GDP, Industrial Production and Retail Sales; UK Employment report; ECB meeting, interest rate decision and statement; US Jobless Claims|
|17/07/20||Canadian Retail Sales|