Market Update

The past week has been marked by dizzying day-to-day movements in stock indices, underscoring the unease gripping equity markets. As we've emphasized before, markets abhor uncertainty, and given the profound uncertainty surrounding the ongoing coronavirus outbreak, they are hanging on every news headline.
Amidst this turbulence, positive economic indicators have provided some relief. The Chicago Fed National Activity Index and the Kansas City Fed Manufacturing Activity Index both showed robust readings, consistent with the strong results seen in previous weeks from the Empire State and Philadelphia Fed surveys. Particularly encouraging was today's (Friday, June 26, 2020) data revealing a record 8.2% surge in US consumer spending in May. This surge underscores that as lockdown restrictions ease, people are gradually returning to shops and restaurants, signaling a positive trend for US employment as companies begin rehiring their laid-off workers.
Similarly, the UK, though lagging in reopening, demonstrated signs of economic recovery this week. PMI data showed impressive improvements in both manufacturing and services sectors, indicating a positive trajectory.
However, these positive developments were tempered by the grim news that the US reported an all-time high in coronavirus cases, leading to renewed restrictions in some states. Texas, for instance, closed bars and limited restaurant occupancy to curb the virus spread. It's important to note, though, that the strict lockdown measures seen at the start of the outbreak have not been fully reinstated.
Adding a potential positive spin, reports surfaced that President Donald Trump might unveil another stimulus package. Such news could swiftly uplift market sentiment. Interestingly, China's CSI 300 index, as seen in the accompanying table, emerged as the only major global equity index to conclude the week higher. China's relatively smooth and successful economic reopening has contributed to this upward trajectory. In fact, the CSI 300 index has managed to climb 1.04% this year, in stark contrast to the UK’s FTSE-100, which has suffered a significant decline of 18.34%.
As we have cautioned before, until the concerns surrounding the coronavirus pandemic recede, we are likely to witness a pattern of taking two steps forward followed by one step back.
Looking ahead, our focus will be on next week's developments. While UK data remains relatively quiet, Brexit trade negotiations with the EU are set to resume. Additionally, the Eurozone will release data on CPI inflation, economic confidence, and unemployment. Chinese PMI and Japanese retail sales figures are also anticipated.
However, our primary attention will be on crucial US data, including consumer confidence, manufacturing readings from Markit and ISM, minutes from the Fed’s monetary policy meeting, the trade balance, US employment data (non-farm payrolls, unemployment rate, participation rate, and average earnings), and weekly jobless claims data. A brief respite will occur on Friday (July 3, 2020) as US equity markets remain closed in observance of Independence Day. Stay tuned for our upcoming commentaries for further insights.