Market Commentary - July 29, 2020

Posted by Kevin Jock on Jul 29, 2020 8:38:21 AM

     Global indices lost ground as they await the Federal Open Market Committee’s announcement due today. Yesterday’s disappointing earnings announcements in Wall Street from blue chips further exacerbated the declines. Expectations see no rate changes from the Fed, of whom have already implemented a super-accommodative monetary policy. With the Fed just yesterday announcing further extensions to emergency lending facilities till the end of the year. Originally, the program was set up to help support struggling businesses requiring access to short-term funding and corporate debt. Acting as a backdrop. Results so far has seen an improvement in the flow of credit.

 

Figure 1 (source: Refinitiv): A dollar in decline.

Headliners to Review

  • Spanish unemployment rate better than expected but still rose to 15.3% from 14.4%. Inherent structural problems had already left Spain with one of Europe’s highest level of joblessness pre-crisis. Lockdowns and travels ban made matters worse. With tourism decimated, an economy in shambles, the government rolled out extensive furlough programs to save the work-force. Nonetheless, the Spanish Central Bank expects unemployment to peak at 24% by years presuming the worse.
  • US consumer confidence deteriorates beyond expectations falling from 98.3 to 92.6. American’s growing more uncertain about the short-term economic outlook, especially as coronavirus cases keep rising leaving States to slow down re-opening.
  • Child-care, pre-school and fuel cost down double digits with the Australian economy slipping into deflation. QoQ CPI and Trimmed Mean CPI data from the ABS showed figures at -1.9% and -0.1% respectively. Not to worry. Whilst data may look dire, barring non-essential goods and services, the economy would have set to post a 0.1% gain.

Headliners to Watch

  • Deluge of announcements coming out of the US.
    • Pending home sales expected to remain historic norms, set to see a 15.6% MoM increase. US housing market thus far has remained remarkably resilient amid the economic downturn. Households unaffected by the crisis have been taking advantage of record low rates and easy credit in purchasing a property of their own.
    • Successful production cuts by OPEC members see’s Crude Oil inventory declining from 4.9M to 1.0M. Other contributing factors include pent demand from states re-opening their economy back up.
    • FOMC sees no change in rate policy. With lending facilities already extended and a US congress in negotiations for further fiscal stimulus, most investors await to see the Fed’s expectations of when the economy will begin to recover.
  • Stringent lock-down measures and social-distancing rules saw New Zealand quick to flatten the Coronavirus outbreak. In turn, business confidence has been steadily increasing from March lows. Last month saw 5-point gain on the index. Analyst predict similar for tomorrow.

 

 

 

 

 

 

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Authors:
Antony Tan
Ben Li
Kevin Jock

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