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Weekly Focus - 22 June 2020

Weekly Focus                      22 June 2020

Sustained monetary and fiscal easing support the recovery
 

 

 

 

The prospect of monetary and fiscal easing and an improvement in economic indicators in the US led to a rise in major equity indices last week. The technology sector was among the better performers within the S&P500 and overall cyclical sector stocks outperformed. The energy component was boosted by reports that that OPEC and other major exporters were implementing production cuts successfully. The normalisation of economic activity also had a bearing as shares of travel related companies rebounded strongly.

 

The market is forecasting a recovery of economic activity and the fears of a second lockdown have decreased. However the pace of the recovery remains clouded by how the Covid-19 spread will be managed.

 

The US FED remains pivotal to improvements in economic activity and equity indices. Last week, it further expanded its policy tools by announcing it will buy corporate bonds. This caused a compression of spreads with treasuries but also led to an increase in supply. The next move of the central bank in September could relate to its forward guidance policy and an announcement on yield curve targeting. This would further decrease volatility in the coming months. Rumours of another fiscal package of USD 1 trillion being discussed by the White House in the run up to the Presidential election has also boosted risk sentiment. In Europe, the ECB eased liquidity conditions by allotting a record EUR 1.3 trillion as part of its refinancing operations for banks. The EU is also discussing the setting up of a recovery fund to boost growth even as the easing of lockdown conditions progressed.

 

Manufacturing PMI data to be released this week will be scrutinised for signs that the recovery is gathering pace (chart above). There is high hope that the data for the US will be close to 50 (expansion territory) as on retail sales largely beat expectations last week. In Europe, soft data like ZEW, points to an improvement which should also show up in the PMI this week.

 

 

Value

1 Week

YTD

Equity Indices

 

 

 

S&P500

3,098

1.86%

-4.11%

FTSE JSE All Share

50,526

0.54%

-11.58%

Stoxx50

3,269

3.66%

-12.71%

FTSE100

6,293

3.07%

-16.57%

DAX

12,331

3.19%

-6.93%

CAC40

4,979

2.90%

-16.70%

SMI Index

10,266

4.80%

-3.30%

FTSE MIB

19,619

3.87%

-16.54%

Shanghai Comp

2,968

1.64%

-2.70%

BSE Sensex

34,732

2.81%

-15.81%

Nikkei

22,479

0.78%

-4.98%

Major currencies

 

 

 

USDZAR

17.46

2.33%

24.76%

EURUSD

1.12

-0.54%

-0.15%

GBPUSD

1.24

-1.52%

-6.86%

USDCHF

0.95

0.00%

-1.61%

EURCHF

1.07

-0.55%

-1.77%

GBPZAR

21.57

0.78%

16.13%

EURGBP

0.91

0.98%

7.25%

USDAUD

1.47

0.84%

3.15%

Dollar Index

98

0.34%

1.64%

 Commodities 

 

 

 

Brent

41.96

8.34%

-36.42%

WTI Oil

39.83

9.85%

-34.77%

Copper

2.61

0.27%

-7.37%

Platinum

824.60

0.95%

-15.16%

Sugar

12.02

1.26%

-10.43%

Corn

332.88

1.22%

-14.15%

Gold

1,756.50

1.11%

14.42%

 Sovereign Yields

 

 

 

US10Y

0.69

-2.25%

-63.84%

UK10Y - price

136.82

-0.91%

4.14%

Germany10Y

-0.42

-6.73%

122.46%

 Deposit rates with selected banks

 

The MCB Ltd, 6M USD 1.20%

 

 

 

 

Contact us: Durban +27 (0) 31 566 3365 | CPT +27 ( 0 ) 21 851 0920 | JHB +27 ( 0 ) 11 017 7230 | Email: enquiries@pwm-wealth.com

Disclaimer: The research report has been prepared for information purposes and does not constitute an offer. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and the company accepts no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this report
 


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