Market Update – 26th June 2020.

Global equity markets reversed yesterday morning’s losses to close in positive territory – and this positive sentiment has continued into today, with the FTSE-100 currently up around 80 points, or 1.30%.

Equity markets were able to brush aside news that Texas had its worst day for new coronavirus cases (which prompted the state’s reopening plans to be stopped), after news that the US regulator was relaxing some post-financial crisis banking rules (which eases their reserve requirements), coupled with positive US data.

While US initial jobless claims continued to edge downwards (which is positive), coming in at 1.48m (making it the 12 straight week of declines), the speed of the decline has disappointingly and frustratingly abated considerably.

However, the more important continuing claims fell more than expected to 19.52m in the week ending Saturday 13 June 2020, from 20.29m the previous week, indicating that Americans are being rehired.

Annoyingly, looking at the data for individual states doesn’t provide much consistency for clues if the uptick in coronavirus infections has the potential to delay the economic recovery.  For example, both Texas and Florida have seen large upticks in coronavirus cases, but while Texas saw claims rise by 5,047, Florida saw claims decrease by 24,013.

However, the rest of yesterday’s economic data from the US was excellent, with both durable goods orders and wholesale inventories exceeding consensus expectations – in fact durable goods orders (i.e. items that are expected to last at least 3 years) jumped 15.8%, the biggest increase since July 2014.

Additionally, the Kansas City Fed Manufacturing Activity index rose sharply from -19 to +1.  This now means that we have seen 4 regional Fed manufacturing indexes – and all have been consistent in suggesting to us that the US (the world’s largest economy) has passed the low point and is already starting to recover.

Today’s data highlights include the University of Michigan Consumer Sentiment index and the Fed’s preferred inflation measure, the PCE (Personal Consumption Expenditures Price Index).

Investment Management Team