Market update – 10th July 2020.

Yesterday’s (Thursday 9 July 2020) important data release was the weekly US jobless claims:  both the initial and continuing claims not only continued to decline (to 1.314m and 18.062m respectively), but both came in better than consensus expectations – this is not only positive, but also suggests that we aren’t seeing a big impact from the recent increase in coronavirus cases and resulting localised lockdowns.  Additionally, the prior week’s data was revised lower (which is also positive news):  initial claims were revised down 14,000 to 1.413m and continuing claims by 530,000 to 18.76m.

Although 23 states did report an increase in jobless claims, as with previous weeks, there wasn’t a particular pattern.  For example, of the coronavirus hotspots, Texas did see jobless claims increase; Arizona was effectively flat; while California, Florida and Georgia all saw jobless claims fall.

While the data came in better than consensus estimates, it unfortunately wasn’t good enough to get equity markets excited:  not only are 18m Americans still continuing to claim benefits, but US coronavirus infections continue to climb – and markets are obviously worried that this may undermine the economic recovery as businesses slow their reopening plans.

As we have previously said, we believe coronavirus deaths give a clearer guide than infection rates as there is a clear dichotomy opening up between new cases and deaths.  This is because the average age of those infected is dropping (i.e. more younger people are being infected).  In fact, the White House health advisor, Anthony Fauci, has said that the average age of US coronavirus patients has dropped by 15 years – and if this continues, we don’t believe it will lead to new shutdowns or slow the economic recovery.

Last night’s negative sentiment which saw both the Dow Jones and the S&P 500 close lower (1.39% and 0.56% respectively), has continued into today.  In China, the CSI 300’s 8 day rally ended, with the index losing 1.81%, while in the UK, the FTSE-100 is currently down just over 10 points, or 0.20%.

Investment Management Team

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