Global equities fell last week as the daily increase in new COVID-19 cases continued to rise, writes Ian Slattery.
The US saw a record daily increase of COVID-19 cases last Wednesday which led to a number of states rolling back on their plans to ease restrictions. The general consensus is that the rise is larger than can be explained by increased testing alone and is higher in southern US states.
Growth stocks outperformed value with the tech heavy NASDAQ index holding up better than broader markets. Bank stocks were hit particularly hard on Friday on the back of the reports that the Federal Reserve would attempt to restrict dividends and share buybacks, both key tools for returning capital to shareholders.
Growth stocks outperformed value with the tech heavy NASDAQ index holding up better than broader markets.
Economic data for the week was broadly positive with the US housing market remaining resilient with new home sales up 17% in May and new mortgage applications up 18% (year-on-year). Factory orders and some auto data was also positive as the rebound in US economic activity continued.
Data from Europe was also encouraging as manufacturing PMIs moved from 39.4 to 46.9 with services PMIs stronger as they moved from 30.5 to 47.3. However, as with all PMI data, it is worth noting that a figure below 50 still represents a contraction in activity. UK PMIs also rebounded as the Bank of England stated that it may look to cut back on its bond purchasing programmes as the Treasury plans a potential cut in VAT. The deadline to request a formal extension to the Brexit negotiations also arrives at midnight tomorrow.
All major markets moved down last week, led by the influential US market which was down -3.4% in both local and euro terms. Closer to home, Ireland was down – 2.1%.
Fixed Income & FX
The US 10-year yield finished at 0.64% last week. The German equivalent finished at -0.47%. The Irish 10 year bond yield finished at 0.01%. The Euro/US Dollar exchange rate finished at 1.13, whilst Euro/GBP was at 0.91.
Oil finished the week at $38 per barrel. Gold finished the week at $1,769 per troy ounce up 16.6% year to date in local terms and 16.1% year to date in Euro terms. Copper finished the week at $5,953 per tonne.
The week ahead
Wednesday 1st July
Minutes from the latest FOMC meeting are released.
Thursday 2nd July
Non-farm payrolls from the US go to print.