Weekly multi-asset desk views

Weekly Review: 14 August 2020

Weekly Mag updates

Summary

  • COVID-19 update: EU virus resurgence continues, impacting mobility
  • China’s July activity data disappoints, whilst the UK sees a Q2 GDP contraction of -20.4%

Market and economic review

Global cases reached over 20m this week, as developments in the COVID situation remain at the forefront for markets. Whilst the trend in the number of cases recorded in the US are starting to see a marginal improvement, there is a stalemate between the Democrats and Republicans on the terms of any further fiscal support being offered.

Aside from that, July activity data for China was released towards the end of the week, which was slightly disappointing. In other data releases the UK saw a large contraction in GDP, and the recovery in the US labour market continued with an impressive weekly decrease in initial jobless claims. 

Covid-19 update: EU virus resurgence continues, impacting mobility

Global cases reached over 20m this week according to Bloomberg, with figures still being driven by India, Latin America and the US.  In the US, we are seeing a continuation of the marginal improvement of caseloads in the ‘sun-belt’ states, whilst hospitalisations in some of these regions continue a downward trend.

Elsewhere, in the EU there is a resurgence in cases, particularly in Germany, France and Spain which have seen their highest new daily cases since the first wave. Further containment measures continue to be announced with Paris mandating face masks to be worn outdoors in the busiest streets, whilst the has UK imposed a mandatory 14-day quarantine on travellers from France, Malta, Netherlands, Monaco, and a number of other countries. Elsewhere, Australia has seen a significant improvement in cases from the Victoria outbreak as containment measures continue to take effect.

Meanwhile on the vaccine front, Russia has become the first country that has granted regulatory approval for a vaccine, whilst US biotechnology company Moderna reached a deal with the US to manufacture and distribute 100m doses of its experimental vaccine. Turning to economic mobility, and we continue to observe a correlation with changes in case growth, seemingly irrespective of official lockdown measures. In the US mobility continues to rise with the declining caseloads, whilst EU mobility has faltered with the virus resurgence. 

China’s July activity data disappoints, whilst the UK sees a Q2 GDP contraction of -20.4%

As China was the first country to suffer the effects of the pandemic, and the first country to go into and move out of lockdown, close attention is paid to economic data releases given what this may mean for other areas of the world. With that in mind, China’s July activity data released on Friday was a disappointment. Industrial output missed expectations rising by 4.8% yoy (vs an expected 5.2%), and retail sales also undershot, printing at -1.1% yoy (vs 0.1% expected). Fixed asset investments came in line with expectations at -1.6% yoy.

Lagging China in the COVID-timeline is the UK, where the economic impact of the pandemic was made clear with its Q2 GDP release. This showed a contraction of -20.4%, which is considerably worse than the contraction seen in other countries such as the US and Germany. On a more positive note, there may be a strong recovery in Q3, following what has been a significant pick up in high frequency data across many industries.

From the US, there was a significant fall in the weekly initial jobless claims, a number we have reported since the beginning of the pandemic. They came in at 963,000 vs an expected 1.1m for the week ending 8 August, which is a big step in the right direction for the recovery in the US labour market. Continuing claims were on a similar track, with the reading coming in at 15.5m vs an expected 15.8m.

Outlook

It’s a light calendar for markets next week as we move through the summer, but the flash PMIs on Friday will be a key highlight in terms of how the global economy has performed into August. These will follow a July PMI reading of above 50 for all the countries, except Japan. Elsewhere in data releases, markets will continue to follow the US weekly initial jobless claims on Thursday following last week’s drop below one million claims for the first time since the pandemic began.

Turning to politics and with less than three months until the US presidential election, former Vice President Joe Biden will formally accept his party’s nomination for president next week at the Democratic convention. Meanwhile across the Atlantic, another round of negotiations between the UK and the EU will take place following a more positive tone from the UK’s chief negotiator this week.

From central banks, next week sees the Federal Reserve and the European Central Bank release minutes from recent meetings, along with emerging market monetary policy decisions from both Indonesia and Turkey.

 

Important information

5-year performance record to 30 September 2020

  Calendar year returns   12-month rolling returns  
  2019 2018 2017 2016 2015   2019-2020  2018-2019  2017-2018 2016-2017 2015-2016 Currency
Insight's broad opportunities strategy (pooled) (GBP) 13.13 -4.99 10.13 5.05 -1.19   -3.60 5.80 2.18 6.82 5.45 GBP
3-month GBP LIBID 0.68 0.60 0.23 0.38 0.45   0.36 0.70 0.50 0.21 0.42  


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