Weekly Market Update

Author : Rachel Poole
Date : July 18, 2020

Global Market News

Global equities make some gains
Global equities added small gains this week, a vaccine hopes overshadowed a continued increase in US Covid-19 cases. The yield of the US 10-year Treasury note remained steady at 0.62% as did Volatility which ended the week at 27, measured by the Cboe Volatility Index (VIX). On the other hand, the price of a barrel of West Texas Intermediate crude oil rose about $2.00 to $40.64.

China reports 3.2% growth in Q2
China’s released economic data this week, revealing that exports rose 0.5% and imports jumped 2.7% as compared to June 2019. The trade surplus reported for the month of $46.42 billion was far below economist’s expectations of $59.3 billion. After contracting 6.8% in the first quarter, Beijing reported an economic expansion of 3.2% in the second quarter. The country also recorded a 4.8% rise in industrial production while retail sales continued to slump, dropping another 1.8%. The Chinese government has introduced fiscal spending and cuts in lending rates among other measures to boost the economy.

Updated Market Figures

Coronavirus Updates

Covid-19 by the numbers
Global Confirmed Covid-19 cases: 14,000,000 Global Covid-19 deaths: 601,000
US Confirmed Covid-19 cases: 3,680,000 US Covid-19 deaths: 141,000
*As of Friday evening

Promising vaccine results overshadow upticks
Two potential vaccines are showing promising results in early trials and are progressing towards more advanced testing. The vaccine being developed in Great Britain by a team at Oxford University will be going into production before trials are complete so that 2 billion doses can be produced by early next year. Meanwhile, Covid-19 cases in the US continue to increase at alarming rates. Spikes in California have prompted the governor to reverse reopening measures, closing restaurants, bars, retailers, and other businesses once again.

Geopolitics Spotlight

UK bans Huawei
British Prime Minister Boris Johnson announced this week that the United Kingdom (UK) will bar Huawei, the Chinese telecommunication giant, from the country’s 5G network. The UK has been pressured by the US to ban Huawei, claiming it will allow the Chinese government to spy on them. The move heightens tensions between the UK and China which have been at a renewed high the last few weeks over the new security law in Hong Kong. Such recent actions taken by the UK and US are evidence of a mounting Western front against Chinese influence is emerging.

Anti-government protests surge in Bulgaria
Bulgaria is on day seven of anti-government protesting. The country’s Prime Minister, Boyko Borisov, is under mounting pressure to step down as protesters accuse him of failing to control government corruption. Demonstrations began last week after the chief prosecutor ordered a raid of the office of President Rumen Radev, a well-liked and popular head of state. The raid escalated a feud between the prime minister and president. In a recent speech to protesters President Radev said, “Let’s throw the mafia out of the government and out of the prosecutor’s office.”

US Social and Political Developments

US calls China’s claims in South China Sea unlawful; Trump signs Hong Kong autonomy act

In a new bout of US-China tensions, US Secretary of State Mike Pompeo declared China’s claims in the South China Sea to be unlawful and condemned their recent acts of aggression in the region. Pompeo declared, “The world will not allow Beijing to treat the South China Sea as its maritime empire.” In response, the China has accused the US of stirring up “disunity” and has no plans to become a maritime empire. Also this week, President Trump signed the Hong Kong Autonomy Act which approves sanctions on Chinese officials and banks as well as an executive order that ends Hong Kong’s preferential trading status. To clap back at the move, China has threatened to retaliate with sanctions against US institutions and individuals. However, nothing official has come to fruition as of yet.

New foreign student visa rule is reversed

After an outcry from students and universities, the Trump administration has reversed their course on new foreign student visa regulations. The new rule would have required international students to transfer schools or leave the country if their universities hold classes entirely online. In retaliation to the rule, more than 200 schools backed lawsuits against federal immigration authorities while 59 schools signed an official court brief supporting the lawsuit brought by Harvard and MIT. Though the Trump administration has stepped back from the rule, it is not entirely clear what visas will be available to incoming students.

Corporate/Sector News

First wave of Q2 earnings reports show mixed results

The first round of second quarter earnings reports began this week. Blended earnings per share (a combination of reported data and earnings estimates) shows that earnings growth is down 44%. After having a stellar Q1 report, Netflix’s stock took a tumble late in the week after reporting subscriber growth below expectations. Big names in the financial sector reported earnings this week including JP Morgan, Bank of America, Morgan Stanley, Wells Fargo, and Citi. It was a mixed bag of reports with JP Morgan recording posting their highest quarterly revenue ever and Wells Fargo reporting $2.4 billion in net losses.

American Airlines to join furlough trend

American Airlines sent 25,000 potential furlough notices to employees this week. The trend is being seen across the airline industry as demand for travel is slowing once again with upticks in virus cases and re-established quarantine restrictions. The company expects it will be over-staffed by 20,000 employees in the fall and hopes to reduce the number of actual furloughs through enhanced leave and early-departure programs. In related news, United Airlines pilots have reached a deal to limit furloughs.

Image of the Week

Charting the Massive Scale of the Digital Cloud

Video of the Week

EU leaders discuss pandemic recovery plan: What’s at stake?

Source: DW News