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Market Report 27th May 2020

Market Report 27th May 2020 981 980 Realm

Global markets are higher this morning but US/China tensions are rising.

 

  • On Tuesday: European stocks ended on a firm note, riding on reports about a potential coronavirus vaccine, and on optimism about economic recovery following several countries across the globe relaxing lockdown restrictions and reopening more businesses.
  • US stocks are generally holding the gains from last week. President Trump says he will make announcement by the end of this week regarding his administration’s response to China’s actions.
  • Asian stocks rose as many U.S. states have begun lifting the restrictions of businesses and public spaces, a survey showed improvement in German business confidence and China sought to reassure Hong Kong that its judiciary would remain independent under a new national security law.

Global Macro

  • The Chicago Fed National Activity Index in the US slumped to a record low of -16.74 in April of 2020 from a downwardly revised -4.97 in March. Figures pointed to a record contraction in activity, due to the coronavirus pandemic, led by declines in production and employment-related indicators although all four broad categories of indicators used to construct the index made negative contributions in April, and all four categories decreased from March.
  • The CBI distributive trades survey’s retail sales balance rose five points from the previous month to -50 in May 2020, suggesting the pace of decline in trade was little-changed from April when retailers reported the joint-fastest drop since the start of the survey in 1983. The lockdown measures due to COVID-19 have hit retailers hard, with 80% of companies saying they are facing cash flow difficulties and over a half of them reporting temporarily laying off staff. In addition, retailers said supply disruptions have worsened since April, with a greater share of them reporting shortages of some goods, increased cost pressures, shipping delays and capacity constraints.
  • The People’s Bank of China announced on May 26th it had cut the reserve requirement ratio (RRR) for big banks by 150bps to 11%, aiming to support the economy hurt by the Covid-19 pandemic. Last month, the central bank had already slashed RRR for mid-sized and small banks by 100bps, in two phases, releasing around CNY 400 billion.

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