Stocks are mixed this morning. Brexit is back in focus with Chancellor Rishi Sunak saying “we remain confident that it’s possible to get a deal in September”. Meanwhile negotiations in the U.S. over a new stimulus package ended on Thursday with Treasury Secretary Steven Mnuchin saying that his team and the Democrats are still “very, very far apart on some significant issues.”
- The number of Americans filing for unemployment benefits rose by 1.2 million in the week ended August 1st, the least since the pandemic started and compared to market expectations of 1.4 million. It was also the largest drop in applications in almost two months, suggesting the labor marketmight start recovering. The US government is expected to deliver a new stimulus plan by the end of the week, but there are no signs of an agreement as lawmakers are still divided about the extension of a $600 unemployment benefit.
- The Bank of England voted unanimously to maintain the key bank rate at a record low of 0.1% and the size of its bondbuying program at £745 billion as expected during its August meeting. Policymakers said Britain’s economy will take longer to recover from the coronavirus-induced recession than initially thought and warned about the risks of cutting interest rates below zero. Meanwhile, the central bank said CPI inflation is expected to fall further below the 2% target, largely reflecting the direct and indirect effects of Covid-19.
- Spot gold hit a new all-time high of $2,060 per ounce on Thursday, as a new coronavirus relief bill to be approved in the US as soon as this week, alongside expectations of fresh monetary policy stimulus from the US Federal Reserve weighed on the dollar, while investors fear that a spike in coronavirus cases could hamper the global economic recovery. Gold has advanced almost 40% since the pandemic hit the world economy back in March as investors turned to safe havens and as governments and central banks across the globe stepped up efforts to help mitigate the negative impact of the outbreak on activity and demand.
- Job cuts announced by US-based employers rose to 262.6 thousand in July 2020, up from 170.2 thousand in the previous month and 38.8 thousand in the same period last year. It was the third-highest level of layoffs on record due to a resurgence in COVID-19 infections. The reason cited for 77.1 thousand of the announced cuts is market conditions. COVID-19 caused 63.5 thousand cuts in July, followed by 60.8 thousand job cuts due to demand downturn, and 17.1 thousand cuts due to voluntary severance/buyouts. 2.0 thousand job cuts were attributed to bankruptcies. July’s cuts brought the yearly total so far to 1.85 million, up 212% from the 593 thousand cuts at this time last year. The current year-to-date total is 109.2 thousand cuts away from the 1.95 million cuts announced in 2001, the highest annual total on record. The majority of cuts continue to come from Entertainment/Leisure companies, followed by retailers, service providers and transportation.
- The IHS Markit/CIPS UK Construction jumped to 58.1 in July 2020 from 55.3 in the previous month, easily beating market expectations of 57.0. The latest reading signaled the steepest expansion of overall construction work since October 2015 as residential building growth accelerated to the fastest pace since September 2014. Commercial work and civil engineering activity also rose at a faster pace. Overall new orders increased the most since February, with survey respondents commenting on a boost to sales from easing lockdown measures and the restart of work on site. However, employment continued to contract at a sharp rate. On the price front, input cost inflation reached its highest level since May 2019. Looking ahead, business confidence moderated since June, which was linked to concerns about the economic outlook and a lack of new work to replace completed projects.
- On Thursday: European stocks closed lower amid worries about growth, after the Bank of England held interest rates steady and forecast a slower post-pandemic economic rebound in the U.K. The continued impasse over a new coronavirus relief package in the U.S. also weighed on sentiment, rendering the mood cautious. US stocks showed a strong move to the upside over the course of the trading day after showing a lack of direction earlier in the session. The strength that emerged on Wall Street partly reflected substantial gains by big-name tech companies like Facebook (FB) and Apple (AAPL). Asian stocks finished mostly higher although underlying sentiment remained cautious amid concerns about the economic outlook as the number of Covid-19 cases continues to rise.
Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy. This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.’