The massive amount of fiscal stimulus enacted in March supported households through the early phases of the Coronacrisis, but consumers spent their stimulus payments quickly and many extended benefit programs have now expired. Another fiscal package will be critical to extending the recovery in our view. We expect another $1 trillion in support by the end of 2020.
Although US fiscal stimulus negotiations soured last week, equities continued their trajectory upward. Stronger-than-expected Q2 earnings, continued tech sector momentum, vaccine hopes, lower jobless claims, and a better-than-expected July jobs report helped the S&P 500 rise 2.49% higher last week. In Europe, major earnings beats buoyed the Euro Stoxx 600, which was up 2.07% over the week. UK equities shrugged off cautionary comments from the Bank of England and the FTSE 100 rose 2.42%. Read More
Oil prices rose higher last week following continued US dollar weakness and Iraq’s planned production cuts. WTI and Brent prices ended the week at $41.22 and $44.40 per barrel, respectively. The weaker US dollar and falling returns on US bonds also helped gold advance to record highs again last week, ending 2.12% higher at $2028 per troy oz. Read More
Government bond markets were relatively calm last week, with only slight yield increases across most major developed markets. Yields remained historically low, with no expectations for a rise in rates and longer-term easing policies forecasted to continue. The US 10-year Treasury yield rose to 0.56% after better-than-expected monthly labor market data. Additionally, UK 10-Year Gilt yields rose 4bps to 0.14% after dropping to historical lows mid-week. Read More
The euro continued its ascent last week, hitting a multi-year high mid-week before closing at 1.1782 EUR/USD. The US dollar index finished the week up 0.35% after a Friday bounce offset weakness amid fears of a slowing US recovery and stalled fiscal stimulus. Meanwhile, the British pound fell -0.40% to 1.3053 GPB/USD. Read More
The Bank of England’s Monetary Policy Committee (MPC) held its Bank Rate steady at 0.1% and kept the target stock of asset purchases at £745bn, as expected. The MPC asserted that it would continue to review the appropriateness of negative interest rates as a policy tool alongside its broader toolkit. Read More
July’s US ISM manufacturing index was stronger than expected, rising to 54.2 from 52.6 in June. The production, new orders, and employment components all improved. The non-manufacturing index also rose to 58.1 in July, against expectations for a decline from June’s 57.1. Read More
The US economy added 1.8 million jobs in July and the unemployment rate declined to 10.2%. Both measures were better than economists expected, though still represented slower improvements than in June when nonfarm payrolls increased by 4.8 million. Renewed virus concerns may have hampered job growth for most of July, but a downturn in weekly jobless claims to 1.2 million for the week ending August 1 suggests the recovery may be getting back on track. Read More
For style performance, Large, Mid, and Small refer to the Russell 1000, Russell Midcap, and Russell 2000 indices, respectively. Value refers to companies with lower price-to-book ratios and lower expected growth values, and Growth refers to higher price-to-book ratios and higher forecasted growth values. Government, Corporate, and High Yield refer to the US Treasury index, the US Corporate Credit index, and the US High Yield index, respectively. Short, Intermediate, and Long refer to the Short, Intermediate, and Long segments of their respective curves. Quality returns refers to the credit quality of asset classes ranging from Government, highest quality, to High Yield, lowest quality.
US Core CPI YoY (Cons: 1.1%, Prior: 1.2%)
Euro area IP MoM (Cons: 10.0%, Prior: 12.4%)
UK IP MoM (Cons: 9.0%, Prior: 6.0%)
UK GDP QoQ (Cons: -20.5%, Prior: -2.2%)
US Jobless Claims (Cons: 1100k, Prior: 1186k)
US Retail Sales (Cons: 1.9%, Prior: 7.5%)
US IP MoM (Cons: 3.0%, Prior: 5.4%)
UMich Cons. Sent. (Cons: 71.9, Prior: 72.5)
“Euro PMI” refers to the Markit Eurozone Composite Purchasing Managers’ Index. “Cons. Conf.” refers to US Consumer Confidence. “GE IFO Business” refers to the German Ifo Business Climate Survey. “New Home Sales” refers to US New Home Sales (MoM). “Dur. Gd. Ord.” refers to US Durable Goods Orders. “UK GDP” refers to the QoQ estimate of the United Kingdom’s Gross Domestic Product for Q3. “Euro M3” refers to the YoY change in the Eurozone’s M3 Money Stock. “US GDP” refers to the estimate of US Gross Domestic Product for Q3. “Pers. Cons.” refers to US Personal Consumption. “UMich Cons. Sent.” refers to the University of Michigan Consumer Sentiment Index. “Japan Core-Core CPI” refers to Japan’s Consumer Price Index (ex- Food, Energy YoY).
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