Market Update: Global economy's gradual recovery supports markets

Market Update: Global economy's gradual recovery supports markets

10th August 2020

Last Week - Key Takeaways

Markets: Shares rise but US-China tensions resurface

  • Global shares ended the week higher as consumer spending continued to recover in Europe (see Europe section), oil prices rose and the US labour market beat expectations in July (see US section);
  • However, tensions escalated between the US and China as President Trump ordered US companies to stop dealing with Chinese technology giants TikTok and WeChat.
  • Omnis view: Stock markets welcomed signs that the global economy is recovering from the worst of the damage caused by the coronavirus pandemic, even though there are some indications the pace of the recovery may already be slowing. Meanwhile, tensions between the US and China could destabilise the markets, especially if China retaliates against the effective ban on two of its most successful tech companies.

UK: No change to interest rates

  • The pound strengthened against the US dollar as the Bank of England (BoE) kept interest rates on hold and warned economic growth may not return to pre-pandemic levels before the end of 2021, although in the third quarter of 2020 it could be stronger than current forecasts imply.
  • Omnis view: Governor Andrew Bailey said the BoE will remain supportive until the economic recovery is well established and is prepared to take further steps if necessary. Mr Bailey also said the Bank had no immediate plans to shift interest rates into negative territory.

US: 1.8 million jobs created in July

Europe: Shoppers spending again

  • There was good news for the European economy after spending by shoppers returned to pre-crisis levels in June as lockdown restrictions eased across the region.
  • Omnis view: While this is a positive signal that the EU’s economic recovery is underway, it remains to be seen whether this latest figure is sustainable or represents a one-off surge of pent up demand.

Asia: Chinese exports rise in July

LOOKING AHEAD - TALKING POINTS

Economic data

  • Tuesday- UK unemployment rate in June;
  • Wednesday- UK economic growth in the second quarter; US inflation (rate at which prices rise) in July;
  • Friday- US retail sales in July.

 

 

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This update reflects Omnis’ view at the time of writing and is subject to change.

The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your Openwork financial adviser. Omnis is unable to provide investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given.