Please find this week’s edition of Weekly Digest attached.
The performance of global equity markets diverged last week, with US markets closing higher after a number of companies reported better than expected results. The technology names in particular drove this positive performance, with Apple, Facebook and Amazon all delivering positive earnings surprises. 312 S&P 500 constituents have reported so far and aggregate earnings have been 21.7% ahead of expectations. While Q2 earnings are still expected to be down 33.8% year-on-year, this has been a strong reporting season so far relative to expectations, with widespread and large beats. Europe was more mixed, reacting to COVID concerns and processing the raft of 2Q GDP reports, which confirmed that the Eurozone economy had contracted by around 12%:
The VIX volatility index fell from 26 to 24, though it is still at a high level relative to the post-Financial Crisis “normal” range between 10 and 20. UK equities fell by 3.3%, again underperforming the global averages as our mix of materials and financials holds the UK back relative to world equities. The UK remains over 20% below its level at the start of the year, whilst global equities in £ are flat.
The UK has now established local lockdowns in some parts of the North West and a government spokesman stated that a London re-lockdown cannot be ruled out. In Australia, Victoria has been declared a state of ‘disaster’ and Melbourne residents are now subject to an 8pm curfew. On a more positive note, NeuroRx and Relief Therapeutics have announced that their ‘aviptadil’ drug has shown rapid recovery from respiratory failure in critically ill COVID patients. The program has been granted FDA fast track status and is now in placebo-controlled trials.
In corporate news, Microsoft has confirmed that it is looking to buy TikTok ‘s US operations from its parent company ByteDance. TikTok has 100 million users in the US alone, though Trump has recently threatened to ban the app on national security grounds. The price tag has previously been rumoured as high as $50 billion but political controversy may reduce this price.
Talks between the Republicans and Democrats on the US stimulus package resume this week. While both parties agree that another stimulus package is necessary, they do not agree on what form it should take. The Democrat proposition, which has already passed the house, is for direct payments to citizens to stay at $600 per week until the end of the year. The Republican position is to reduce the payout to $200. There is some urgency as the payouts expired on Friday. Analysis by Moody’s suggests a move to $200 per week will see a 1.15% decline in GDP and 1m job losses by year end.
The earnings season continues this week, with updates from Diageo, Easyjet, BP, Disney and Novo Nordisk among others. On the central bank front, we will hear from the Bank of England on Thursday. The focus will be on the overall tone of Governor Bailey’s ensuing press conference and references to the future path of quantitative easing.
As well as Weekly Digest, please also find attached an article by Richard Traub in our Compliance Team highlighting COVID scams to avoid. Fraud Covid-19