Weekly Market Update: Resurgence in virus cases and trade rhetoric dampen market mood, even as some data improves
Investors were unable to look past surging Covid-19 infections in portions of the US Sunbelt this week. Early on, weakness in overall equity markets was masked by continued buying in select mega-cap technology stocks. June PMI readings provided some fodder for the bulls, especially in Europe where key markets registered readings not seen since before the pandemic induced shutdowns. Those numbers were tempered though by reports of rising tensions on the trade front between the US and Europe and China. As the week progressed US coronavirus cases mounted and investors’ willingness to offload risk rose. Some analysts also noted that Joe Biden’s lead in the polls has extended as virus cases have risen. The IMF further reduced its outlook for world growth this year, cutting the 2020 global GDP forecast to -4.9% due to extended uncertainty around the epidemic. By Friday, the S&P 500 was testing the 200-day moving average after Texas and Florida were forced to roll back some reopening measures, including closing bars and pulling back restaurant capacity. US Treasury yields moved lower and the US dollar firmed. For the week, the S&P fell 2.9%, the DJIA lost 3.3%, and the Nasdaq declined 1.9%.
In corporate news this week, Nike reported a surprise miss on earnings for just the second time in eight years as sales tumbled, but management was more upbeat on its conference call, pointing to positive e-commerce sales trends and improving digital engagement. La-Z-Boy posted an earnings beat but missed on revenues, though the furniture maker noted it has been seeing strong early demand as its galleries have begun to reopen. MasterCard acquired data aggregator Finicity for $825M in order to advance its open banking strategy. Dell reportedly hired advisers to explore options for its 81% VMware stake, which is valued at around $50B. Gap shares looked stronger on Friday morning after it announced a new fashion line partnership with Kanye West to be launched next year.
MON 6/22 (US) Trump administration confirms new employment visa restrictions; will extend halt on new green cards through end of 2020; action will affect H-1B, H4, some H-2B, J, and L visa types - press
TUES 6/23 *(FR) FRANCE JUN PRELIMINARY MANUFACTURING PMI: 52.1 V 46.0E (1st expansion in 5 months and highest reading since Sept 2018) *(DE) GERMANY JUN PRELIMINARY MANUFACTURING PMI: 44.6 V 42.5E (18th straight contraction) *(EU) EURO ZONE JUN PRELIMINARY MANUFACTURING PMI: 46.9 V 45.0E (17th straight contraction but highest reading since Feb 2020) *(UK) PMI JUN PRELIMINARY MANUFACTURING: 50.1 V 45.0E (1st expansion in 4 months) MA To acquire Finicity to advance open banking strategy for $825M *(US) JUN PRELIMINARY MARKIT MANUFACTURING PMI: 49.6 V 50.0E *(US) JUN RICHMOND FED MANUFACTURING: 0 V -2E *(US) MAY NEW HOME SALES: 676K V 640KE (MX) Reports of strong earthquake in Mexico City; preliminary magnitude 7.1 - press VMW *DELL EXPLORING OPTIONS FOR 81% VMWARE STAKE, VALUED AT $50B - PRESS
WEDS 6/24 (IE) ECB’s Lane (Ireland, chief economist): Sees some signs of initial recovery but the process likely to be gradual *(DE) GERMANY JUN IFO BUSINESS CLIMATE SURVEY: 86.2 V 85.0E; CURRENT ASSESSMENT: 81.3 V 84.0E (US) USTR said to target $3.2B in new tariff targets on exports from France, Germany, Spain and the UK IMF TO UPDATE ITS WORLD ECONOMIC OUTLOOK (WEO): CUTS 2020 GLOBAL GDP FORECAST FROM -3.0% TO -4.9% *(US) DOE CRUDE: +1.4M V +0.5ME; GASOLINE: -1.7M V -1.5ME; DISTILLATE: +0.2M V -0.5ME *(CA) FITCH DOWNGRADES CANADA SOVEREIGN RATING ONE NOTCH TO AA+ FROM AAA; OUTLOOK STABLE
THURS 6/25 *(DE) GERMANY JULY GFK CONSUMER CONFIDENCE: -9.6 V -12.0E BA.UK Issues H1 Trading statement:Guides H1 Rev to be 'broadly stable' and Profit 'lower y/y; productivity levels in June have improved within our defence businesses (which account for around 90% of the Group's revenues) *(US) INITIAL JOBLESS CLAIMS: 1.48M V 1.32ME; CONTINUING CLAIMS: 19.5M V 20.00ME *(US) MAY PRELIMINARY DURABLE GOODS ORDERS: 15.8% V 10.5%E; DURABLES (EX-TRANSPORTATION): 4.0% V 2.1%E *(US) Q1 FINAL GDP ANNUALIZED Q/Q: -5.0% V -5.0%E; PERSONAL CONSUMPTION: -6.8% V -6.8%E *(US) Q1 FINAL GDP PRICE INDEX: 1.4% V 1.4%E; CORE PCE Q/Q: 1.7% V 1.6%E (US) Texas Gov Abbott issues order to suspend elective surgeries at hospitals in Bexar, Dallas, Harris, and Travis counties as COVID-19 infections rise NKE Reports Q4 -$0.51 v +$0.02e, Rev $6.31B v $7.26Be *FED BANK STRESS TEST RESULTS: FED TO LIMIT BIG BANK DIVIDEND PAYOUTS AND BUYBACKS TO PRESERVE CAPITAL DURING DOWNTURN; BANKS WILL HAVE TO RESUBMIT CAPITAL PLANS LATER THIS YEAR
FRI 6/26 *(US) MAY PERSONAL INCOME: -4.2% V -6.0%E; PERSONAL SPENDING: 8.2% V 9.2%E *(US) JUN FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 78.1 V 79.2E (CN) Chinese diplomatic and trade officials have warned the US that meddling in Chinese domestic affairs could jeopardize purchases of US exports under Phase I trade deal – press (US) New York Fed Nowcast: raises Q2 forecast to -16.3% from -19.0%; raises Q3 forecast to 1.5% from -1.9%