Good news
UK and U.S. markets were closed Monday 25th June 2020 – but that didn’t stop European markets roaring ahead yesterday.
There are a number of positives for markets to be happy about right now. England is to re-open non-essential shops by mid June. European countries are easing their lockdown measures. Spain is looking to resurrect their holiday season this summer by ending quarantine of arrivals by 1st July. Germany’s Ifo business survey indicated ‘things’ are likely better than thought, and this despite entering recession.
The death rate in the U.S. slowed to a two month low (likely distorted by the Memorial Day holiday weekend seeing fewer reported cases). And UK coronavirus deaths in England and Wales at lowest level for six weeks according to data from the ONS.
There are good news reports too on the medical front with Moderna Inc. progressing well with its trials. Oxford University and AstarZeneca gearing up for possible production in September and of Novavax which has also now started clinical trials of its vaccine.
Central Bank’s are likely to keep the ‘money’ taps open to maintain liquidity. The governor of the Bank of France has reportedly indicated that the European Union will likely also see more stimulus?
The Bank of Japan and the People’s Bank of China, both of which have stressed they will keep the money flowing, as will the Fed and BoE. If central banks are content to pour vast amounts of ‘free’ cash in to the system – markets will never fail – will they? More debt is piling up!
Bad news
There are many concerns too for the markets. U.S. and China trade tensions may resurface as a blame game develops. Germany has entered recession. The UK is in recession, France and Italy too. Singapore lowered its GDP estimate to fall by as much as 7%. The situation in Hong Kong is concerning as China imposes it reach on HK security issues. U.S. unemployment at historical highs. UK debt increasing at dramatic speed to historic levels.
Optimism in equity markets is out of whack with what’s happening on the ground – this I can’t fully understand? Markets surge ahead despite the unseen high level of damage to economies yet to be revealed. And then, we have still the palpable fear of a second coronavirus wave posing a continued significant risk to the global economy. There is real concern is that economic reality will catch up in the coming months
Good new vs bad news – markets want to win, and they will in the long run. But I’m not so sure the economic damage yet waiting patiently to be revealed will allow them to do so…not fully at least .
Central banks will continue to prop ‘things’ up until..?
The debt pile is building.