U.S. GDP at -5% in first quarter

U.S. GDP

The U.S. economy slowed more than expected with the GDP reading for the first quarter coming in at -5%. Analysts have suggested that the second quarter GDP could be down by as much as 40%

1 in 4 Americans have lost their jobs

Data yesterday, 28th May 2020, showed U.S. job losses increased again with nearly 41 million workers now unemployed. If it is possible for there to be a faint glimmer of hope at this time – the data does suggest that the trend is slowing.

The weekly count was down for the eighth week running, with continuing claims down around 3.9 million to 21 million, which indicates some jobs are being created. But the damage is done – and the fear is that not all of these jobs will come back. It took just 10 weeks to lose them – it will likely take far longer to get them back!

U.S. and China tension

China’s decision to introduce security legislation on Hong Kong has further ramped up U.S. – China tensions, creating ‘caution’ in market valuations again.

U.S. stocks did an-about-turn in the last hour Thursday to close down at: 25400, dropping 300 points after it was announced that the president would hold a press conference on China on Friday.

Donald Trump is reported to have said, ‘We are not happy with China. We are not happy with what’s happened’. The U.S., UK, Canada and Australia signed a joint statement criticising China for its actions. The phase one trade deal may be damaged too, expect more volatility with this situation now firmly in focus.

Valuations stretched

As equity valuations become stretched over rising U.S. – China tensions, investors should consider that ‘things’ are likely to get worse. The U.S. has an election looming this year, the world is dealing with one of the worst recessions in living memory and 100,000 U.S. lives have been lost from the ‘plague’ as Trump calls it. It appears that he may blame this on China. And then we have the trade war, which is still unresolved.

US & China flags

Pressure

The pressure on Donald Trump is high. A press conference is due to be held today, 29th May 2020. Will we likely see the president increase the war of words with China? Will he go further by introducing sanctions on individuals, or will he revoke Hong Kong’s special trade status or worse, place the whole trade deal on hold and re-introduce tariffs again on China? Remember, only the first stage of the original deal was completed (phase one).

And then there is the issue of human rights?

The markets could be about to enter a protracted period of volatility again.

Heads up for Monday 1st June 2020 – scheduled market moving events

China – manufacturing PMI data due overnight

UK – manufacturing PMI data due at: 09:30 BST

U.S. – manufacturing data due at: 14:45 – 15:00 BST

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