Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for June 22, 2020.
Global stock markets were weaker overnight in Asia as concerns about the resurgent coronavirus continue to grow.
Both the Nikkei and the Hong Kong Hang Seng were weaker on the first day of trading for the week, down 0.2% and 0.9% respectively, as a growing number of coronavirus cases were reported, in particular in the US.
This weekend several US states said they had seen record-high daily infection rates, while the US also reported more than 30,000 new cases on Friday, the highest total since May 1, according to CNBC.
Against this backdrop, the S&P 500 index of America’s biggest public companies is up more than 30% over the past three months, but how investor sentiment shifts around the resurgence of new cases will determine the progress made from here.
Last week, the major US stock indices delivered their fourth weekly gain in the past five weeks, with the tech-heavy Nasdaq Composite up more than 3%. Both the Dow Jones Industrial Average and S&P 500 gained more than 1%.
In political news, President Trump and leading Democrats are facing off on the firing of the Manhattan US attorney over the weekend. The sacked official has now been called to testify in hearings, which will examine accusations that Trump has been purging the US justice department. The story broke as Trump launched his reelection campaign with a rally in Tulsa. For investors in US stocks, the race for the presidency has significant implications. If elected, Joe Biden is expected to roll back hefty cuts Trump made to corporation tax, which would directly hit company earnings. There has also been significant market volatility linked to tensions between the US and China, which Trump’s aggressive rhetoric has fanned the flames of repeatedly.
Tech stocks continue to lead the charge
Most of the gains posted last week by US stocks happened on Monday and Tuesday, with markets stuttering for the rest of the week. Several factors led to the gains: positive May retail sales numbers, the 11th straight week of improvement in initial jobless claim figures, rumblings of a trillion dollar infrastructure plan, and the Federal Reserve beginning to buy individual corporate bonds. Sector wise, the biggest winners in the S&P 500 last week were information technology, consumer staples and consumer discretionary stocks, with real estate the only sector in the red for the week. The information technology sector has stormed ahead in 2020 and is up double digits year-to-date. Investor concerns around the potential implications of rising Covid-19 case numbers were evident in how airline shares performed last week. United Airlines and Delta Air Lines both saw their share prices fall last week, following a monster rally for airline stocks in hopes of a return to more normal travel demand as lockdown restrictions eased.
- S&P 500: -0.6% Friday, -4.1% YTD (+1.9% last week)
- Dow Jones Industrial Average: -0.8% Friday, -9.4% YTD (+1% last week)
- Nasdaq Composite: 0% Friday, +10.9% YTD (+3.7% last week)
Solid week for UK stocks as Bank of England pumps in more money
London-listed stocks outpaced their US rivals last week, with the FTSE 100 up 3.1% and the FTSE 250 climbing 3.6%. Both indices remain down more than 15% year-to-date, however. Last week, the Bank of England’s Monetary Policy Committee voted eight to one in favour of pumping another £100bn into the economy and left its benchmark interest rate unchanged at 0.1%. Similar to the US, stocks made their gains in the first two days of the week and were broadly flat for the remainder. Firms in the FTSE 100 derive more than 70% of their revenues from overseas, and companies in the FTSE 250 still make around 50% of their revenues overseas. As a result, both indices fluctuate based on the state of play in the US and other international markets where British companies make their money, as well as the value of the pound. A case in point is National Grid, which has reportedly joined other large utilities providers in challenging Trump administration rules, which favour petrol cars over electric. The firm oversees the main power grids in the UK, but half its business is in the US. Last week, the company reported a drop in profits and projected a near half a billion pound hit to its earnings this year due to the pandemic.
- FTSE 100: +1.1% Friday, -16.6% YTD (+3.1% last week)
- FTSE 250: +1% Friday, -19.2% YTD (+3.6% last week)
