Market Update – 22nd July 2020.

Yesterday morning (Tuesday 21 July 2020) the 27 members of the EU reached a historic agreement to support Europe’s economic recovery from coronavirus which lifted equity markets as they opened.

Attention later in the day turned to US policy makers, as many of their support packages are set to expire in the coming weeks. Recent positive US economic data is testament to the timeliness of the US policy response; however, it should not downplay the urgency for renewed economic support.

With the coronavirus seemingly persistent in many US states, Donald Trump resumed daily coronavirus updates last night. There is no doubt, further economic support for the US economy will be delivered in time, however, given the uncertainty over when an agreement will be reached, the dollar weakened versus most major currencies yesterday and most global equity markets reversed early modest gains whilst still closing broadly in positive territory.

Later this afternoon, US existing home sales data will give us more insight to US economic activity in June, and there is a big step-up in the number of companies reporting quarterly results. Encouragingly, US earnings season has, so far, offered more positive than negative surprises.

Quarterly figures yesterday from Coca-Cola were inevitably awful, however, the fact that they had already seen a near V-shaped recovery in demand across the globe was very reassuring and reinforces our confidence that while this will be the deepest recession in history, the coronavirus is a transient issue and the recovery will be ‘V-shaped’ or like a ‘Nike Swoosh’, thus making it one of the shortest recessions in history.

At the time of writing (08:30 on Wednesday 22 July 2020), Asian markets have not long closed and trading was mixed, equity markets climbed in China, whilst those in Japan and Hong Kong edged lower. The FTSE 100 has just opened and whilst it initially opened down around 0.3% it is currently unchanged on the day.

Peter Quayle, Fund Manager