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Weekly Market Commentary: 22 July 2020

July 2020

by Alex Brandreth

The big news over the last week has been the agreement on the EU recovery fund and developments on a coronavirus vaccine. We are also starting earnings season in the US and Europe and will get an idea of how companies have fared during the brutal conditions in the second quarter.

Whilst it is interesting to look back at how companies have performed, it is just as important, if not more important to look forward and see how businesses are adapting and preparing for the new environment that we find ourselves in. 
 
EU Leaders strike a deal
 
EU leaders approved a landmark stimulus package to fight the aftershocks of the coronavirus outbreak that has sunk Europe into its deepest recession in history. The €750 billion deal was sealed after four days and nights of intense negotiation that saw threats of walkouts and fierce intransigence by the Netherlands. “Deal!” tweeted EU Council Chief Charles Michel, whose job was to guide the tortuous talks over more than 90 hours.

The package was made possible by the crucial backing of Germany and France and includes the biggest ever joint borrowing by the 27 members of the bloc, something that had been resisted by Berlin for generations.

The deal is a special victory for French President Emmanuel Macron who came to office in 2017 committed to strengthen the EU but had struggled to deliver against member states with less ambition for the seven-decade-old EU project. He hailed “a historic day” for Europe.

The package will send tens of billions of euros to countries hardest hit by the virus, most notably heavily indebted Spain and Italy that had lobbied hard for a major gesture from their EU partners.
 
Coronavirus vaccine developments – positive noises 
 
A coronavirus vaccine being developed by the University of Oxford and AstraZeneca should be available globally “at cost price” by year-end, the firm’s director-general said this week.

“Our objective is to bring the vaccine to everybody, (and) equally to do so on a not-for-profit basis so we shall be providing the vaccine at cost price,” Pascal Soriot told RTL radio. “At cost price that will be about €2.5 per unit. “We hope to be able to produce a vaccine by the end of the year… perhaps a little earlier if all goes well” on the back of phase three results expected in the autumn, Soriot added in an interview.

Early results of a closely watched Phase 1/2 trial published this week in The Lancet suggest the vaccine candidate is safe and induces an immune response. US group Johnson & Johnson has also vowed to deliver a vaccine at “non-profit” pricing. In contrast rivals Pfizer, Merck & Co and Moderna confirmed Tuesday to US lawmakers they would not sell a vaccine at cost.

Alex Brandreth
Chief Investment Officer

 


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