Weekly Market Commentary: 8 July 2020
A Plan for Jobs
The level of support from both global central banks and governments has been both significant and swift in order to boost their economies in this challenging environment. Today we saw another step from the UK government to support the economy with UK Chancellor Rishi Sunak announcing a £2 billion scheme aimed at alleviating youth unemployment by subsidising work placements in his Coronavirus recovery package.
To try and stem the amount of government support needed, the Chancellor announced a new “job retention bonus” for employers who bring back furloughed staff, when the Coronavirus Job Retention Scheme ends. The Chancellor has also announced a six-month cut to VAT for the hospitality sector from 20% to 5% and an immediate stamp duty “holiday” to temporarily exempt the tax on the first £500,000 of homes purchases in England and Northern Ireland.
Finally, we will all get the chance to have a discounted meal on the government; everyone will get 50% off meals in participating restaurants during August. The discount will go up to £10 per head for adults and children, and will apply Monday to Wednesday.
Away from today’s announcement and let’s take a look at what has been driving markets over the last week…
Before the 4th July Independence Day celebration in the US, there was some strong US employment data released which showed that the largest economy is starting to rebound from its lows. The US unemployment rate has fallen from its recent peak of 14.7% to 11.1%, this is despite the number of Coronavirus cases continuing to increase.
Asian markets started the week very strongly, which has had a knock-on impact on global equity markets. This was principally being driven from Chinese equity indices which witnessed large gains as state media stated that a healthy stock bull market was more important than ever post the pandemic. This was a front-page editorial for the Securities Times and suggests that Beijing will continue to act to support the equity market through regulation as well as fiscal and monetary policy. With risk assets more finely poised at the moment given what is happening in the US, government and central bank support is of growing importance.