Market Commentary 13th July 2020 from Charlie Hancock

Both indices rose strongly on Monday, after positive sentiment from Asian markets fed into UK stocks. Monday’s session also saw a boost from housebuilders, with investors reacting to rumours of a stamp duty holiday and the release of data showing that activity in the construction sector is picking up. Barratt Homes, one of the UK’s largest housebuilders, reported that their order book is strong and rival company Persimmon also reported an increase in customer reservations. Barratt’s share price rose by 10.87% across the week, with Persimmon seeing a 16.64% gain.

Sentiment faded as the week progressed, with investors seemingly nervous about rising coronavirus infections in some regions. Poor performance from heavyweight stocks also contributed to the negative sentiment for UK equities. BP declined by 5.45%, Royal Dutch Shell lost 3.69% and HSBC saw a 6.86% fall. The three companies combined account for approximately 19% of the FTSE 100 index.

The performance in European indices reflected the mixed sentiment amongst investors around the globe. Economic data is improving, with encouraging indicators for industrial production in France and Italy being released last week, however, investors were in a cautious mood. Whilst most of Europe appears to have the spread of coronavirus relatively well contained, rising infections in the US caused some market nervousness.

Drivers for investor sentiment in the US were mixed. Weekly jobless claims were lower than expected at 1.3 million, indicating that the pace of job losses is slowing, however, coronavirus infections in the US continued to rise sharply. On Friday, a record high of nearly 67,000 new cases were reported.

Gains were driven by the technology sector, with stocks such as Amazon and Netflix continuing to attract investor attention. Their share prices rose by 10.72% and 15.06% respectively across the week.

Chinese stocks rallied strongly last week after a state-owned news organisation published a story which suggested that equities will rise strongly as the country’s economic recovery continues. Trading volumes, i.e. the amount of shares being bought and sold, doubled in comparison to recent months as retail investors in China piled into the stock market.

Data published last week showed that Chinese copper production rose strongly during June, pointing to an increase in industrial activity. China accounts for 50% of the world’s copper consumption.

GBP / EUR – Current 1.1172 Previous 1.1102

The Pound rose against most major currencies last week, gaining 1.11% against the US Dollar and 0.63% against the Euro.

Economic stimulus measures announced by chancellor Rishi Sunak last week appeared to drive the Pound higher. Mr Sunak announced a stamp duty holiday to boost housing transactions and measures which should encourage employers to re-employ furloughed staff.