Weekly financial market overview 03.08.-09.08.
Main events of the previous week
US President Donald Trump announced at a press conference on Saturday that he has taken a series of steps to stimulate the economy bypassing the Congress. According to Trump, he has ordered to provide the unemployed with an additional 400 dollars per week. At the same time, a quarter of these costs will have to be paid by the states. Trump also announced a tax break for payroll taxes for those earning less than $100,000 a year. According to him, this tax cut will last either from September 1, or from August 1 until the end of the year. According to Trump, the administration is also considering additional tax cuts, including income tax and capital gains tax. He also said that he had ordered the suspension of evictions for defaulters of rent or mortgages. Trump also said, additional measures will be taken to ease student debt for tuition.
The Bank of England at their last meeting on August 6 kept its key interest rate at 0.1% and stated that it may take longer than previously expected for the British economy to return to pre-crisis levels. The BOE also warned of possible risks of negative interest rates. The BOE kept the volume of the bond repurchase program at 745 billion pounds. According to BOE estimates, UK GDP will return to the level observed before the coronavirus pandemic no earlier than the end of 2021. At the same time, the regulator has improved its forecasts for the current year. The fall in GDP in 2020 is expected at 9.5% - this is the worst figure for the last 99 years, but better than the 14% fall predicted in May. Next year, the British economy shall grow by 9% instead of the previously expected recovery by 15%, while there are risks of a slower recovery, according to the Bank of England. Inflation in the UK could turn negative in July, according to the forecast of BOE, and then return to the 2% target over the next couple of years and reach 2.3% in 2023. The committee does not intend to tighten monetary policy until there is clear evidence that significant progress has been made towards eliminating spare capacity and achieving the 2% inflation target on a sustainable basis.
US. The unemployment rate in July fell by 0.9 percentage points to 10.2%, and the number of non-farm payrolls amounted to 1,763,000, which is 163,000 more than expected and 3,63,000 less than month before. The reading came much better than expected, yet new job growth had slowed.
The number of initial jobless claims for the week was registered in the amount of 1 million 186 thousand, which is 249 thousand less than the week before and 229 thousand less than predicted by analysts. This figure was the lowest since the beginning of the pandemic.
China. The trade surplus in July reached $ 62.3 billion. Imports in July decreased by 1.4% compared to July 2019, while exports grew by 7.2% over the same period.
Key events this week
- On Wednesday, the eurozone will publish data on industrial production for June, and in the US the rise in prices for July will become known, as well as the change in oil reserves for the week.
- On Thursday, the US will know the number of initial jobless claims for the week.
- On Friday, the eurozone will report on the second quarter GDP data after secondary reading, the US will publish statistics on retail trade and industrial production for July, and China will report on the unemployment rate, as well as the growth of retail trade and industrial production for July.
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