Mid-week update: 22 July 2020

The week to Tuesday’s close saw the UK top 100 companies index decline by 0.4%, the US S&P 500 Index rise by 1.0% and the Eurozone Index rise 0.4%. The global UK world index added 1.3% in sterling, bring the three month total to 18.7%.

Despite the apparent calm in markets the week was a busy one on the news front, culminating in Tuesday’s announcement that after months of negotiation the EU had finally agreed on an economic recovery package  that will see the €750bn raised from financial markets, with €390bn distributed as grants and £360bn as low interest loans.  This deal breaks new ground with eventual repayment tied to all EU members rather than to the individual nations that will receive the money.  This is a significant moment in the development of the EU though, as the muted response of equity markets showed, the eventual passing of the plan was widely expected. 

We also received good news on the development of a Covid-19 vaccine, with positive results from the AstraZeneca and Oxford University vaccine trial. This is one of many candidates that markets are assuming will provide at least one effective vaccine.  On the negative side, the week saw a marked increases in Covid-19 infection rates and limited re-imposition of lockdown measures globally which has tempered investor enthusiasm in the short-term. 

For now investors appear to be taking all news on Covid-19 as positive for share prices, with bad news implying further rescue packages and good news providing reassurance.  We expect that to continue.