Stocks Halt Four-day Run With Economy Worries Back

US stocks tumbled to the lowest in a week after an unexpected rise in jobless claims rekindled concern the economic recovery has stalled. The S&P 500 fell 1.23% to 3,235.66 while Dow Jones was up 353.51 points (1.31%) to 26,652.33.

US Jobless Claims Rose Last Week for First Time Since March

US jobless claims rose last week for the first time since March, the clearest sign yet of a pause in the economic recovery as coronavirus cases surge in much of the country and force businesses to close their doors once again. Initial claims through regular state programs increased to 1.42 million in the week ended July 18, up 109,000 from the prior week, a Labor Department report showed.

ECB’s Strategic Review Will Take a Deep Dive Into Fiscal Policy

The European Central Bank is restarting its strategic review that will now include a closer look at the impact of fiscal policy in the euro area. “Fiscal and monetary policy in a monetary union” was added to the work streams that outline the scope of the review -- joining topics such as inflation, digitalization and climate change. It comes just days after European Union leaders agreed on a landmark 750bn euro (US$869bn) stimulus package that includes a plan to offer joint debt.

Italy Eyes US$29bn in Extra Spending to Rescue Economy

Italy’s government approved a proposal for 25bn euros (US$29bn) in extra spending as it battles to rescue an economy devastated by the coronavirus pandemic. The extra money will be used to help businesses with temporary layoffs and liquidity, and provide subsidies to local and regional authorities, the government said. With the economy set to contract by 11% this year, Conte is betting that he can spend his way out of trouble, taking advantage of an EU decision to suspend budget restrictions.

UK Consumers Stay Gloomy With End of Wage Support Approaching

UK consumer confidence remained weak in July as the government prepared to start winding down pandemic wage subsidies next month. GfK’s survey of households showed sentiment had lifted only slightly from June and was unchanged from a flash reading two weeks ago. While optimism about personal finances improved, the key measure of willingness to make large purchases stayed low.

South Korea Falls Into Recession With Worst Contraction in Decades

South Korea’s economy slid into a recession with exports plummeting in the second quarter as the coronavirus pandemic hurt profits in some of the nation’s largest industries from automobiles to refineries. Gross domestic product shrank 3.3% from the previous quarter, the Bank of Korea said in a statement, far exceeding economists’ expectation for a 2.4% drop. From a year earlier, the economy contracted 2.9%.

Australia Deficit Blows Out to US$132bn, Jobless Peak 9.25%

Australia’s budget deficit will blow out to a post-World War II record amid a surge in spending to plug a virus-induced gaping economic hole, as the government sees the crisis spilling into next year. The underlying cash balance will be a A$184.5bn (US$132bn) shortfall in the 12 months through June 30, 2021, the government said in an economic and fiscal update released in Canberra. The deficit in the fiscal year ended last month was estimated at A$85.8bn.

Oil Dives With Investors Fleeing Risk Assets Over Economic Fears

Oil’s afternoon attempt to hold a rally failed after a breakdown in US equities added to growing negative sentiment spurred by signals of a global economic slowdown. Brent crude for September settlement decrease US$0.98 to US$43.31 per barrel.

Source: Affin Hwang Research - 24 Jul 2020