30 June - update from our investment partner

  • 30th June 2020

What has happened

US Equity markets looked through the poor coronavirus news yesterday and managed to close meaningfully up after a lacklustre start.

Hong Kong security law passes

Overnight the Chinese National People’s Congress passed the new Hong Kong security law but with the full details of the law still yet to be released to the public. Before this announcement US Commerce Secretary Wilbur Ross said that the preferential terms and regulations that Hong Kong attracted would be suspended with the potential for further action in the future. Markets will be watching any escalation closely as a risk of US/China bubbling over whilst US cases are on the rise would certainly impact sentiment.

Latest on stimulus plans

Boris Johnson is set to announce £5bn of accelerated infrastructure projects including hospital maintenance and school building. These announcements form part of the previously allotted public sector investment so are not in and of themselves new. The Chancellor is expected to unveil the latest round of stimulus in his planned summer economic update next week. Yesterday we also saw comments around the EU recovery fund after joint talks between Macron and Merkel. Whilst there was no update to their original proposal for €500bn of grants, the pair remained committed to a deal which is due to be thrashed out by all 27 EU members on 17th July.

What does Brooks Macdonald think

There was some stabilisation in the US new case numbers yesterday which helped settle markets however the Monday figures are frequently impacted by weekend reporting so don’t give a full picture of the current state of the viral spread. Over the last few days there have been more and more measures rolling back certain aspects of lockdown easing and imposing mandatory face coverings. This helps reassure investors that US cases won’t be allowed to continue to rise without state action and this was enough to settle last week’s nerves. Whilst the new Hong Kong security law has been well signposted when the text is revealed we may see more international condemnation. Donald Trump has previously been cautious of escalating anti-Chinese rhetoric when sentiment is already rockier so the immediate reaction to the law’s unveiling later today will be closely watched.

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