Overview: Stock markets finished higher last week, led by emerging markets (MSCI EM). EM stocks were up 3.7% for the week, with the S&P 500 index up 1.8% and international developed stocks up 0.5%. Markets rallied in the face of a spike in COVID-19 cases across the world, as investors fret over a new round of business shutdowns. The U.S. had over 60,000 new daily cases, its highest rate thus far. Virus case spikes in countries such as Italy and Australia have many countries grappling with deploying restrictions again. In bonds, global sovereign yields contracted meaningfully over renewed fears of an economic pullback amidst an acceleration of confirmed COVID-19 cases. Investors moved toward safe-haven assets, leading 10-year Treasury yields to fall to 0.63%, near recent lows. In an auction that defined a historical low borrowing rate for the government, market participants bought $19 billion of 30-year bonds at a yield of 1.33%.
Economic news: Initial jobless claims for last week leveled, reporting a four-month low of 1.3 million. This reflects the fourteenth consecutive week of declines since the peak of initial claims hit in late March. However, weakness is still persistent, as continuing jobless claims still comprise roughly 12.4% of the workforce. In other data, core PPI printed at 0.1% year-over-year for June. The report was below consensus estimates of 0.4%, suggesting a potential for continued subdued inflation.
This week: The highlight this week will be the kickoff of second-quarter earnings. Estimates from JP Morgan are for earnings to be down -45.5% from a year ago. This should not be a surprise to investors, and market participants will be focused on forward guidance and evaluation by companies as to the effects of the current pandemic on earnings and business operations.
Sources: Goldman Sachs Asset Management, JP Morgan Asset Management, Bloomberg
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