As infections in the most populous provinces continued to decline over the week (just below 5,000 a day), as expected President Cyril Ramaphosa removed most of the Covid-19 lockdown restrictions on Saturday night. Level 2 takes effect from midnight tomorrow, when restrictions on alcohol, cigarettes, interprovincial travel and personal and family visits will largely fall away. Bans will remain on spectators at live sport, and on international travel.
The new regulations will be well received by all sectors of the economy, especially the hospitality and leisure sectors, which have all been severely impacted by the lockdown restrictions.
There was an unwelcomed return of rolling nationwide power cuts on Thursday and Friday as Eskom reported that several generating units broke down. The added challenge of energy constraints is ill-timed for a local economy that has been shattered by nearly five months of lockdown.
The JSE All-Share Index ended weaker on Friday but managed to print a gain over the week (+0.56%), while gold fell to $1,953 declining more than 4% over the week, its biggest weekly percentage fall since early March.
Market Moves of the Week:
U.S. stocks ended the week higher, with the S&P 500 hovering just below its February all-time high. Better-than-expected economic data in the U.S. saw initial jobless claims fall below one million for the first time since March, while retail sales continued to rebound, exceeding pre-pandemic levels.
Retail sales rose 1.2% in July, reflecting what households spent at service stations, stores, restaurants and online. The sales number was stronger than expected when excluding auto sales (1.9% versus 1.3%).
Consumer spending accounts for about 70% of the U.S. economy and while the rebound in retail sales is encouraging critics remain concerned that the extra $600 in weekly jobless benefits that expired at the end of July, which propped up incomes and spending for millions of unemployed people, will place the rebound in consumer spending at risk. Lawmakers have been in a stalemate over another fiscal stimulus package.
New surges of Covid-19 are disrupting peak holiday season in Europe with the likes of Germany recording its biggest daily increase in coronavirus cases in more than three months on Wednesday, while France suffered the biggest daily uptick in positive tests since lifting its lockdown restrictions in May. The UK recorded its biggest rise in new cases in seven weeks prompting additional travel restrictions adding France, the Netherlands, and Malta to its quarantine list.
In the Middle East, Israel and the United Arab Emirates agreed to establish formal diplomatic ties in a U.S.-backed agreement. The Emirates is the third Arab country to have normal diplomatic relations with Israel along with Egypt, which signed a peace agreement in 1979, and Jordan, which signed a treaty in 1994.
Equities in Europe ended the week higher on signs of progress in developing a vaccine against COVID‑19 with the pan-European STOXX Europe 50 Index ending the week 1.61% higher while the UK’s FTSE 100 Index climbed 0.96%. Stocks in Japan surged over the week as the Nikkei 225 Stock Average advanced 959 points (4.3%) and closed at 23,289.36. The Shanghai Composite Index ended relatively flat for the week as investors stayed on the side-lines ahead of scheduled U.S.-China trade talks over the weekend.
Chart of the Week:
The Commerce Department’s report on Friday showed retail sales increased 1.2% from the prior month after an upwardly revised 8.4% gain in June. The monthly slowdown reflected declines at motor-vehicle dealers and building materials outlets, along with weaker gains at restaurants and clothing stores. After a third straight monthly increase, albeit a weaker gain than expected, the total value of U.S. retail sales has rebounded above pre-pandemic levels.
Whilst volatility is likely to continue amid current market uncertainty over the coronavirus disease, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe that investors should stay properly diversified across a variety of asset classes and that clients financial plan supports their long-term goals, time horizon and tolerance for risk.
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