Stock market – the epidemiological situation | Weekly market review August 3-7, 2020

August 3, 2020
Stock market – the epidemiological situation | Weekly market review August 3-7, 2020

Stock market – the epidemiological situation

Stock market indices continue to rise despite the lack of progress in negotiations on a new economic aid package in the United States and the worsening epidemiological situation. The majority of large companies reported better than expected earnings, which contributed to the growth of the indices.

This week talks on an economic aid package between White House officials, Republicans and congressmen from Democratic party will continue. The parties cannot agree on the size of this package, as well as on the number of additional payments to unemployment benefits, which, according to Republicans, deprive recipients of incentives to get a job. The adoption of the stimulus package by the US Congress will boost the stock market.

Currency market

The dollar continues to decline against major currencies due to the massive asset purchasing program launched by the Fed.  Downward pressure on the dollar was also exerted by rumors about a possible change in the Fed’s approach to inflation targeting, according to which it will allow inflation to rise above 2%. Also, the dollar’s decline was facilitated by the Fed’s statement of its intention to maintain the interest rate in the range of 0 – 0.25% for an extended period.

Main events of the current week

  • Data on retail sales in Australia and employment change in New Zealand will be released on Tuesday. The Reserve Bank of Australia will hold a meeting, at which no changes in monetary policy are expected.
  • On Wednesday, data on UK and US Services PMI, ADP employment change, and crude oil inventories will be released.
  • On Thursday, data on UK Construction PMI and the number of jobless claims in the US will be presented. The Bank of England will hold a monetary policy meeting.
  • On Friday, nonfarm payrolls and unemployment rate in the United States will be published, as well as data on employment change and PMI in Canada.

Corporate earnings reports

Bayer will report earnings on August, 4 before the market open. The company continues to face lawsuits over its Roundup herbicide, which, allegedly, caused cancer. More than 125 thousand lawsuits have been filed against the company worldwide. In May, the company announced it had reached a settlement agreement on a portion of claims totaling $10 billion.

Disney will release its quarterly report on August, 4 after market close. Disney has been gradually reopening its amusement parks, which the company was forced to close in the midst of the pandemic, thus restoring a significant portion of its revenue. There is also a growing number of subscribers to the Disney + streaming service, which was recently launched in several European countries and Japan.

BMW will release the report on August, 5 before the market open. Car sales in key markets have dropped significantly as a result of the pandemic, forcing the company to cut 6,000 jobs. The company’s management said that demand for cars in Europe and the United States will recover slowly.

Biotech company Moderna will report earnings on August, 5 before the market open. The company has made significant progress in developing a vaccine against the coronavirus and started the final third phase of trial. Moderna also received additional funding from the US government in the amount of $ 472 million.

Adidas will release its quarterly report on August, 6 before the market open. Strong growth of online sales could offset the decline in revenue due to store closures caused by lockdown restrictions. Online sales grew by 35% in the first quarter.

Uber will release the report on August, 6 after the market close. The company was forced to lay off about a quarter of its employees due to falling demand for transportation services. Uber is also facing pressure from regulators to recognize Uber drivers as employees, which will drive up the costs of the company, which remains unprofitable.

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Categories: Analysis

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