Markets weaken, despite improved US jobless data

Improvements in US jobless claims data cannot hide the fact that there are still a total of 18 million claimants in the country. In UK markets, housebuilders have outperformed while Rolls-Royce has fallen. 

• US markets follow Europe lower, despite gradual improvements to US jobless claims data 
• Housebuilders outperform, while Rolls-Royce shares lose altitude 
• US-China relations under strain, yet Chinese investors pay no attention 

Initial US optimism at the open lasted all of 10 minutes, with stocks swiftly following their European counterparts into the red as ongoing uncertainty stifles sentiment despite the wave of central bank liquidity that has been washing through markets over the course of the crisis. The US has been front and centre for traders, as unemployment claims continued their downward trajectory despite fears that we could see an uptick in response to secondary lockdown measures. Nevertheless, with continuing claims now down to around 18 million, there is a clear pathway for the US economy as it seeks to leave the worst of the crisis behind it.   

Chief amongst the gainers in the UK today were the housebuilders, boosted by both a positive update from Persimmon and the potential implications of yesterday’s stamp duty holiday. With a RICS survey showing improvements in June across, newly agreed sales, and new instructions, there is no doubt we are seeing the housing sector wake from its slumber. Unfortunately, Rolls-Royce are on the other side of the fence, with the stock slumping 9% after warning that it could take years to recover from this crisis. Despite laying off thousands of employees, Rolls-Royce investors are facing up to the reality that the firm burned through £3 billion in cash in the first half of its financial year. 

US-China relations are still under strain, as Donald Trump’s administration sought to bring forward regulations that will prohibit US companies from buying goods or services from five different Chinese firms (including Huawei). The Coronavirus and Hong Kong security bill are taxing Chinese relationships around the world but investors appear to be paying little attention, after the CSI 300 gained 9% for the week thus far. For a government that historically encouraged people to buy gold, we are now seeing a state push towards equities that is likely to drive outperformance for some time yet.