US-Sino tensions – Tensions increased this week between the US & China, as US President Donald Trump’s administration suspended passenger flights to the US via Chinese airlines. President Trump’s actions were said to be in retaliation to China barring American carriers from re-entering China. While the recent moves from both parties are said to be fuelling the growing tensions, markets were surprised to hear that US Trade Representative, Robert Lighthizer, announced that he feels “very good” about the progress of the phase one trade agreement with China. He stated that thus far, China have honoured the agreement made during the coronavirus pandemic. On Monday and Tuesday this week, China bought $185 million worth of U.S. soybeans, however, the stability of the initial trade agreement is being questioned as tensions continue to grow.
ECB stimulus package – In other news, Thursday saw the European Central Bank (ECB) announce an increase in the envelope for the pandemic purchase programme by €600 billion, taking the overall aid package to €1,350 billion. The money will continue to help support funding conditions in the real economy, especially for businesses and households. In a switch from longer term trends, European equities are now said to be outperforming their US peers in the rebound, following a strong outperformance of cyclical shares on bets of a swift economic recovery. The Europe Stoxx 600 Index has rallied 12% since mid-May, versus 9% for the S&P 500 Index.
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