There can be no doubt that central bank stimulus will play an important role in the recovery of the global economy from the carnage inflicted by the on-going pandemic and the actions taken by governments to combat its spread.
With such a disparate set of member nations the Eurozone was always going to struggle more than most to reach the compromise required to make this happen. But compromise they did in July 2020 with the announcement of a €750 billion rescue package which, for the first time in the bloc’s history, relied upon common debt issuance to fund the loans and grants up to 30% of which would focus on tackling climate change. For many this is a pivotal moment for Europe. The sums involved, although impressive, are all but what is becoming a standard response to the crisis. What is more significant is the shift toward a more cohesive fiscal regime, the absence of which has often been viewed as the area’s Achille’s heal. The move should not be viewed as the first step towards a common fiscal policy but a signal that the EU is willing to act together where the circumstances dictate. This goes some way to silence critics of the regime who view the weakness of peripheral European economies as the obstacle in the way of the long-term future of the Eurozone.
The inability of authorities in the US to control the progress of the virus, as well as the continued deterioration of the country’s relationship with China with tit for tat consulate closures put a lid on any further strong equity returns. The second quarter earnings season got well underway during the month and, although unremittingly bleak for many, the bar has clearly been substantially lowered ensuring the fallout was more limited than would have been the case had such poor performance come out of the blue.