Weekly Report

23.03.2020
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Global equity markets endured another week of steep losses as the rout continued.

Governments stepped up responses to combat the economic impact of the coronavirus pandemic.

Markets

  • Global equity markets suffered another week of significant losses as concerns deepened over the coronavirus outbreak and its economic impact.
  • Global stocks were unable to hold on to any gains as traders warned that any rebound would likely be temporary until there were signs that the pandemic’s spread was stalling.
  • The US’ S&P 500 was left nursing a 15% decline for the week, while European equities also recorded sizeable losses as countries imposed ‘lockdowns’ as their economies faltered, raising the prospect of a prolonged recession.
  • Investors around the globe continued to sell whatever they could to raise cash, which sent equities lower, bond yields higher and prompted strong appreciation of the US dollar.
  • Investors’ actions of reducing risk by raising cash has intensified the demand for US dollars, sending the greenback higher with the potential to create serious issues for those countries holding dollar-denominated debt.
  • The bond sell-off appears to have removed the last safe-haven available to nervous investors, who are instead sheltering in cash. Gold, which is also a haven asset, continued to fall for the same reason.
  • The Cboe Volatility index remains elevated at the 65 level, illustrating investors’ anxiety over the impact of the pandemic. The measure is down from its year-high of 85.47 but far from its year-low of 11.75.
  • Oil prices were extremely volatile but finished the week much lower. Prices experienced an interim bounce on Thursday amid reports that the US may intervene in the Saudi Arabia-Russia price war, although this proved short-lived.
  • Airline stocks continued to be thumped as carriers grounded most of their fleets and took measure to preserve cash. Shares in banks were also under pressure due to the impact of lower interest rates and ‘easier’ monetary policy.
  • The FCA, the UK’s financial regulator has asked listed companies to delay publication of their preliminary results for… ‘at least two weeks’, giving them more time to assess the impact of the coronavirus disruption on their profitability, and reduce pressure on staff.

Economics

  • The ECB, the US Fed and the Bank of England all stepped in to try and keep markets stable and borrowing costs low after investors across the globe continued to sell whatever they could to raise cash.
  • The ECB announced plans to buy €750bn in bonds in an effort to support highly indebted countries.
  • The BoE cut interest rates to 0.1% (from 0.25%) and expanded its QE programme by £200bn to £645bn. Meanwhile, the UK government launched a £330bn lifeline of loan guarantees and provided a further £20bn in tax cuts, grants and other help for businesses facing the risk of collapse from the spread of the coronavirus; Chancellor Rishi Sunak pledged to do “whatever it takes” to help retailers, bars, airports and other firms.
  • The US Fed rolled out yet another emergency programme, with the latest one aimed at keeping the $3.8tn money market mutual fund industry functioning if investors make rapid withdrawals. The new ‘Money Market Mutual Fund Liquidity Facility’ will make available loans for up to 1-year to financial institutions that pledge high quality assets as collateral, allowing them to borrow cash to fund withdrawals thereby mitigating the need to sell assets.
  • The US Fed also broadened the availability of dollar swap lines to additional countries, including large emerging markets, in order to ease the shortage of dollars overseas.
  • The Trump administration said it was seeking support from Congress for a $850bn spending package to address the economic impact of the coronavirus.
  • The Bank of Japan revealed that it aims to double its purchases of ETFs to ¥12tn ($112bn) a year.

The Week Ahead

Monday-
TuesdayEurope PMI manufacturing & services; Japan PMI manufacturing & services; UK PMI manufacturing & services; US PMI manufacturing & services
WednesdayUK CPI
ThursdayUK retail sales; UK MPC meeting
FridayUS PCE inflation

Index Data

Stock Markets Mar 20 Mar 13 % Change
FTSE 100 5191 5366 -3.27%
FTSE All Share 2837 2994 -5.25%
S&P 500 2398 2525 -5.02%
Nasdaq Composite 7196 7311 -1.57%
Dow Jones Industrial 20106 21578 -6.82%
FTSE Eurofirst 300 1151 1168 -1.42%
Xetra Dax 8929 9232 -3.28%
Nikkei 16553 17431 -5.04%
MSCI Asia ex Jap $ 531 582 -8.80%
MSCI EM $ 766 883 -13.22%
MSCI World $ 1694 1777 -4.62%
Bond Yields Mar 20 Mar 13 Bps Change
UK Gov 10 yr 0.54 0.38 16
US Gov 10 yr 0.96 0.95 1
German Gov 10 yr -0.32 -0.58 26
Japan Gov 10 yr 0.09 -0.02 11
Commodities Mar 20 Mar 13 % Change
Brent Crude ($/bbl) 28.49 34.27 -16.87%
Gold ($/oz) 1474.25 1570.70 -6.14%
Copper ($/lb) 2.19 2.50 -12.40%
Currencies Mar 20 Mar 13 % Change
$ per £ 1.174 1.240 -5.32%
€ per £ 1.099 1.120 -1.88%
¥ per $ 111.340 107.160 3.90%

Source: FE Analytics, Financial Times, JP Morgan Asset Management

Risk warning: Investors should be aware that past performance of investments is not a reliable indicator of future results and that the price of shares and other investments, and the income derived from them may fall as well as rise. The content of this bulletin is for general information and reflects the general market view of Parallel Investment Management Ltd. - it should not be interpreted as recommendations or advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of the content.

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