Global equity markets advanced, despite a volatile week of trading as news flows caused investor sentiment to swing sharply.
Economic data remained dismal, illustrating the significant impact of the Covid-19 pandemic on global economies.
- Global markets rallied at the start of the week as some countries announced plans to ease the lockdown restrictions and several, including Italy, Spain and the UK, recorded their lowest number of coronavirus-related deaths in weeks. The S&P 500 advanced 1.5% on Monday taking it to its highest level in six weeks and trimming losses for the year so far to 11%.
- A further boost to global markets was provided mid-week in the form of positive results from the testing of a potential treatment for the coronavirus, despite data showing a sharp decline in US growth.
- Asian markets joined the buoyant mood with the MSCI Asia Pacific index climbing into bull market territory as gains pushed past the 20% mark from recent lows.
- However, the positive sentiment did not last, and markets ended the week on a negative note as tensions rose when President Trump threatened to impose new trade tariffs on China. The mood was further soured by disappointing unemployment data and warnings from big tech companies, including Apple and Amazon over the impact of the Covid-19 pandemic.
- Despite the market falls on the last day of the month, April was the best month for the S&P 500 since 1987, advancing 12.7%. Similarly, in Europe, the Stoxx 600 index recorded its best month since October 2015.
- Brent crude oil closed the week higher to end its recent streak of consecutive weekly losses, as prices rebounded on hopes that demand would start to rise as soon as the lockdown restrictions are eased.
- Gold experienced it worst week since mid-March, despite posting a late rally at the end of the week on the back on President Trumps’ trade threats.
- Italian government borrowing costs increased after Fitch, the credit rating agency, in an unscheduled update downgraded the country’s credit rating to one notch above junk status to reflect the economic impact of the coronavirus.
- In corporate news, Royal Dutch Shell cuts its dividend to shareholders for the first time since the second world war, in a move to protect its balance sheet and reflecting the significant drop in current demand for oil.
- Central banks continued to provide support for national economies. The US Federal Reserve announced that interest rates would be kept on hold, but that it remained committed to taking additional measures, if required.
- The European Central Bank also kept rates on hold, but it widened its programme of making loans to banks at record-low rates of interest, as warnings were raised that the region’s economy could shrink by up to 12% this year. The bank offered reassurance that it was “fully prepared” to increase support measures if required.
- The Bank of Japan too, announced its commitment to purchasing an unlimited number of government bonds and quadrupled the limit on corporate debt purchases to ¥20tn.
- The US economy ended its longest expansion on record as GDP fell at an annualised rate of 4.8% in the first quarter of the year, exceeding expectations of a 4% decline. Personal consumption dropped by 7.6%, the biggest fall since 1980 and business investment fell for the fourth consecutive quarter.
- Over 3.8m Americans filed new claims for jobless benefits last week, taking the total since the lockdowns began to more than 30m.
- In the US, consumer confidence fell to a 6-year low in April, tumbling markedly from March’s level. Manufacturing PMI survey data fell to its worst level in 11 years in April, with a reading of 41.5 (above 50 shows expansion).
- The Eurozone economy shrank by 3.8% q/q in Q1, the fastest fall on record. Three of the region’s four largest economies, France, Italy and Spain, announced record contractions in GDP in the first quarter, with both France and Italy officially entering a recession.
- Eurozone inflation fell to its lowest rate in nearly four years in April, dropping to 0.4%.
- Economic confidence in the Eurozone plummeted to 67.0 in April from a downwardly revised level of 94.2 in March.
- In the UK, manufacturing PMI survey data tumbled to a record low of 32.6 in April from 47.0 the previous month, in what was its sharpest decline in three decades.
- China’s official manufacturing activity survey data in April, at 50.8, showed some signs of expansion, but this still recorded a fall from March’s level of 52.0. However, the unofficial Caixin manufacturing PMI still showed activity had contracted on the month with a reading of just 49.4.
The Week Ahead
|Tuesday||UK PMI composite; US ISM non-manufacturing|
|Wednesday||Europe PMI composite; Europe retail sales |
|Thursday||UK Bank of England base rate; China PMI services|
|Friday||US non-farm payrolls; US unemployment rate; Japan PMI composite|
|FTSE All Share
|Dow Jones Industrial
|FTSE Eurofirst 300
|MSCI Asia ex Jap $
|MSCI EM $
|MSCI World $
|UK Gov 10 yr
|US Gov 10 yr
|German Gov 10 yr
|Japan Gov 10 yr
|Brent Crude ($/bbl)
|$ per £
|€ per £
|¥ per $
Source: FE Analytics, Financial Times, JP Morgan Asset Management
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