With a truncated week due to Good Friday, markets only had the four days to assess the economic damage the outbreak of COVID-19 was having on the global economy. News from southern Europe over the weekend allowed markets to get fully into their stride with a two-day winning streak on Monday and Tuesday. Data released showed that the number of both cases and deaths in the two European epicentres of Spain and Italy were beginning to plateau.
On Monday, Coronavirus deaths in Spain slowed for the fourth day in a row, with hospitals in Madrid returning almost to normal, a week after being stretched to breaking point. The positive news was also echoed across the pond as New York, the US epicentre, also reported that its cases are starting to level off.
On the news that government efforts to stem the virus through lockdown were working, especially in Europe, the pan-European STOXX 600 index rose 1.88% with MSCI’s gauge of global stocks gaining 1.60%. Emerging markets stocks rose 3.16%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 2.69% higher after China announced that it was seeing far less cases and was planning to open the city where the virus originated, Wuhan. With risk sentiment on the rise, the main casualty was the USD as investors saw an ease in liquidity.
With the news that the Prime Minister had been hospitalised and was spending the night in intensive care, investors naturally rushed to sell sterling with worries over who would be running the country. However, with calming words from Foreign Secretary, Dominic Raab, and news that the PM’s condition was improving, the pound made its way back up towards $1.25 throughout the second half of the week.
Where global equity markets enjoyed a more sanguine week compared to the moves they experienced over the past month, it was oil markets that took on the mantel of increased volatility over the past week. With an emergency OPEC meeting being scheduled for the beginning of the week and then pushed back to Thursday, oil markets swung up and down as the chances of a truce between Saudi Arabia and Russia waxed and waned. Oil prices gave up early gains during Monday to fall sharply during the middle of the week as hopes that the world’s biggest producers would agree to cut output were overtaken by anxiety that a deal would not emerge. It seems the deal hangs on whether ‘OPEC+’ members, those oil producing nations that aren’t part of the cartel, will also join in the cuts, such as the US, with Donald Trump saying there is little chance his nation will.
The week ahead
The coming week looks to be ushered in after a bright, warm and sunny Easter and the general public get out in their collective gardens, balconies or just near a window as the UK’s lockdown continues. With markets staging something of a recovery on the news that the number of cases of COVID-19 in Europe and the US are starting to plateau, it could be global equities that have their place in the sun during the coming week.
The first piece of economic data that could get analysts egg-cited is US Retail Sales, released on Tuesday afternoon. With consumers around the world locked down, it will be interesting to see how much spending has taken place. The data should also detail how purchases have been made and if the lockdown has pushed more towards online methods. With continuously underwhelming sales data in the US before the COVID outbreak, many will be hoping that these numbers won’t be as bad as many are predicting. The figures should dovetail well with the following day’s US Unemployment Claims. With unemployment in the world’s largest economy having hit consecutive record highs over the last two weeks, it is a fair assumption to think that this would heavily impact the amount consumers are spending on purchases.
The end of the week sees the G20 nations coming together for an emergency summit on how to tackle the outbreak of the Coronavirus; presumably held over videoconferencing facilities this time around. The meeting will be attended by finance ministers and central bankers alike from the 20 largest industrialised nations, including the G7 nations - Canada, Italy, France, Germany, Japan, the UK, and the US. The meetings are closed to journalists, but officials usually give hints to reporters throughout. A formal statement covering all policy shifts and meeting objectives is released after the meetings have concluded. The entire summit is expected to last until Sunday.
The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in April 2020.