Markets and key events

Markets consolidate as the volatility of the last few weeks abate

Markets have consolidated over the past few days, after the wild gyrations investors have had to stomach in recent weeks.  Whilst a short, very sharp recession is consensus in the market, with a very welcome bridge built to the other side by governments and central banks, the exit strategy remains elusive, as does the speed to recovery.  Whilst this is the case, any recovery in equity markets is likely to remain on hold

Wide dispersion in market returns

As of 12pm on Friday, London time, global equities for the week have fallen a relatively benign 1.2%, with US equities down 0.6%, European equities have given up 0.4%, whilst UK equities have fallen by 2.1%. There has been greater dispersion in Asia, with Japanese equities having tumbled 9.2% as rising coronavirus infections shook investor sentiment and the Bank of Japan’s support for the equity market levelled off.  Australian stocks rose 4.7%, benefitting from a jump in crude oil by almost 30% for Brent and over 22% for US WTI (West Texas Intermediate) as following a Tweet by President Trump, expectations were raised for a massive cut in production by Russia & Saudi Arabia, since denied by Russia.  Emerging market equities fell 0.5%, however, the dispersion at country level was high, with Indian equities falling by 7.5%, whilst domestic Chinese stocks fell 0.3%.

Haven assets were well behaved over the week, with the yield on 10-year US Treasuries currently trading at 0.59%, German Bunds minus 0.44% and UK Gilts 0.32%.  Gold is currently trading at $1,630 an ounce, having fallen 1.4% over the week.  The US dollar strengthened over the week, having weakened sharply last week, with the dollar index rising 2.4%.  Sterling is trading at USD 1.22 and EUR 1.14

US investment banks forecast one of the worst, if not the worst, recession on record

Goldman Sachs, the US investment bank, forecast a 6.2% decline in US GDP for 2020, with unemployment reaching 15% by the middle of the year, as economists try to gauge how long the current

lockdown will last.  Whilst Bank of America reckons that the US will experience its deepest recession on record, nearly five times more severe than the post war average.  Initial jobless claims in the US jumped up to a record 6.6 million, with the increase more than doubling from last week’s initial claims.  However, it should be noted that for some, the new benefits package on offer in the US will mean a pay increase, no doubt helping to exacerbate the situation.

European service sector activity collapses

The latest business activity released for the Eurozone services sector showed an unprecedented collapse, with the IHS Markit PMI reading coming in at 29.7 in March, a fall from 51.6 in February, the lowest reading since the survey began 22 years ago.  Any number below 50 represents contraction.

The information provided above is for Professional Advisers: All data has been sourced from Lipper. Any investment must be made in conjunction with reading the relevant KIID or Investment Mandate. Clients should be aware that the value of investments and the income from the may fall as well as rise and they may not get back the amount originally invested. Investors should note that the views expressed and information given were current at the time of publication but may no longer be so and/or may have been acted upon by the Investment Manager already. Source SmartIM