Markets and key events

Covid-19 flare ups give cause for concern

Stock markets gave back some of their recent gains as concerns over the economic damage and the potential for a second wave of Covid-19 infections outweighed optimism for an economic recovery as the lockdown is eased across Europe and the US.

As of 12pm London time on Friday, US equities had fallen 2.6% for the week, with technology stocks falling 2.0%.  European stocks fell 4.0%, with the UK market falling 3.1%, and more domestically orientated UK mid cap stocks losing 5.3%.  The UK market was hampered by news that the Brexit negotiations have made little progress so far, with an EU-UK summit due in June, when both sides have to decide whether a new trading relationship can be agreed by the end of 2020.  Asian markets fared a little better, partly benefitting from news that the Chinese economy was showing early signs of recovery.  The Japanese equity market fell 0.3%, whilst the Australian market rose 0.25%.  Emerging markets recorded a 1.2% fall for the week.

South Korea, China and Germany report increase in Covid-19 cases

Covid-19 flare ups in South Korea, China and Germany, signalled to investors the challenges that lie ahead in reopening economies. Wuhan, the epicentre of the original outbreak in China, reported its first new cases since the lockdown ended a month ago.  This coincided with an outbreak in Seoul, South Korea, which were linked to a man who visited a number of nightclubs last week.  This led to 85 confirmed new infections, the shuttering of bars and nightclubs once more, and officials now trying to track and trace 5,000 people who visited the same clubs and bars over that period.

Until a vaccine is found, or herd immunity is proven, these flare ups are likely to continue to weigh on investor sentiment.

Central bankers caution investors

Sentiment was further hurt by comments from the chairman of the US Federal Reserve, Jay Powell, who said there was likely to be some long-term economic scarring from the pandemic. Figures showed that a further 2.98m people in the US claimed unemployment benefits for the first time, increasing the total unemployed by 36m in the past eight weeks. The governor of the Bank of England, Andrew Bailey, echoed Jay Powell’s comments on Thursday, after the UK reported that GDP fell by 5.8% in March, the largest monthly drop since the series began in 1997.  For the first, UK GDP fell by 2%, whilst German GDP fell by 2.2%, the largest decline since the financial crisis, but one that is likely to be eclipsed in the second quarter.

Saudi Arabia cuts oil output by a further 1 million barrels a day

The oil price recovered a little over the week following Saudi Arabia pledging to cut a further 1m barrels a day of output to try and stabilise the oil price.  This was helped further when the International Energy Agency predicted that the drop in demand for crude oil would not be as extreme as first thought, set against supply this is expected to drop to a nine year low.  Brent crude rose by 2.4% over the week, now trading at $31.7 a barrel, whilst US WTI (West Texas Intermediate) leapt by 14.1%, now trading at $28.2.

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