Markets and Key Events

Global equities rallied over 20% since their lows

Global equities have rallied by over 20% since hitting their nadir on the 23rd March, with US equities having risen by 25%, as the rate of infection from the coronavirus has slowed down across Europe and in parts of the US.  The rally was showing signs of running out of steam this week, as company earnings season began bringing some reality to investors.  However, on the day that China announced its first fall in GDP since 1976, with year on year quarterly growth coming in at minus 6.8%, stock markets were rallying again as Donald Trump announced a plan as to how the US economy will reopen. In addition, a report suggested that a drug developed by Gilead, remdesivir, had shown positive results in clinical trials on COVID-19 patients.  However, the drug, from which patients have seen rapid recoveries in fever and respiratory symptoms, remains in clinical trials, with possible side effects yet to be established.

US Federal Reserve measures of support keep coming

As central banks and governments have continued to provide further measures to bridge the collapse in demand from the lockdown, and the rate of infections has shown positive signs of abating, investors have been emboldened to take advantage of the prices on offer in markets.  Last Thursday, the US Federal Reserve extended its bond buying programme to include high yield ETFs (exchange traded funds), a step that caught most by surprise.  The largest high yield ETF in the US, known by its ticker HYG, rallied by more than 6% in a day, its largest one-day gain since the financial crisis of 2008/09.

First quarter earnings season begins, bringing a dose of reality

This week marked the start of the first quarter earnings season, with the large US banks reporting first.  JPMorgan Chase said profits fell 69% as it increased loan provisions for losses from clients hit by the crisis, whilst Wells Fargo reported net income falling by almost 90%.  US industrial output for the month of March dropped by the most in over seventy years in March, whilst retail sales fell a record 8.7%, as the IMF forecast the biggest slowdown since the 1930’s.  However, investors are braced for dreadful results for the first two quarters of this year, and what matters most, is how quickly the lockdown ends and business returns to normal.

OPEC cuts fail to stem the slide in prices

Despite OPEC and Russia agreeing to cut crude oil supply by 10 million barrels a day, starting in May, crude oil prices continued to slide over the week, as the collapse in demand has led to a record glut in oil supplies.  US WTI (West Texas Intermediate) fell as low as $18.1 a barrel, whilst Brent crude fell to $27.2 a barrel at its lowest point.

Chinese exports for March surprise to the upside, but the worst is still to come

Chinese exports fell less than expected in March, with exports falling 3.5% year on year, showing a slight increase on the sharp falls seen in January and February as the Chinese economy relaxed the lockdown.  However, the worst is probably still to come for China’s export sector, as it is now faced with a collapse in demand from the West.

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