Global Markets Update Monday, 11 May 2020

Posted on 11 May 2020

Global stocks rallied, looking beyond dismal economic data, as Spain, Italy and India tentatively eased economic and social restrictions and let some businesses resume operations this week, while more US states began to lift lockdowns.

Global Market Update

UK

The FTSE 100 rose 3.0% over the week.
The Bank of England forecast that the UK economy would shrink 3% in the first quarter of this year, followed by a 25% contraction in the second quarter. However, the Bank predicted a V-shaped recovery and “only limited scarring to the economy”.
The composite IHS Markit/Cips purchasing managers’ index fell to a fresh record low of 13.8 in April. Services sector activity plunged to 13.4 in April from 34.5 in March, far worse than the lows reached during the 2008 financial crisis although the reading was better than forecast, while manufacturing dropped to 32.6. Activity in the construction sector dropped to a record low of 8.2 in April from 39.3 in March and 52.6 in February, suggesting that construction has been hit harder than other industries.
Virgin Media and O2 agreed to a £31.4bn deal to combine their UK operations. The deal will unite the UK’s second-largest broadband network with its largest mobile network, creating a strong competitor to BT.
BT suspended its dividend, joining the ranks of FTSE100 companies that have cut payouts to shareholders by nearly £24bn since the start of the pandemic.

US
The S&P 500 rallied 3.2% over the week, approaching levels last seen several months before coronavirus infections had first been identified. The technology-heavy Nasdaq Composite gained 6% over the week to come within striking distance of its all-time high.
The US unemployment rate surged to 14.7% in April, its highest level since World War Two, and compared to a near a 50-year low earlier in the year. Non-farm payrolls dropped by 20.5 million, the biggest drop on record and compared to a loss of 870,000 in March.

Europe 
The FTSEurofirst 300 slipped 0.6% over the week.
Germany’s constitutional court called on the European Central Bank to justify its bond-buying programme.
German exports plummeted 11.8% in March, the steepest monthly fall on record, while imports dropped 5.1%, the biggest decline since 2009.
Norway’s central bank cut interest rates by 25bps to a record low of zero but said that rates were unlikely to go negative.

Japan 
The Nikkei 225 gained 2.9% over the week.

Pacific Basin
Chinese exports rose 8.2% in April on a year-on-year basis, compared to a 3.5% decline in March. The recovery was driven by stronger demand from south-east Asia, a region that is one of China’s biggest trading partners, where markets are gradually reopening as the COVID-19 pandemic shows signs of easing. However, trade with the EU and US, where large parts of the economy remain under lockdown, declined 6.65 and 15.9%, respectively.

Emerging Markets
Brazil’s Congress ratified a constitutional amendment allowing the central bank to start quantitative easing to fight the impact of COVID-19 on the economy. 

Bonds
The yield on the 10-year US Treasury bond closed the week at 0.66%, while the yield on the 10-year German Bund ended at -0.54%.
Asian (ex Japan) sovereign, supranational and government agencies raised  $18.7bn in dollar bonds in April, their fastest rate in 10 years.

Commodities
Brent crude climbed above $30 a barrel for the first time in six weeks.