Global Markets Update Monday 13 April 2020

Posted on 14 Apr 2020

The MSCI All Countries Index rallied 10% over a foreshortened week, its biggest weekly rise in almost 12 years.

The number of COVID-19 daily fatalities continued to fall in Italy and Spain, with the latter starting to lift lockdown measures by allowing non-essential factories to re-open. Denmark, Austria and the Czech Republic also plan to relax social distancing measures. However, fatalities in the US and UK continued to increase: breaching 22,000 and 10,000 respectively.

Global Market Update

UK
The FTSE 100 bounced 7.9% over the week.

After three nights in intensive care, Boris Johnson was discharged from hospital – although Dominic Raab continues as caretaker prime minister while Boris recuperates. 

The UK economy declined 0.1% in February, meaning the economy expanded 0.1% between November 2019 and February 2020.

US
The S&P 500 rallied 12.1% over the week. The index is now more than 20% above its nadir on 23 March – placing US stocks in a theoretical bull market. However, the rally was greeted with caution given the likely impact on corporate earnings. Earnings for companies in the S&P 500 Index are now forecast to decline 8%, the biggest fall since the aftermath of the 2008 financial crisis.

The Federal Reserve expanded its bond-buying programme to include high-yield bonds for the first time on record. The Fed will not purchase high-yield bonds directly but will buy shares in exchange traded funds that own the debt and seek to track the market. The Federal Reserve also announced an additional $2.3 trillion loan package to support small businesses during the pandemic.

Almost 17 million US citizens have filed for jobless claims in the last three weeks, with the number increasing by 6.6 million in the last week.

Bernie Sanders withdrew from the campaign to become the Democrat challenger to take on Donald Trump, leaving the field open for Joe Biden.

Europe 
The FTSEurofirst 300 rallied 6.6% over the week.

Eurozone finance ministers agreed a €500 billion emergency rescue plan but failed to disagree over how to pay for the longer-term economic reconstruction effort that will follow the crisis. The plan includes revised pandemic credit lines from the European Stability Mechanism; a boost to the lending capacity of the European Investment Bank; and a new €100bn unemployment insurance scheme proposed by the European Commission. Italy’s finance minister faced backlash over his agreement to the plan, which does not contain any reference to “coronabonds” – debt issued jointly by all eurozone states.

Germany’s top economic research institute said the German economy will shrink by almost 10% in the second quarter. This will be the sharpest decline on record and double the size of the previous largest drop in the 2008 financial crisis.

The French central bank warned that the French economy could have contracted by 6% in the first quarter, with the lockdown continuing to knock 1.5% off French GDP every two weeks.

Spain is predicted to be the worst affected EU economy, with GDP expected to decline 15.5% this year as a result of COVID-19.

Japan 
The Nikkei 225 gained 9.4% over the week.

Japan declared a state of emergency after the country saw a steady rise in the number of new COVID-19 cases. Governors in seven prefectures will have the power to request business closures to increase social distancing, although the closures are not compulsory and many shops, restaurants and factories will be allowed to stay open.

Pacific Basin
Singapore, Hong Kong and China all saw a jump in new COVID-19 infections, with most thought to be imported cases from other nations. Singapore passed a bill banning social gatherings of any size for six months while Hong Kong extended closures of entertainment venues for two weeks.

Emerging Markets
G20 nations appear to be close to offering lower income countries a moratorium on sovereign debt repayments for at least six months, possibly into 2021.
Argentina postponed the payment on $10 billion of US dollar-denominated bonds until 2021. 

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