Market Update: Week Starting 13/04/2020

Market Update: Week Starting 13/04/2020

Written by: Connor Campbell

Update 17-04-2020: Dow Jones opens higher, but loses bravado seen in initial moments after bell

Though still firmly in the green, some of the enthusiasm that was present after the bell rang on Wall Street started to disappear as investors looked down the barrel of another potentially stressful weekend of coronavirus headlines.

 

Opening as much as 900-plus points higher, the Dow Jones saw that surge more than half as the dust settled on Friday afternoon. Now it is up around 400 points, leaving it above 23900, but below the 24000 levels it has repeatedly struggled to stay above despite multiple attempts in the last fortnight.

 

Still, it has been a good 24 hours for the US markets, with a whiplash-inducing turnaround from the post-jobless claims malaise to the hopes of Gilead’s remdisivir covid-19 drug trial.

 

Even if its lost some of its bravado, that US open nevertheless preserved a good chunk of Europe’s gains. The FTSE was up 120 points, though that left it around 30 points shy of 5800, while the DAX climbed 250 points, again leaving it short of 10600. In contrast the CAC held onto almost all of its growth, lurking at 4500 thanks to a 3.2% surge.

 

It’s been an up and down few days for the markets, one that isn’t set to get any easier next week. Alongside whatever this weekend brings, there’s a host of potentially illuminating data, including the UK jobless claims for March on Tuesday, as well as April’s flash manufacturing and services PMIs on Thursday.

Update 16-04-2020: 22 million Americans lose their jobs in the space of 4 weeks, China Q1 overnight

Trading was subdued on Thursday afternoon, as investors digested yet another multi-million jobless claims reading out of the US.

 

For the week ending April 11th, another 5.245 Americans lost their jobs – marginally below forecasts, but enough to push the total number for the last 4 weeks above 22 million people. Truly insane.

 

Yet once again the Dow Jones didn’t freak out at these figures. Instead it sank around 100 points – a manageable decrease for an increase that’s got use to 500-plus point swings.

 

Nevertheless, it did put a further dampener on a session that had already lost steam. The DAX clung onto a 0.4% increase, while the CAC actually slipped into the red by a handful of points. Interesting the FTSE got a bit of a lift once the bell rang on Wall Street, climbing half a percent despite losses for BP and Shell.

 

Another reason for the fairly nervy trading may be the fact that overnight arguably the most important economic reading of the pandemic so far will be released: China’s Q1 GDP. A contraction of anywhere between 10% and 11% is forecast; a huge fall from Q4’s 6.0% growth, and the first time the Chinese economy has shrank since 1989. It’ll also give the Western nations – which are starting from a far worse base level of GDP – what they can maybe expect in Q2.

Update 15-04-2020: Sharp contraction in US industrial production causes losses to accelerate across the board

Once the Dow Jones et al. got involved Wednesday’s trading took another dive southwards, following some nasty data out of the US.

 

The headline number was a 5.4% slump in industrial production in March – the worst contraction since 1946. Couple that with retail sales falling by a sharper than forecast 8.7% – not to mention the various recession warnings that have been coming thick and fast – and the US markets were perhaps forced to swallow a bitter dose of reality following last week’s hopeful, naive rebound.

 

If investors are now willing to pay attention to all this alarming data – they haven’t been too keen in recent weeks – Thursday’s US unemployment claims and Friday’s Q1 GDP reading from China could make waves.

 

Having briefly struck 24000 on Tuesday, the Dow Jones sank more than 600 points, the index hurtling back towards 23300 in the process.

 

This then had the side effect of accelerating the losses elsewhere. With Brent Crude now down 8.6%, sitting under $27.50 per barrel, the FTSE fell 180 points to 5620 – more than a fourfold increase on the losses the UK index incurred just after the bell.

 

As for the Eurozone, the DAX shed 400 points as it found itself barely hanging on above 10300, with the CAC slumping 3.7% to 4370.

Source: SpreadEx