Market Update: Week Starting 20/04/2020

Market Update: Week Starting 20/04/2020

Written by: Connor Campbell

Update 21-04-2020: Oil rebounds as Trump threatens Iran, FTSE back above 5750

A much-needed rebound from Brent Crude allowed the Western indices to hold onto their growth this Wednesday – and in some cases, saw them improvement on their initial gains.

 

It would be nice for oil’s push higher to come from a less troublesome catalyst. Donald Trump’s order for the navy to ‘shoot and destroy’ Iranian gunboats that ‘harass’ American ships cause some investors to return to the black stuff, lifting Brent Crude back towards $21 per barrel with a near 8% comeback. This after it had at one point fallen under $16 per barrel overnight.

 

The FTSE was a big beneficiary of this move. With BP and Shell all of a sudden up 5% and 5.8% respectively, the UK index rose more than 2%, returning it to 5760.

 

The DAX, meanwhile, teased 10400 as it climbed 140 points, with the CAC overcoming its initial reticence to add 1%.

 

As for the Dow Jones, it climbed more than 400 points after the bell, causing the US index to just about hit 23450.

 

It has already been an intense week, defined by the unprecedented oil rout. Tomorrow could potentially cause a bit of chaos, with the release of the flash manufacturing and services PMI for April AND the latest US jobless claims reading.

Update 21-04-2020: FTSE struggles as Brent Crude sinks under $20 per barrel, pound fall softens blow

The Western markets largely maintained the losses incurred at lunchtime, though there was a slight improvement from their intraday lows despite the worsening situation for Brent Crude.

 

Avoiding the 550 point fall suggested by the futures, but still dropping 420 points, the Dow Jones found itself just about keeping its neck above 23200. That’s roughly a 1000 point decline from where it was at the end of last week.

 

The DAX struggled to reduce its 300 point decline, keeping it at or around 10350, while the CAC was saddled with a 100 point slide, trapping it the wrong side of 4400.

 

The FTSE was able to trim its own losses to around 100 points, allowing it to sporadically stick its now above 5700. Given how commodity-heavy the index is, and the fact Brent Crude is down 23%, striking sub-$20 per barrel levels, you’d maybe expect the FTSE to be even lower.

 

However, BP and Shell crucially managed to keep their losses to 2.3% apiece despite the oil rout. The pound also provided a cushion for the index as it fell 1.3% against the dollar and 1.2% against the euro following the UK/EU trade negotiations restart.

Update 20-04-2020: Dow Jones falls at open, but better than forecast drop lifts Europe

The European markets managed to pull up from their intra-day lows despite a bad open from the Dow Jones.

 

Falling 260 points after the bell, the Dow found itself lurking just below 24000. That decline was, however, far better than the 500 point plunge suggested by the futures, and kept the index at the top end of its recent trading range, even if it has so far struggled to find a reason to burst through that key level with any permanence.

 

That slightly better than forecast start from the Dow allowed Europe to shake off the excesses of the day. Moving away from their 1%-plus declines, the FTSE returned to 5800 as it added 0.2%, while the DAX kept above 10600 as it rose a handful of points.

 

Looking to Tuesday and the arrival of the latest UK jobs report – one that has a coronavirus-related claimant count change reading, and a pre-pandemic pair of wage growth and unemployment figures – and the ZEW economic sentiment numbers will likely help shape tomorrow morning’s European session.

Source: SpreadEx