Update 29-04-2020: Gilead drug success allows investors to ignore 4.8% Q1 contraction in US

Taking the heat off a terrible Q1 GDP reading out of the US, investors instead focused on Gilead’s announcement that it had seen positive results with its remdesivir trial.

Now, remdisivir isn’t a vaccine or anything of the sort. Rather, in the words of Gilead, the drug would ‘help hospitals and healthcare workers treat more patients in urgent need of care’.

Following on from reports a couple of weeks ago that the drug was effective in treating covid-19, confirmation from the horse’s mouth created a surge in optimism from investors.

And it came just at the right time. Earlier in the day it was revealed that the US economy shrank by 4.8% in Q1 at the annualised rate, far worse than the -4.0% forecast, and a massive swing from the 2.1% growth seen in Q4. It’s the biggest decline since the fourth quarter of 2008, when GDP dropped 8.4%, and is, terrifyingly, only a taste of what is to come: Q2 2020 is expected to see a 35% contraction.

Ignoring the bad to focus on the good, the Dow Jones climbed more than 450 points, striking a 7-week peak of 24550.

This in turn generated even greater growth in Europe. The FTSE added 150 points, crossing 6100 for the first time since early March, while the DAX, which was seeing pretty tepid growth at lunchtime, swaggered past 11000 as it rose 230 points.

This reaction potentially takes the pressure off the Federal Reserve, which meets this evening. With markets almost uniformly at 7-week highs, Jerome Powell and co. may feel like that can sit on their hands.

Update 28-04-2020: Dow Jones disappoints as CB consumer confidence falls month-on-month

With the Dow Jones not quite delivering on the promises of its futures, Europe slipped slightly from their lunchtime highs.

Its growth trimmed back to around 90 points, the Dow fell from its 24550-nearing intraday highs following a sharp decline in CB consumer confidence. The reading, unsurprisingly, came in at 86.9, a significant drop-off from the previous month’s 118.8 (itself a downward revision).

There may be another test on its way this evening, when Alphabet reports its Q1 earnings. The Google-parent may well find itself caught between surging traffic and a fall in cost per paid click. Adjusted earnings are expected to rise to $14.30 per share, while revenue is set to climb around 13% to $41.1 billion. The number of paid clicks is set to be up 25.6% quarter-on-quarter, but with a 7.9% decline in the cost per click as companies cut their ad spend in the face of lockdown.

The Dow’s minor disappointment didn’t stop Europe expanding its gains. Ignoring the bad news from BP and HSBC, the FTSE struck a 7-week peak of 5950 as it rose more than 100 points. The DAX, meanwhile, briefly crossed 10900 before settling the wrong side of 107070 as it added 1.2%. Similarly the CAC was left short of 4550 after its rise was trimmed to 1.3%.

Update 27-04-2020: Dow Jones crosses 24000 once again as lockdown-easing optimism holds

The Dow Jones crossed 24000 once again on Monday afternoon, as investors continued to express their optimism-tinged relief at the latest round of countries to announce lockdown-easing measures.

Adding 270 points, the Dow found itself nearing 24050, its best level in exactly 7 days. It faces a potentially daunting week, however. Not only are there earnings from its biggest hitters – Alphabet on Tuesday, Microsoft on Wednesday and Apple on Thursday (not to mention the non-Dow Amazon.com) – but the advance first quarter GDP reading AND Federal Reserve meeting on Wednesday.

With the Dow looking strong, the DAX and CAC clung onto their gains. The German index spent the session loitering around 10600 thanks to a 2.5% increase, while the CAC was knocking on the door of 4450 following a 1.9% rise.

The FTSE, however, found itself slipping, its growth cut from 100 points to 60 points. That left the index only just above 5800, hurt by cable’s sustained rebound.

Source: SpreadEx