News / Analysis
Finance Update – Markets get Cold FeetApril 20, 2020
Asian markets ended last week in the green, following Europe and the US at a lesser rate. And after China cut interest rates by 20 basis points, indexes added about a ½% each, the Hang Seng, 1.56% but the Nikkei a full 3.15%.
China’s GDP contracted by nearly 10% during this year’s first quarter for the first time in nearly 45 years. Other data has improved since the beginning of the Covid crisis – Industrial production in March contracting by only 1.1% and retail sales by 15.8%.
More red was seen in Japan, where industrial production diminished by 0.3% in February MoM.
The CAC-40 on Friday closed with a celebratory 3.42% increase, leading European indices – the Dax close behind with 3.15% and the FTSE with 2.82%.
European industry took a turn for the better in February, Production contracting by 0.1% MoM in February – half the expected. On Friday, the zone’s March CPI came in at 1.1% MoM, with construction output for February contracting by 1.51% MoM.
Germany’s CPI came in at 1.3% YoY for March, and Italy reported a €1.016 bn trade surplus for February. The ECB’s Christine Lagarde on Thursday assured the IMF that her bank will increase its asset purchasing “by as much as necessary and for as long as needed.”
Indexes once again closed up in the US last week, nearly 3% for the DOW but 4.4% for the Russel Small Cap 2000. However, Reuters reports that Elliot Fund’s Paul Singer is expecting a 50% loss in stock markets as the world enters the post-Covid recession.
Although markets have been gaining traction on President Trump’s call for reopening the economy, vocal opposition warns against a re-surging virus backlash that could cripple services and decimate recent gains.
The USD has been shrugging off data, lately, and last week was no exception. US housing in March, reported Thursday, shows a drop to 1.216mn units started, less than expected, but a pleasing 1.35m permits issued for building to begin.
Initial Jobless Claims once again disappointed for April 10th at 5.25 mn new claimants – higher than expected but still less than the previous week’s reading of 6.6mn. There are, at present, 11.976 Americans claiming unemployment. Meanwhile, in Canada, manufacturing sales in February grew by a half percent.
Americans continue to close down oil wells, Baker Hughes on Friday reporting another 66 rigs offline, bringing the total count to 438. Talks have provided ample energy for oil, which opened on Friday with a humongous $6 bull gap. The commodity has since settled into a very relaxed downtrend, trading in the $25 region at present.
Meanwhile, gold continues to recover from its dizzying post-17K heights, the week’s opening price just below 1694.
And The Street’ reports that Facebook is moving ahead with its Libra cryptocurrency, the new launch date – November this year. Instead of a single currency backed by a basket of assets, however, the revised form will offer a selection of digital currencies, each pegged to individual fiat currencies – a sort of Paypal for peer-to-peer payments.
Covid damage assessment will be in focus as earnings season enters full gear this week. With 9% of companies having already reported – disappointingly so – Goldman Sachs expects the S&P to lose a record 24% of its value in Q2, says Reuters.
Short-sellers have increased positions against index funds to about $68 bn. IBM opens the week on Monday. On Tuesday, the flood of data includes Coca Cola, Snapchat, Philip Morris, Netflix and Lockheed. AT&T, Paypal, Tesla Boeing and Visa are up on Wednesday, Amazon, Intel and Starbucks report Thursday and American Express closes the week on Friday.
|06:00 AM GMT||Germany||Producer Price Index (March)|
|08:00 AM GMT||EU||Current Accounts. Trade Balance at 9 AM.|
|12:30 PM GMT||US||Chicago Fed National Activity Index. 3 & 6 month bill auctions at 3:30|
|10:30 PM GMT||NZ||Business PSI|
|01:30 AM GMT (+1)||Australia||RBA Meeting Minutes|
|06:00 AM GMT (+1)||UK||Unemployment & Average Earnings|