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Weekly Feed5 Mins Read

Kristal Weekly Feed | 11th May 2020

These are tough times and it can get difficult to understand and analyze major events around the globe and how they affect your investments. In our weekly market update, we help you slice and dice the latest news updates to make informed investment decisions.

Headlines this week:

    • At the time of writing this, the number of confirmed Covid-19 cases crossed the 4 million mark
    • Investors around the globe seemed optimistic about businesses reopening soon amidst certain restrictions. The feeling that the worst was over kept most markets positive.
    • The Nasdaq Composite Index managed to recover most of its losses in March and stood in the positive territory in the YTD figures
    • Despite historic job losses and poor earnings reports, investors latched on to the hope of lockdown restrictions easing and economies beginning their recovery

Tracking COVID-19

Covid-19 now has 4,121,778 confirmed cases around the globe and the death toll is at 280,868.
Some positive news snippets:

      • According to a study published in the peer-reviewed journal, The Lancet, a combination of three medicines has been found effective in reducing the treatment tie of COVID-19. However, further clinical study is needed to confirm the same.
      • The rate of recovery seems to be increasing with around 1.4 million patients recovered till date
      • Italy to begin testing on a vaccine to prevent COVID-19.
      • Israel claimed to have extracted antibodies to neutralize the virus. Testing to commence soon.

Market Update

1. United States

The US markets had a good week as they regained the positive momentum and posted gains. Despite historic job losses and poor earnings reports, investors seemed to latch on to the hope that the economy was reopening in parts and advances in medical research in the fight against COVID-19 could soon bear some good news. The tech-heavy Nasdaq Composite Index climbed back into the positive territory (YTD) and inched closer to the all-time high in February.

The boosters
When markets crash, the initial investor sentiment is panic. This is usually followed by a desperate search for some positive news to regain hope causing extreme volatility. Eventually, investors reconcile with the situation and start focusing on the future than be dragged down by the current situation. The market crash due to the pandemic revealed the resilient nature of stock markets as investors seemed to take negative news as a sign of the economy bottoming and the only way further to be up. Although there were no positive developments on many fronts, most major indices managed to remain in the green throughout the week. Also, with parts of the global economy reopening, oil experienced a rise in demand, the US crude oil prices managed to gain nearly 18% during the week.
This week, Japan granted approval for the use of Remdesivir as a therapeutic. Also, the US Food and Drug Administration approved the first Phase 2 clinical trial of a possible vaccine raising hopes of the eventual end to this crisis.


The dampeners
With most businesses still non-operational and lockdowns in place in most cities, earnings reports and forecasts for the second quarter remained low. Further, the job losses due to the pandemic led to the unemployment rate to increase to 14.7%! This is the highest since the Great Depression. In the month of April, nearly 20.5 million jobs were lost in the US – approximately the number of jobs that were added during the last decade!
Investors were a little concerned with the possibility of the US-China trade war resuming. However, news about negotiators from both countries meeting again to resume work on implementing the first phase of the trade deal managed to keep the outlook optimistic.


The European markets were more volatile than the US markets this week. With markets responding to the possible escalation in trade tensions between the US and China and the overall economic impact of the pandemic, many investors believed that the worst was over leading to positive momentum in the markets.
Like in the US, the primary booster of the European markets was the investor sentiment that economies of the countries around the globe had bottomed. As all countries planned to reopen their economies in parts, the markets would soon stage a comeback. However, European investors remained cautious as easing the lockdown rules could also mean a spike in the number of new coronavirus cases.
Further, while the week started with the possibility of increased trade tensions between the US and China, news about representatives from both countries meeting to implement the first phase of the deal kept the sentiment positive.
Markets also responded to the negative earnings reports and rising unemployment rates. Overall, European markets nudged a little higher this week.


Asia Pacific

This was a mixed week for markets in the Asia Pacific region too with some of the major markets being closed during the week. Some important highlights were:

      • The Reserve Bank of Australia released its statement on monetary policy highlighting a sharp fall in global GDP in 2020.
      • Markets in the region responded to the US jobless data and weak earnings forecast for the second quarter.
      • Overall, Asia Pacific investors remained cautious as hopes to ease the lockdown restrictions spread across the globe.


Heading into next week…

In the coming week, important economic data in the US is expected with the Inflation Rate YoY report on Tuesday and Retail Sales MoM on Friday. The inflation rate report for China, Netherlands, India, Denmark, Ireland, France, Italy, and several other countries is also expected this week. A few Business and Consumer Confidence reports, jobless reports, retail sales reports, etc. will help determine the direction of the markets this week. With investors optimistic about the US and China planning to implement the first phase of the trade deal, any development on that front will impact the markets too.


The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.

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