Weekly Feed5 Mins Read
Kristal Weekly Feed I 16 March 2020
With a busy schedule, 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:
- President Donald Trump declared a temporary suspension on foreign nationals traveling from Europe to the US for 30 days
- The US declares a national emergency to combat the spread of the virus
- Markets around the globe suffered heavy losses this week as oil prices posted their worst weekly thrashing since 2008 to add to coronavirus fears. The US and Australian markets slipped into the bear phase while most others remained dangerously close
- The OPEC failed to strike a deal with its allies regarding production cuts leading to an escalation in tensions and a price war between Russia and Saudi Arabia
- On March 11, 2020, WHO’s Director-General declared COVID-19 as a pandemic causing the Dow Jones Industrial Average Index to plunge into the bear market territory.
Tracking the 2019-n-CoV
Covid-19 now has 143,247 confirmed cases around the globe and the death toll is at 5407. Countries with confirmed cases of Covid-19 include:
Benchmarks in the US nosedived more than 7% on Monday. After the OPEC deal failed, tensions between Russia and Saudi Arabia escalated that added volatility to the markets that were already struggling with the economic impact of the Covid-19.
The sentiment in the US was replicated in the European markets too as benchmarks tanked more than 7%. The markets reeled under the added pressure due to this price war between Russia and Saudi Arabia.
With oil prices dropping 24% making it the worst day since 1991, stocks in the Asia-Pacific region saw huge declines too.
Let’s take a look at how the global markets performed during the week:
The downward trend continued on Monday with benchmarks falling more than 7%. This was triggered by the oil price war between Russia and Saudi Arabia following failed OPEC talks. Coupled with the fears regarding the economic impact of COVID-19, investor sentiment was pessimistic. On Tuesday, President Donald Trump starting pushing for the economic relief package to fight the economic slowdown. This boosted investor confidence and the markets recovered half of their losses on Monday. The optimism was short-lived since on Wednesday, the Director-General of the World Health Organization (WHO) declared Covid-19 as a pandemic.
Further, the U.S. Government imposed a temporary suspension on foreign nationals traveling to the U.S. from Europe for the next 30 days. This led to most stocks heading south on Wednesday. Thursday was a black day in the history of stocks in the U.S. as the markets ended in the bear market territory. Despite the attempts made by the Federal Reserve to boost confidence by pumping trillions into the markets, benchmarks lost more than 9%. On Friday, Donald Trump declared a national emergency to fight the spread of the virus. The markets fought back too and the S&P 500 posted its biggest one-day gain since 2008. Overall, it was a bad week for the U.S. markets.
The European markets started the week with benchmarks tanking more than 7%. This was due to the oil price war between Russia and Saudi Arabia following failed OPEC talks along with the fears regarding the economic impact of COVID-19. Italy’s government decided to quarantine its entire northern region and subsequently to the entire country to prevent the virus from spreading. The investors remained focused on the developments in Italy as the worst-affected country outside Asia. The markets remained in the red.
On Wednesday, despite the rate cuts announced by the Bank of England, the markets could not make a recovery and closed lower. Thursday was a day that most investors would want to forget as the European markets posted their worst one-day drop in history! This was on the back of the travel restrictions imposed by the U.S. and the European Central Bank’s decision to keep the interest rates unchanged. The pan-European Stoxx 600 lost 11.48%. European investors tried shrugging off the fears on Friday and the markets made a small comeback and closed in the green. Overall, this was the worst week since October 2008.
Adding to the volatility due to COVID-19, fears of an oil price war between Russia and Saudi Arabia resulted in some steep declines in the Asia-Pacific markets. Benchmarks in Australia and Thailand dropped more than 7%. Most markets made some recovery on Tuesday as investors remained hopeful about receiving a stimulus package from the government to combat the economic impact of the virus.
With no such packages coming their way, most investors started losing hope by Wednesday which saw most markets tumble back into the red zone. Australia entered the bear phase losing more than 20% from its 52-week high. Further, with the Dow Jones Industrial Average index slipping into the bear market territory overnight due to WHO declaring COVID-19 as a pandemic, Thursday was a bad day for Asia-Pacific markets too. Most benchmarks fell sharply with the Thailand SET Index losing more than 10% in a single day. The lack of confidence in the economy was evident on Friday too as most markets closed lower. The Australian markets tried to make a dramatic comeback with the S&P/ASX 200 Index gaining 4.42%. Overall, a bad week for the Asia-Pacific markets too.
Heading into next week…
While most markets either in the bear territory or close to it, investors are bound to feel overwhelmed with what was one of the fastest declines in history. While there will be a lot of ink spilled to explain the impact of the virus, uncertainty will be the underlying theme. While investors will be keeping an eye on the developments, aspects like a slowdown in the number of new cases, economic stimulus packages, etc. need careful consideration. Investors are advised to be watchful before making any huge investment decisions and speak to an investment advisor to ensure that the decisions are data-driven. We expect the volatility to continue and urge our investors to stay vigilant.
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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