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Kristal Weekly Feed | 18th 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:
- Last week, the number of confirmed Covid-19 cases crossed the 4.5 million mark.
- We also saw some of the optimism from last week fade away as concerns about the second wave of new coronavirus cases due to easing of the lockdown restrictions gripped investors around the globe.
- Statements made by the US Fed Chair regarding the need for additional fiscal stimulus and the National Institute of Allergy and Infectious Diseases regarding the risks of reopening economies too soon further dampened the investor sentiment.
- Concerns regarding increasing trade tensions between the US and China also kept the markets in check.
Covid-19 now has 4,121,778 confirmed cases around the globe and the death toll is at 316,671.
Some positive news snippets:
- This week the WHO said that four to five potential coronavirus treatments seem promising in reducing the severity or length of the COVID-19 disease.
- Novavax, an American vaccine development company, claims that it is confident of cracking the code for the COVID-19 vaccine.
1. United States
It was a mixed week for stocks in the US with most major indices shedding some gains made over the last week. The market sentiment lacked the hope and optimism seen last week as investors reacted to the poor economic data and growing uncertainty about the future.
While the overall investor sentiment lacked optimism this week, the hope of economic activities getting a boost soon with ease in the lockdown restrictions helped the markets cover some losses later in the week. The US crude oil prices increased for the third straight week on the back of the recent production cuts and rising demand as parts of the global economy reopened. With no major event offering a clear direction to the investors, the markets remained mixed and posted losses for the week.
This week many investors seemed to lose hope for a V-shaped recovery. There were several factors that kept investors worried:
- Without any major event offering a sense of direction to the investors, they were left to analyze the impact of the pandemic on the economy.
- The World Health Organization released a report stating that countries that had eased the social distancing norms were experiencing a surge in new coronavirus cases.
- President Donald Trump’s comment about not being interested in renegotiating the US-China phase one trade deal was a cause of worry for the investors.
- Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases warned that reopening the economy too soon can lead to needless suffering and death due to the virus.
- The U.S. Federal Reserve Chairman Jerome Powell said in an online speech that the recession might continue longer than expected if the government does not inject additional fiscal stimulus.
- Retail sales fell by 16.4% in April while industrial production dropped by 11.2%.
- The U.S. Labor Department reported that 2.981 million Americans filed unemployment insurance during the week ending May 9.
The European markets also posted losses this week as concerns regarding the second wave of coronavirus dampened the market sentiment. With no major global event offering any direction to the markets, investors turned their attention to the possibility of a second wave of new coronavirus cases as the continent eased lockdown restrictions. These concerns were triggered by the cluster of new cases in Wuhan, China since lifting the lockdown measures.
Also, the comments from the US Fed Chairman Jerome Powell regarding recession continuing for a long time increased investor’s concerns. This statement dampened hopes of a speedy recovery from the crisis. By the end of the week, investors managed to come to terms with the effects of reopening the economies, and the markets managed to recover some losses made during the week.
Most major indices in the Asia Pacific region posted losses as the optimism fueled by the reopening of economies was dampened by fears regarding the second wave of coronavirus cases. Here are some key points:
- China’s industrial production rose by 3.9% year-on-year.
- Disney reopened its Disneyland theme park in Shanghai on Monday.
- South Korea warned of a possible second wave of the virus if restrictions are eased to soon.
- With most countries having already launched extraordinary fiscal and monetary policies, many experts believe that the equity markets won’t power any higher.
- Markets in the region also reacted to the statement by Dr. Fauci of the National Institute of Allergy and Infectious Diseases regarding the need for a vaccine to stop the spread of the virus and the time it might take to have one ready.
- After the statement made by the US Fed Chairman Jerome Powell regarding the need for additional fiscal stimulus to fight recession, most indices in the region experienced sharp drops.
Heading into next week…
In the coming week, important economic data in the US is expected with the NAHB Housing Market Index on Monday, Housing Starts report on Tuesday, FOMC minutes on Wednesday, and jobless claims on Thursday. In Europe, the Zew Economic Sentiment Index is expected for Germany and the Eurozone. Considering the concerns raised this week by Powell’s statements, we will keep a close watch on any major/minor fiscal packages released by countries to combat the economic impact of the lockdown.
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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