Weekly Feed5 Mins Read
Kristal Weekly Feed | 20th April 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:
- This week, the number of confirmed Covid-19 cases nearly touched the 2.2 million mark as global markets struggled to latch to hopes of recovering from its economic impact.
- With news about a drop in new Covid-19 cases and the positive response to the new medication Remdesivir, boosted market sentiment. In the US, all three major indices recorded the second week of gains.
- European markets had a mixed week as some countries started a phased reopening of their economies while others extended the lockdown.
- In the Asia Pacific region, markets remained volatile. However, most indices posted weekly gains.
Covid-19 now has 21,97,593 confirmed cases around the globe and the death toll is at 153,090.
Some positive news snippets:
- In an experimental test program, US researchers deliver the first Covid-19 vaccine to volunteers
- A researcher from the John Hopkins Institute said that the antibodies from the blood of Covid-19 patients could help protect people at risk
- The recoveries have started outnumbering new infections in South Korea
- China closes several temporary hospitals and reopens public parks
- Australian research scientists are making headway with drugs to treat the virus
- Canadian and Dutch researchers have also reported medical breakthroughs in finding a cure
1. United States
The US markets had a mixed week as investors continued to weigh the economic impact of Covid-19 and remained hopeful about the economy reopening in stages. However, all three major indices posted the second consecutive week of gains with the Nasdaq Composite Index posting the highest gains.
This week the US saw a drop in the number of new coronavirus infections and hospitalization rates in its worst-hit areas. This week there were reports about some patients responding well to the antiviral medication Remdesivir. Also, news about various states planning to reopen the economies helped boost market sentiment. The recent announcement regarding a cut in oil production by OPEC managed to bring stability to the energy sector.
On the other hand, the optimism was kept in check due to the first-quarter profit reports released by some major banks:
- JP Morgan Chase reported a profit decline of 70%
- Wells Fargo reported a drop of 89%
- Citigroup’s profits declined by 46%
Banks had clearly felt the effects of lower lending rates and the possibility of rising defaults. Some additional factors that further lowered the week’s gains were:
- A drop of 8.7% in monthly retail sales in March
- While the food and beverages stores recorded a 26% rise in sales, they managed to offset the decline in the restaurant and bar sales
- The unemployment data revealed another 5.2 million Americans filing for unemployment claims. This increased the total number of these claims over the last month to 22 million
The European markets had a mixed week too as investors responded to President Trump’s plan to commence reopening of the US economy and advancements in finding the cure for COVID-19. The pan-European Stoxx 600 Index posted a gain of 0.61%.
This week, some European countries started reopening their economies indicating a drop in the spread of the virus. These included:
- Denmark – where primary schools were reopened
- Italy – where the government allowed some small stores and bookshops to open
- Austria – where home improvement stores opened this week
- Czech Republic – where the government lifted the ban on communal sports
- Spain – where non-essential industry workers resumed work
- Germany – where a decision was made to resume automobile production from the coming week onwards
The European markets also responded positively to the news that a hospital in Chicago that was treating COVID-19 patients with Remdesivir in a trial, found them to be recovering from severe symptoms.
Some countries decided to extend the lockdown that included:
- France – which will continue the lockdown until 11th May and then reopen schools
- Italy – which will continue its containment measures until 3rd May
- United Kingdom – where the lockdown might last at least three more weeks
A declaration by the International Monetary Fund (IMF) stating that in 2020, the global economy is likely to suffer its worst financial crisis since the Great Depression due to the pandemic.
3. Asia Pacific
Almost all major indices in the Asia-Pacific region posted gain this week. The volatility was restricted due to investors remaining cautious and observing the global economic developments closely. China recorded its first quarterly decline since 1992. While economists are hoping for a recovery in the second quarter, weak domestic and foreign demand might weigh down most businesses in the region.
From the Gurus
Mark Carney, the ex-Governor of the Bank of England, wrote in a recent piece for The Economist about how ‘value’ will change in a post-COVID world. He says that since the traditional drivers of value have imploded, the new world order might see the gulf between what the markets consider valuable and what people think is valuable closing.
We recommend this as your Monday read. Quote from Mr. Carney’s article below:
We are entering a world in which firms will be expected to prepare for black swans by valuing anti-fragility, as the writer Nassim Nicholas Taleb called them, and planning for catastrophe. The financial sector learned these lessons the hard way during the global financial crisis, which is why banks still have enough capital to be part of the solution….After decades of risk being downloaded onto individuals, the bill has arrived, and people do not know how to pay it. Entire populations are experiencing the fears of the unemployed and sensing the anxiety that comes with inadequate or inaccessible health care. These lessons will not soon be forgotten. They will have lasting consequences for sectors that rely on aggressive borrowing by households, a booming housing market and a vibrant gig economy.
Heading into next week…
As earnings season roll in, we’ll be looking closely at companies announcing their Q1 stats this week. Netflix (NFLX) and Snap (SNAP) are the ones expected to post some positive earnings, while the travel industry leaders like Delta Air Lines (DAL), Southwest Airlines (LUV), and American Airlines Group (AAL) will expectedly post a drop.
We will also be looking at the economic reports coming out from the U.K. this week. The country is slated to release its unemployment rate for March on Tuesday, and Consumer Price Index on (CPI) on Wednesday.
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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